Handcuffed and Hamstrung: Why Black, Brown, and Native Led Organizations Can’t Rely on Institutional Funding (And How You Can Fix It)

If you’re an entrepreneur or nonprofit founder and have a sneaking suspicion that your ideas aren’t given the same consideration as others, you’re not imagining things—you’re absolutely right.

Handcuffed and Hamstrung with No Way Out

The majority of decision-making power in grantmaking and venture funding is still controlled by white, male leaders. In the U.S., only 1.4% of total assets under management (AUM) , across all sectors, are controlled by diverse-owned or run firms, despite research indicating no significant difference in performance between diverse-owned and non-diverse-owned VC firms. Furthermore, less than 10% of assets in venture funds are managed by women or minority-owned firms.

For philanthropic foundations, 18.1% of assets are managed by diverse-run foundations. Though some foundations have started increasing their investment with diverse-run nonprofits, the progress remains slow (Knight Foundation ).

These statistics highlight a fundamental structural imbalance in leadership and financial decision-making power across every funding landscape in the United States.

This would not be a problem if research showed that the capital markets worked fairly—if underrepresented founders had the same access to opportunities. But studies continually show this isn’t the case.

In fact, research consistently shows that organizations led by Black, Indigenous, People of Color (BIPOC), Women, and LGBTQ+ face significant barriers in securing funding and even if funding is secured, face onerous restrictions tied to funds received that are not comparable to white-male led firms doing similar work.

Why Not Bootstrap?

And you might be thinking, well, if they have such problems with how the capital market works?, just bootstrap. Bootstrapped firms are often celebrated in entrepreneurial culture, but the reality is that these firms, particularly those led by underrepresented founders lacking generational wealth, face even more significant hurdles.

When entrepreneurs and nonprofits bootstrap, they’re not just stretching their resources—they’re opening themselves up to economic exploitation and intellectual theft.

Without proper funding, it becomes harder to secure patents, trademark ideas, or access the legal and financial protections needed to safeguard their intellectual property. In the end, bootstrapping often perpetuates the cycle of underfunded and undervalued organizations, leaving these leaders vulnerable to having their innovations co-opted by larger, better-funded entities with fewer original ideas but more resources to bring them to market.

Past is Prologue

Due to the history of the American financial system where historic wealth is directly tied to Jim Crow and chattel slavery, white families hold about 84% of total U.S. wealth, despite representing only 60% of the population (The Chicago Federal Reserve ). This means historically underrepresented founders are in the unfortunate economic position of begging and borrowing – not forging equal partnerships. [DB1]?The result? Entrenched financial gatekeeping that limits access to capital and stifles innovation.

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It Doesn’t Have to Stay Like This

This week, we saw a small sprout of hope in the work that Mackenzie Scott’s foundation is doing in partnership with Native-run nonprofit organizations. Read the full article from Maria Di Mento at the Chronicle of Philanthropy.

?Here are three leadership takeaways we learned that could help VCs, Foundations, and Founders:

?1. Provide or Request Unrestricted Capital for Mission-Driven Impact

• Scott’s Approach: MacKenzie Scott provides unrestricted, no-strings-attached grants, allowing nonprofits to use funds as needed. This flexibility empowers organizations to focus on their core mission instead of administrative requirements.
• Leadership Insight: Foundations and VCs should consider shifting from restrictive grants and investments to unrestricted capital. This type of funding enables founders to innovate and adapt based on their organization’s specific needs, rather than meeting arbitrary benchmarks.
• Actionable Step: Offer unrestricted grants or investments with minimal reporting requirements, particularly for diverse-led organizations, enabling them to prioritize long-term growth over short-term metrics.

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2. Insist on Building Trust-Based Relationships, Not Bureaucratic Barriers

• Scott’s Approach: Scott’s funding process is simple and non-bureaucratic, requiring minimal administrative work. Native-led nonprofits like the First Nations Development Institute found Scott’s approach unique in its simplicity and trust.
• Leadership Insight: For historically underrepresented founders, the funding process is often riddled with excessive scrutiny and hoops to jump through. By contrast, VCs and foundations should adopt trust-based philanthropy, where the emphasis is on the organization’s impact rather than compliance checks.
• Actionable Step: Reduce the administrative burden for applicants by simplifying the grant or funding application process and developing relationship-driven funding models that focus on trust and impact.

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3. Leverage High-Profile Donations to Influence Broader Funding Trends

• Scott’s Approach: Scott’s significant, publicized donations helped increase visibility for Native-led nonprofits, leading other funders and donors to follow suit.
• Leadership Insight: Large VC or foundation investments in diverse-led organizations can act as a seal of approval that legitimizes these organizations in the eyes of other funders, creating a ripple effect in the broader funding landscape.
• Actionable Step: Make bold, public investments in diverse-led organizations to influence other funders and signal that these organizations are trustworthy, capable, and worthy of large-scale support.

The power to change the status quo is in your hands. It's time for VCs, funders, and leaders to step up, rethink their strategies, and commit to inclusive, transformational funding practices. The assessments are in and our entire society is harmed by unfair restrictions in the financial market that diminish our collective wealth and health.

I'm Darein Burton, a world-traveled consultant and corporate strategist. Every Tuesday, I publish the Perspectives for Progress newsletter , designed to empower historically underrepresented professionals like myself. As a Black and queer man, I understand the unique challenges we face. That's why I started this newsletter —to offer a business and networking platform for in-depth analysis, diverse perspectives, and building community with like-minded professionals.

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