Closing the Gap for Underrepresented Founders

Reflecting on One Year of the SB Opportunity Fund

One year ago, SoftBank Group International made a commitment to invest in entrepreneurs who too often lack access to capital. In the wake of increased racial violence and injustice, we had a responsibility to take action. And as one of the world’s largest technology investors, we decided to do what we do best – put our money to work. In this case, that meant investing directly in businesses led by Black, Latinx and Native American founders.

The $100 million SB Opportunity Fund came together within 48 hours. We launched with the fundamental beliefs that more underrepresented founders would build extraordinary companies given the chance, the network and the capital to do so – and that there is no tradeoff between diversity and excellence. One year into the fund, I am thrilled to share that our work is proving this all to be true.

 As I reflect on our work, I want to share three things we have discovered along the way.

First, the pipeline problem is a myth.

In a recent HBR study, VCs reported that over half of their deal flow comes from an investor’s personal network, and only 10% comes from inbounds. To anyone who keeps saying there aren’t enough talented, diverse founders to fill the investment pipeline with quality companies: Our work has proven that to be fundamentally false.

Despite having one of the most thorough diligence processes for an early-stage fund – we are part of SoftBank, after all – we are finding our pipeline is consistently full of some of the best emerging technology companies. To date, we have evaluated deals from over 1,450 incredibly talented founders and invested more than half our capital in over 50. There is no pipeline problem.

While the pool of talented, diverse founders is vast, it is only by broadening and diversifying our networks that we can create sustainable change. This is why we were so intentional with the diverse team we put together. Our investments span throughout the U.S., and we continue to find founders outside traditional avenues.

Second, value creation can supercharge founders.

With only 2.4% of VC funding going to minority founders, these leaders need an investor’s full support to scale. We believe that value creation is our superpower in making that happen. The SB Opportunity Fund is SoftBank like you’ve never seen before. For the first time in decades, we are investing in early-stage companies, at scale. And all our founders have the same access to SoftBank’s broad ecosystem and resources as the rest of SoftBank’s investments.

 We call our approach VC2.The first two parts of the equation – Validation and Connections – are table stakes for any good VC. But it’s the third that sets us apart: Community. We have built an incredible community that brings together our growing portfolio of founders of color with our talented Investment Committee and global network of executives who believe in our mission. Top that off with the validation that comes from SoftBank’s investment and the connections across our ecosystem of operators and founders who can help you scale, and you have VC2.

 And finally, these founders can produce outsized returns.

Underrepresented founders of color are an undervalued asset class. Ignoring these founders is as short-sighted as ignoring AI or crypto. If you don’t invest in them now, you will look back and realize you missed out on potential gains. We are encouraged to see our hypothesis that these founders can produce outsized returns being proven out.

We are not just finding talented founders of color. We are also seeing them thrive post-investment. The majority of companies that the SB Opportunity Fund has invested in are showing strong month-over-month growth. Several are already raising their next rounds of funding 8-10 months after our initial investment, at multiple times higher valuations.

These companies are shaping the future of our world: transforming telehealth, using AI and machine learning to transform workflows and cyber security, leveraging VR to improve diversity training, helping immigrants connect with the resources they need, enabling nonprofits to scale and much more.

So what’s next?

First, we need to address the issue at hand. Black and Latinx founders received only 2.4% of venture dollars over the past five years. We need to do better. A lot better. And that goes beyond venture capital. At SoftBank Group, we have established a dedicated diversity and inclusion program that promotes individual expression, innovation, and achievement. While there is always work to be done, we are proud of the role we are playing to help close the racial and gender equity gaps across our industry – starting with ourselves.

The SB Opportunity Fund is also redoubling efforts to expand our network, with a focus on women of color and Native American tech founders. We are planning our first-ever in-person gathering events. And we are launching a SoftBank Advisory Network of experts within and outside of the SoftBank ecosystem to give our founders direct access to leaders from some of the most innovative companies.  We also intend to grow our capital commitments over time, including reinvesting gains from the first fund into subsequent funds.

After a year of the SB Opportunity Fund, I am enthusiastic about what’s to come for founders of color as they build the companies of our future. This is just the beginning for us at SoftBank.

If you are a talented Black, Latinx or Native American founder, send us a note on our website. We read every email. No warm introduction needed.