Funding disparities to Black women founders are impacting successful venture exits just look at the case of Sweeten and Katerra. Any company that's raised hundreds of millions, I can tell you they have been given the luxury of making more mistakes than I have, Jean Brownhill, founder and CEO of Sweeten, a proptech company that matches vetted general contractors to construction projects, told The Plug.
They have made mistakes that have cost them as much as I've raised in total. Brownhill's business was a direct competitor to now-defunct Katerra, which raised $2 billion in venture backing, largely from investing powerhouse Softbank. The more successful line of business for the shuttered company mirrored what Brownhill created, by using AI to digitize the building and construction process.
While Brownhill has raised $20 million in venture capital, Katerra has raised $2 billion. This exemplifies that the funding opportunities that exist for Katerra founders, Jim Davidson and Fritz Wolf, who are both white, look very different than the obstacles Brownhill has faced as a Black woman founder. I was invited to a dinner and the founding partner of the firm was running late, he burst in, handed me his jacket and asked me to get him a glass of wine, I ultimately didn't stay for the dinner, Brownhill said. After the investor mistook her for coat check staff, in spite of her wearing a company sweatshirt, it became harder to visualize taking the firm on as an investor. I was standing with all white male peers, CEOs of other tech companies. I couldn't imagine this person investing in the company because he couldn't see me as an equal.
Brownhill founded New York-based Sweeten in 2011 and became one of the first Black women founder to raise over $1 million in venture capital in 2013. The company has grown its undisclosed revenue year-over-year and is tracking to close out its best fiscal year to date, according to Brownhill. Seattle-based Katerra, which launched in 2015, cited the effects of COVID-19, rising labor and materials cost as reasons for closing. But the company's problems began long before the pandemic when the Securities and Exchange Commission opened an investigation into the company's accounting practices and reports of failing projects surfaced in 2019. Softbank investors responded by pumping $400 million more into the company after that.
When I think about Katerra, that seems like an outsized risk, $2 billion dollars in one company, when you juxtapose that to $100 million dollars for all of the Black founders, though the [Softbank] opportunity fund...It's great that we have it but proportionally, it could be more, Brownhill said. At the time of publishing both, Softbank and Katerra did not respond to requests for comment. Katerra's 2,400 employees will be let go without severance pay. Brownhill is looking forward to the day when the adage that being Black means you have to work twice as hard to get half as far doesn't ring so true, and when Black founders will be able to raise capital and have investors support them without having to carry extra credentials. It's not a coincidence that a lot of the funding that we see African American founders getting is through their industry expertise, Brownhill said. In my case, I'm an architect. African American founders have gotten the professional degrees and have other certifications that give us credentials that then make it possible for us to fundraise. I think that trend will probably continue for good or for bad.