Black women, Latinas lag in venture capital
Black women and Latinas are raising more venture capital funding than ever before, tapping into Silicon Valley’s wealth-generating machine amid the nation’s racial reckoning, but funding parity is still a pipe dream for women of color, according to a new research report from digital-undivided.
“We have seen the number increase but not enough,” said Lauren Maillian, CEO of digital-undivided, a nonprofit that supports female entrepreneurs of color named for civil rights pioneer Diane Nash.
Black women-founded companies raised about $700 million in funding from 2018-2019, a significant increase from the previous two-year period yet still account for 0.27% of the $276.7 billion in venture capital investment, the ProjectDiane report found.
Latina-founded companies raised $1.03 billion in the same time period, accounting for 0.37% of total venture capital investment during those two years.
Combined, Black women and Latinas make up less than 1% of all venture capital investment.
ProjectDiane is a biennial demographic study that tracks public funding announcements for Black women and Latina entrepreneurs. It comes as COVID-19 has a disproportionate impact on minority-owned businesses. Earlier this year, digital-undivided reported that 82% of Black women founders experienced a pandemic-fueled loss of revenue.
Most Black women and Latina entrepreneurs don’t raise any venture capital at all.
For decades, funders have underestimated and overlooked Black women and Latinas. Research shows that Black women are among the least likely to get checks cut by venture capitalists. So few raise venture money that the percentage is, statistically speaking, nearly zero.
The majority of entrepreneurs who land venture capital funding are white
men, much like the financiers who hand it out. Venture capitalists tend to place their bets on people who’ve already succeeded or who remind them of the people who have.
Black women and Latinas face significant roadblocks in Silicon Valley – insular networks, negative stereotypes and overlapping discrimination based on gender and race.
The first ProjectDiane report in 2016 found that just 12 startups led by Black women raised more than $1 million in funding. Two years later, nearly triple the number of Black women founders – 34 – had crossed that threshold. The latest report found those ranks had grown to 93 Black women and 90 Latinas.
ProjectDiane draws from a database
Combined, Black women and Latinas make up less than 1% of all venture capital investment.
of about 600 Black women and Latina founders.
The progress is frustratingly slow for those trying to reverse entrenched patterns of exclusion, but Maillian says “for women of color, this has been their year to prove their worth” as more venture capitalists recognize the “cultural relevance” of the companies they are building as momentum to support entrepreneurs of color grows.
At the start of 2018, 34 Black women had raised $1 million or more. In data tracked through August 2020, more than 90 Black women have raised that much or more, the new data show.
Raising venture capital is still so tough, many founders rely on workarounds instead, ProjectDiane found.
Of the founders surveyed by digital-undivided, 86% used savings or earnings from current employment to fund their businesses. Other funding sources included support from a spouse or partner (22%), grants (12%), and revenue from other business ventures, accelerators, angel investors, and crowdfunding platforms (less than 10% each).
Nearly a quarter of the founders received outside funding from angel investors, crowdfunding, and pitch competitions. More than three-quarters have not received any outside investment though 60% of them indicated that getting that funding is a current goal of their business.
At this rate, how long will it take for women of color to reach funding parity? Maillian says she can’t speculate but at least it’s a discussion that’s now beginning.
“The conversation around funding parity is not a conversation we have ever had to have because the conversation had always been ‘just fund women of color,’” she told USA TODAY.
With the momentum seen in the 2020 ProjectDiane report, “now we can begin to look at parity and it is something we will track.”
“I pray,” she said, “it happens in my lifetime.”