Level the Playing Field: The Rise of Black-Owned Cryptos, NFTs & DAOs

Cryptocurrency is arguably the hottest sector in tech, often touted as a tool for equality, transparency and fairness.

Well, only 2.3% (134,567) of US businesses are Black-owned, according to the Census, even though Black people comprise almost 14% of the population. Not to mention, Black-owned businesses have spectacularly high failure rates. While 20% of small businesses fail within the first year, 8 out of 10 Black-owned businesses fail within the first 18 months. 

So, what are some of these challenges that Black entrepreneurs are faced with, particularly in the tech industry? And how can blockchain technologies like cryptocurrencies, NFTs and DAOs offer a better way?
 

Now you might still be skeptical as to why there’s a need for Black-owned crypto businesses. I mean, can’t we just move past skin color in the metaverse, where our avatars can look however we want them to? Well, not really. Because this goes way deeper than skin color. At the end of the day, it’s about equal opportunity. 

You see, even after slavery was abolished in the US, the gap between African Americans and white Americans continued to grow with regard to homeownership, household income, employment, education, and other economic factors. 

For a minute there it seemed like this was improving. Racial segregation in the late 19th century forced Black people to move into the same communities, (like South Side Chicago), where thousands of Black entrepreneurs began to establish businesses like banks, insurance companies, restaurants and retail stores that catered to Black customers. But following the Great Depression, income fell so drastically that many Black entrepreneurs closed shop and switched over to high-paying jobs in munitions factories. 

A century later, and Black people now occupy roles in predominantly white industries like law, finance and tech. Ashley Caines, a Web3/Blockchain Project Lead at the Black-owned media company Blavity Inc, has spent most of her career working in these white-dominated jobs, always feeling like an outsider. “All of those places required me to carve out space for myself or eventually leave,” Caines says. 

People have always known that tech, famous for minting 20-year-old billionaires, is an industry in which Black people are significantly underrepresented. But it was only after the George Floyd protests that top tech players began to really focus on boosting their diversity statistics. 

To Najah Roberts, a crypto entrepreneur and educator focused on closing wealth gaps in the Black community, a lot of these efforts “feel like people are trying to tolerate us, as opposed to allowing us to have the opportunity to be in this space because we come with the skills, you know?”

Don’t get me wrong. Kudos to Andreesen Horowitz, Softbank and other high-profile VCs for pledging millions to funding entrepreneurs of color. But the lack of Black representation in tech goes beyond just meeting quotas. Let’s explore what real diversity is all about.

We all experience the world differently. The more diverse we are in terms of race, nationality, religion and gender, the more we have to learn from each other. And if tech companies and VCs don’t leave their bubbles filled with people who look and think the same, and have similar experiences, they can’t truly hope to change the world for the better.

Looking back on her childhood, Roberts remembers how she and her friends used to be teased for the way they looked, dressed and talked. Fast forward to 2022, and Black culture has permeated every facet of the society, from the music we listen to and the clothes we wear to the beauty standards prompting many young women to go get lip injections.

A startup ecosystem consists of various people and organizations in a shared location, working in concert to build, fund and sell startups. To better understand structural inequalities facing Black entrepreneurs, we need to explore how Black people are being left out at multiple levels of the startup ecosystem. 

Universities

In 2018, about 7% of graduates with a STEM bachelor’s degree were Black, according to the Pew Research Center. This shows that Black people are underrepresented among STEM college graduates compared with their share of the adult population (12%). This could be chalked up to a decline in outreach efforts, peer mentoring and affirmative action, among other factors.  

Another problem concerning universities is that many players in the tech industry are known to mostly recruit or fund graduates from elite universities like MIT and Stanford as opposed to historically Black colleges with great STEM programs. 

Venture capital firms

Black VCs are few and far between. According to the National Venture Capital Association, only about 3% of all venture capitalists are Black. And the percentage of venture capital firms owned by Black Americans is naturally even smaller.

One of the main barriers to diversity in this sector is that the limited partners that invest in venture capital funds will only trust new VCs with their money if more established investors can vouch for them. And this, in turn, makes it all the more difficult for Black VCs to establish strong track records on their own. 

Startups

In the first half of 2021, Black entrepreneurs managed to raise nearly $1.8 billion—a more than 4x increase year-over-year. This is undoubtedly great news. But to put it in context, Black entrepreneurs still only received 1.2% of the record $147 billion invested in U.S. startups during that time.

So why is this? Well, one explanation is that Black Americans don’t generally attend the elite universities that birth most VCs, which means they have a harder time getting in touch with them. According to Harvard Business Review, only 10% of VC deals result from cold email pitches, with the bulk of deals coming from VCs’ former colleagues. 

Without proper financing, it’s difficult to grow a company at scale and compete in a cutthroat market. This forces some Black entrepreneurs to explore less desirable funding options like bank loans. But with Black Americans having the lowest median household income in the US, most can’t provide the collateral banks require.

“As a tech founder, I feel very strongly that we're being left out,” says Roberts. “I see millions of dollars going to kids that are graduating college with just an idea. And here I sit in a company that is actually doing the work, and it's like pulling teeth to get someone to fund or do anything in this space right now”. 

But what if Black business owners had an alternative path to startup riches?