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Fred Hutson isn’t one to miss an opportunity.
Back in 2007, at age 24, he saw an opportunity to improve the distribution of marijuana to Florida by shipping it through FedEx, UPS and DHL from his mail store in Las Vegas. Unfortunately, that knocking sound he heard in October of that year wasn’t opportunity but Drug Enforcement Agency officers coming to arrest him. He did four years behind bars.
When he was released to a halfway house in 2012, he knew that with a record, he’d likely be stuck in some low-paying job, if he could get hired at all. But after his stint in prison, he saw an opportunity not only to create a legitimate business but also to provide services to inmates that could help them stay connected to their families, which studies show is key to reducing recidivism.
In 2013 he launched tech startup Pigeonly, which allows inmates to make Internet phone calls and share photos with loved ones at a much lower cost than what the prison system charges.
“The idea for Pigeonly was born out of my personal frustration with the system; I knew there had to be a better way,” Hutson says. “The current options were either too expensive or too much of an inconvenience for my friends and family on the outside to use.”
Since launching the company, he has raised nearly $5 million in venture capital funding.
Hutson’s story is a perfect example how black tech entrepreneurs can change the game by developing solution-oriented companies for underserved communities. By creating businesses for untapped markets, black tech leaders have an opportunity to close the disparity gap in venture capital funding by encouraging investors to open their portfolios beyond the typical dating or gaming apps that are often led by white men and their homogeneous teams.
“Anything you can show that your idea is real and you’re solving a real problem, people start to pay attention,” Hutson tells The Root. “The big thing people should see instead of creating the next mobile game is that there is an opportunity to build products to solve real problems.”
But convincing investors wasn’t easy. Hutson enrolled in the NewMe accelerator—a program launched in 2011 by Angela Benton to promote tech businesses created by people of color—to get the support he needed to pitch investors on his business idea. There was only one problem: Investors couldn’t relate to his story.
“The biggest challenge for me was the bias, which justifies the discrimination when people aren’t familiar with the type of problems you face or you simply don’t look like them,” Hutson says. “Instinctively, the investors I started pitching when I first started out didn’t have the same level of trust to be comfortable enough with giving me money.”
With additional introductions, guidance and some help from Benton to refine his pitch, Hutson convinced investors that his model was unique and equally profitable. But he didn’t just talk the talk; he proved that his service would work by getting in front of inmates and their families and signing them up for his service to show his investors that there was a demand for his business.
So how can black entrepreneurs create high-growth, impactful businesses that attract investors?
According to Hutson and venture capitalists Marlon Nichols of Cross Culture Ventures and Jason Towns of the Towns Group, hot markets for innovation include health care and financial services.
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