Photo caption (above): Christopher G. Hollins (l) and Elgin Tucker (r)
Six Morehouse alumni recently joined forces to launch BlackStartup, a new online crowdfunding platform designed to provide access to funding to African-American and other small businesses.
BlackStartup is the first crowdfunding website to specifically target African American businesses with the aim of reducing the disparity these businesses often encounter in accessing business capital.
The founders, each under the age of 30, aim to create the largest community of African American innovators the world has ever seen. The six-member business team was one of eight chosen to participate in Yale Entrepreneurial Institute’s 2013 Summer Fellowship, a competitive 10-week program for the university’s most promising student startups. Their selection marked the first time an African-American business has received the award. To date more than 20 small businesses have created campaigns on the site and six campaigns have been funded since the company’s launch in May 2013.
According to a 2013 report by the U.S. Small Business Administration Office of Advocacy, the major constraint limiting the growth, expansion, and wealth creation of small firms—especially women- and minority-owned businesses—is inadequate capital, making it the perfect timing for the launch of this new funding platform.
BlackStartup is a platform that allows black and non black innovators to finance their ideas through small pledges collected from many funders. Projects can come from any field – cultural or technological, creative or spiritual, a small business, a community-oriented project or an advocacy campaign – as long as a positive link to our community is created.
Empower Magazine recently caught up with two of the founders, Christopher Hollins and Elgin Tucker to find out the origin of this new business venture that seeks to open new doors of opportunity for Black-owned businesses and others seeking to impact the community.
Q. When did the idea for BlackStartup originate?
A. Elgin Tucker – The idea developed around this time last year, when we were approached by one of our co-founders who worked on Capitol Hill in the Securities and Exchange Commission about this new tool called crowdfunding. He was engaged in an internship and actually worked on developing some of the legislation that directly impacted crowdfunding and thought that it would be a great tool to apply to the African American community.
Q.What are some of the challenges African American businesses face in accessing funding?
A. Christopher Hollins – In general, when starting a small business the average small business owner who does not have access to specific networks is not going to be aware where investment dollars can come from. And I think that issue is much more specific to the African American community.
One of the challenges also is a lack of understanding from the investment community regarding the potential within the African American community. Investors have not had exposure to some of these businesses and may be less apt to throw their dollars in. BlackStartUp.com comes in to bridge that gap as far as access on one side and information for the investor on the other side.
Q. Describe the crowd funding phenomenon?
A. Elgin Tucker – Crowdfunding has seen incredible growth. It has grown at a rate of 80 percent over the last two years. In 2012, the crowd funding marketplace was internationally 2.7 billion dollars. This year it is expected to cap out at 5.1 billion dollars and again that growth is expected to continue into 2016 at a rate of 80 percent and, the following year, 60 percent.
Q. What changes are on the horizon for crowdfunding?
A. Elgin Tucker – There are going to be a lot of changes with respect to crowdfunding moving forward particularly with regard to the ability of the average American to make an equity investment into a brick and mortar or tech company. Currently the laws allow only an accredited investor to invest over the Internet into a company for ownership purposes. But the FCC is currently grappling over the rules and regulations that will apply to accredited investors – which is basically your average American that makes less than $200,000 a year and does not have a net worth of over a million dollars.
With these proposed changes, we expect that individuals will be able to make small investments in companies using crowd funding platforms which will democratize finance and allow average folks to enter into a marketplace that has not been available to them. As we know with greater access comes greater potential for growth.
A. Christopher Hollins – If you go back to FDR and the Great Depression, the security laws that were passed only allowed certain types of investors to make private investments in companies. Currently you have to have an income of over $250,000 and/or a net worth of over a million dollars outside of your home to make investments in small and emerging companies. What we are finding now is that a lot of people who have the intelligence and the wherewithal to make these types of investments, don’t have that much capital or income or are being deprived of the ability to invest in these types of small businesses. The JOBS act in some ways is intended to address that and we are waiting to see what laws are going to shape this new investment environment.
Q. What is the primary goal of your company?
A. Christopher Hollins – Our primary goal is to create a clear avenue for Black-owned businesses that are trying to get funding to get off of the ground floor. By and large, most of the campaigns on our site tend to be community focused. I think that is just evidence of the entrepreneurs in the Black community that, like us, are fortunate in their positions and always have an eye toward giving back and helping others. I think that is part of the Black culture for hundreds of years in that we had to help each other.
Q. What tips do you provide for creating a successful campaign on BlackStartup.com?
A. Christopher Hollins – Use all of the avenues you would use to communicate any kind of good news in your life. Use email and all forms of social media, for example, Twitter, Instagram, etc., to engage family, friends of friends and anyone you have some sort of connection to. If they know you well, they will know how hard you have been working to get this project off of the ground and that will motivate them to help you get it off the ground.
A. Elgin Tucker – In order to be successful you need to be constantly contacting those in your personal network and be involved in social networking activities to make sure that not only everyone you know, but people that may be two or three degrees away from your network are aware of your project goals. Also, being able to convey the project in a compelling way through picture, video and text allows someone interested in backing your project see where the project is currently and gather in their own minds how they can help it move forward to the next level.
Q. What methods are you using to promote BlackStartUp?
A. Elgin Tucker – We are developing a partnership push to engage smaller communities within the African American community, such as the local 100 Black Men Coalition, NAACP and Urban League to partner with us. The goal is for such groups to have their own page wherein they can enter into a profit-sharing agreement to host projects that come through their particular organization and their specific page. This will increase our ability to source and get good quality projects.
Also in the spring we are looking at hosting an on-campus Historically Black College & University (HBCU) crowdfunding event to tap into the generation that currently utilizes these platforms the most – ages 18 – 28. On a college campus, they have a lot of people who fit that mold and have great ideas with no concept of how to get financing to take those ideas to the next level. We initially are going to focus our marketing efforts on New York, Washington D.C. and the Atlanta metro area.
Q. Describe the characteristics of your co-founders that enhance your chances for success.
A. Christopher Hollins – Each is very accomplished in their own right. We are all very hardworking individuals who are quite accomplished for our age and not one of us has hit 30 yet. That youth and that energy, combined with our passion for this specific work, along with our diversity when it comes to our interests and personal strengths not only gives us the balance but the general foundation to be successful.
Q. Who do you credit as a mentor in your life?
A. Christopher Hollins – I think that my partners would all say that we have had many mentors and inspirations along the way that pushed and prodded us in various ways. From my great-grandmother to grandmother down to my parents and aunts and uncles, it has always been instilled in me not only to put God first, but to also believe in yourself and work hard to achieve your dreams.
I would also credit friends and professors at Morehouse. The curriculum and the level of mentorship and brotherhood at Morehouse provides young African men a deep and broad exposure that I don’t think is available anywhere else.
A. Elgin Tucker – From a personal perspective, my grandparents were entrepreneurs in their own right and allowed me to see what a leader looks like. My grandfather owned a convenience store that he ran for years. He also had a lot of real estate investments and was a local leader in the African American community.
Q. What qualities must an entrepreneur possess to succeed?
A. Christopher Hollins – I think the first thing is, obviously, the ability to believe in yourself and not be willing to give up. I have a lot of friends who are entrepreneurs, some more successful than others, but even those who aren’t doing as well, they keep getting up every morning and trying to take their business to the next level. Specifically in the kind of economy we are in right now, you have to learn quickly and your mistakes have to be cheap. You have to figure out a way to test something quickly without blowing all the funds available to you.
Q. Where would you and your co-founders like to see BlackStartUp in 5 years?
A. Christopher Hollins – It is clear and obvious that there are dozens and dozens of crowd funding sites out there. For us, it is a constant learning process. In the next 5 years, we are going to keep learning, keep adjusting and keep making the product better so that we serve both the investment community and the Black business community as best we can.
The founders of BlackStartUp are Nathan Bennett Fleming, Christopher Hollins, Elgin Tucker, Bola Adewumi, Kyle Yeldell and Aaron O’Brien. The launch of BlackStartup.com has captured the attention of a range of publications from Black Enterprise to FastVenture to the Washington Post and landed the founders on Jet Magazine’s First Annual 2013 ‘40 Under 40’ list.
Morehouse Alumni launch new venture to fuel growth of African American Businesses