Venture capital has definite appeal for founders looking to scale faster, but some black travel entrepreneurs would rather avoid that discriminatory world.
Black startup founders face systemic financial constraints that don’t hinder their white counterparts, but this isn’t stopping young travel companies like Black & Abroad from slow and steady progress. Founders Kent Johnson and Eric Martin, based in Atlanta, said the company is completely bootstrapped, and they don’t want to lose control through outside investment.
The fear of losing control may be familiar to entrepreneurs of all backgrounds, but it has special meaning in the black travel movement. The value of these travel experiences can be intangible, social, political, and even emotional: travel that revolves around exploring black identity in a safe space.
For Black & Abroad, that product line includes group and private trips, events, activities, merchandise, and tourism consulting, with plans to scale those trips and focus on connecting the global African diaspora. Johnson and Martin feel that their brand could suffer significantly from offering equity to outside investors who don’t align with their values.
The Value of Black-Owned
“People want the Black & Abroad that they met in April of 2015. They don’t want some whitewashed version of it. This is for us, by us,” said Martin. “Once you give up that control, especially for this type of company, you lose the trust that we’ve worked so hard to build.”
“You pay to have a moment of pride,” said Johnson of the importance of Black & Abroad partnering with black-owned enterprises in each destination. “We hired a black tour guide, we hired a black sommelier,” he said of a recent Paris tour. It included the Afropunk festival, a black history tour, and 40 participants from the United States, United Arab Emirates, Finland, Norway, and other countries.
Basketball icon LeBron James is preaching full-ownership, according to his former head of business development, Latesha Williams, co-founder of the game company Cards for All People, whose offerings include Black Card Revoked.
Williams appeared with Black & Abroad on a Facebook-sponsored panel of black founders Tuesday in New York City, and stressed “understanding the value of ownership, of not giving away equity.”
That being said, Johnson said his company could scale much faster with outside funding, and it’s frustrating to go slower. “If we did a Series A and rounded up a couple million, we could do all the things we want to in the next 12 months,” said Johnson.
And yet, “I know some people who wish they hadn’t,” he said of compromising a company’s mission to please investors.
Evita Robinson, founder of Nomadness Travel Tribe, which offers trips, events, and now Audacity Fest, said she got a similar warning from an adviser: “All money ain’t good money … If you give [equity] to the wrong institution, the wrong investor, they are gonna make you start doing inauthentic things to reach certain benchmarks.”
Robinson said she prefers crowdfunding to keep control within the black community, after which she would consider the right angel investor.
“I’m very uncomfortable with [venture capital] personally, not as a system but for Nomadness specifically,” said Robinson.
In the past, Robinson has used crowdfunding for individual projects, like obtaining $26,000 for a cross-country RV tour that featured speaking engagements at historically black colleges and universities. And the company has secured small, short-term loans through PayPal. “Their Working Capital program is amazing,” said Robinson.
Media outlet Blavity’s 2017 acquisition of tour operator Travel Noire was a positive example of releasing some control, according to Johnson and Martin, with one black-owned company joining another black-owned company. Travel Noire declined to comment.
“I would much rather see Blavity acquire it than anybody else,” said Martin, who described the event as “watching two black women create a historic milestone.”
When news of the acquisition hit, Robinson of Nomadness Travel Tribe received numerous unexpected emails from concerned community members urging her not to sell, despite that she said she wasn’t even considering it.
What Are the Odds for Black Founders Seeking Outside Funding?
The venture capital world is overwhelmingly white. According to a study by Social + Capital, 78 percent of senior investment team members at top VCs were white, and only 1 percent were black. Of the 71 funds analyzed, 30 percent were all-white.
Minority-owned companies are less likely to receive loans than non-minority firms, according to research by the Minority Business Development Agency. Among firms with gross receipts under $500,000, 23 percent of non-minority firms received loans compared to 17 percent of minority firms.
In addition, minority-owned firms received lower loan amounts, were denied loans three times as frequently, and paid higher interest rates. The study also said that minority-owned firms receive smaller equity investments — the average amount of new equity investments was $3,379 for minority firms, which is 43 percent of the non-minority level.
The agency also noted that a lower level of wealth among Americans of color creates a barrier to entry, as funding in the earliest stages often comes from the founder, friends, or family.
If anything, Black & Abroad is open to non-equity crowdfunding first, while being wary of loans and even more wary of venture capital, according to its founders. Equity crowdfunding has been recognized as helping to level the playing field for black entrepreneurs, as it allows anyone in the United States over 18 to invest in startups in with amounts as small as $10.
Major banks have a long history of giving unfair, even predatory terms to black loan-seekers, said Martin, who doesn’t want to be involved in that type of debt.
Despite these obstacles, entrepreneurship among black Americans remains strong. Black Americans start businesses at higher rates than white Americans (14 percent versus 12 percent), though their established business ownership levels are little more than half that of whites (4.5 percent versus 8.7 percent), according to a report by Babson College and Baruch College.
The black travel movement continues to grow steadily — maybe not as quickly as some other areas of the startup world — and it doesn’t seem bogged down with the often-discriminatory practices of venture capital investment.
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Photo credit: Black & Abroad co-founders Kent Johnson (right) and Eric Martin (left) prefer to avoid the world of venture capital. Black & Abroad