Venture capital funding for Black-led startups has fallen precipitously. And, in the wake of the Supreme Court’s decision in June 2023 blocking affirmative action in college admissions, programs promoting diversity, equity and inclusion (DEI) are under siege. Indeed, just last month the 11th Circuit Court of Appeals issued an injunction blocking the Fearless Fund from providing grants exclusively to Black female entrepreneurs–its very mission.

But Google for Startups isn’t retreating. It recently announced its Black Founders Fund and Latino Founders Fund had together awarded grants to a combined 20 startups, all of them with business models that use artificial intelligence. Each founder is receiving a $150,000 non-dilutive cash award (in other words, Google gets no equity in return for its money) and $100,000 in Google Cloud credits. Additionally, they will have access to mental health resources and mentorship from Google experts in AI and sales.

According to Crunchbase, funding for Black founders dropped 71% in 2023, nearly twice the percentage as overall VC funding fell. Google for Startups says it has invested $50 million since 2020 in Black and Latino led startups, which have collectively raised over $590 million in follow-on and other funding.

The startups getting Google money this year run the gamut, though all use AI in some fashion. Akeptus from Glenwood, MD, offers a smart home energy management system designed to optimize energy usage and reduce costs. Beta Financial Services, based in Chicago, IL, aims to eliminate human bias from deposit and lending services. Bountiful, headquartered in San Francisco, CA, specializes in agricultural technology, providing insights into crop production impacts at both field and scale levels. Cambio AI, located in New York City, provides software empowering commercial landlords and corporate tenants to achieve net zero goals through facility decarbonization. EdVisorly, operating out of Los Angeles, CA, runs a recruiting platform aimed at helping students move from community colleges to four year degree granting institutions. Raincoat, in San Juan, PR, is developing a new form of climate insurance.

One of the companies receiving a Google award this year is Hue, which was recognized by Forbes on the 2023 30 Under 30 list in the retail and commerce category. While at Harvard Business School, Hue cofounders Nicole Clay and Janvi Shah were on a Zoom call led by HBS alumna Vicky Tsai, the founder of Tatcha, about how to be entrepreneurs in the beauty industry.

“I love telling this story. Sometimes I get a little emotional. I was on the call, and Janvi also happened to be on that call. I think I asked a question, and later, she slid into my Slack and said, ‘Hey, my name is Janvi. I worked at Google Photos and have this idea I’d love to run by you,’” recalls Clay. “We launched into what I call ‘founder dating,’ where we grabbed coffee, talked about the idea, and eventually met at my apartment. There were sticky notes everywhere. We quickly realized that there was a need for people like us to build technology in a very empathetic way.” They later added another HBS classmate, Sylvan Guo, as a cofounder.

Hue has raised $2 million from NFX, Underscore VC, and other investors, but Clay says it’s still challenging for Black founders to secure adequate funding. She deems the kind of mentorship support that Google is providing, including in the “often overlooked” area of mental health, crucial.

The Hue platform uses AI to personalize online makeup shopping. Shoppers take a one-minute quiz about their skin tone and complexion and then receive shade recommendations, and video and photo reviews from real customers with similar skin tones.

“We interviewed hundreds of customers and began understanding their shopping journey, particularly why they weren’t converting on websites. Nearly every one of them would open Google or TikTok, with TikTok emerging as the new Google. When we asked why they were using TikTok, they said they were looking for someone like themselves,’’ explains Clay. “This made me reflect on my experiences growing up and shopping for beauty products or anything else, like hair care or fashion. I always seek someone like me to build trust in a product beyond the brand’s claims. Seeing myself represented in a brand is crucial.”

According to a 2022 report by McKinsey & Co., only 16 of 213 venture capital-backed beauty companies have Black founders. But Black consumers are three times more likely to be dissatisfied than non-Black consumers with their options for hair care, skin care, and makeup–meaning there’s a big untapped opportunity there. In fact, the report notes, while Black VC-backed beauty brands raised a median of $13 million in venture capital, compared to $20 million raised by non-Black brands, their revenue was 89 times higher than that of non-Black brands during the period studied.

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