STARTUPS BY BLACK WOMEN CHANGING SILICON VALLEY
They’re nation’s fastest-growing demographic of entrepreneurs
SAN FRANCISCO – In the early days of Zume Pizza, visitors to Julia Collins’ robotic food prep company in Silicon Valley would greet her at the door and say, “Can you grab me a water? I’m here to meet with the founder.” When pitching her business to investment partners at venture capital firms,
Collins was nearly always the only woman and always the only black person in the room.
Then, late last year, a hairline crack surfaced in the invisible yet seemingly impenetrable barrier that limits black women’s access to the tech world. A $375 million investment gave Zume Pizza a valuation of $2.25 billion.
It wasn’t just the company she co-founded that reached unicorn
“If there is anyone we should double down on, it’s black women.” Arlan Hamilton, head of investment firm Backstage Capital, which dedicated a $36 million fund exclusively to black women
status. Collins did, too, as the first black woman whose tech company is valued at $1 billion or more by investors. Now that she’s working on a new startup in regenerative agriculture, investors are calling her.
Generating tens of billions in revenue, black women are the nation’s fastest-growing demographic of entrepreneurs. For decades at the nexus of money and power in Silicon Valley, they’ve been underestimated and overlooked. 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 are fighting that pattern: Good ol’ boys network, meet black girl magic.
There’s Morgan DeBaun, who was just 24 when she created Blavity, a popular digital media hub for black millennials. Stephanie Lampkin leads Blendoor, a startup that uses technology to combat bias in hiring. Kellee James, who advised the Obama administration on environmental markets, is behind Mercaris, a futures market for organic and non-GMO commodities.
“Although I recognize that I am the first,” Collins says of becoming a unicorn, “the thing that I spend the most time thinking about is how to make sure I am not the last or the only one.”
Black women are sharply underrepresented on Sand Hill Road, the leafy stretch in Menlo Park, California, where venture capitalists cluster, miles from the headquarters of some of the most powerful tech companies.
Jessie Woolley-Wilson, CEO of education tech company DreamBox Learning and the daughter of a Haitian immigrant, recalls being asked to fetch coffee while waiting to pitch her company in 2012. “I turned around and said, ‘I don’t know where the coffee is here, but when you find it, would you mind bringing me some? I take it black,’ ” she says. “I laugh about that now, but I said it at the time with a tense jaw.”
Little has changed since then for black women trying to tap Silicon Valley’s wealth machine, Woolley-Wilson says. “People with good hearts still believe that I’m an anomaly,” says Woolley-Wilson, who has raised $170 million. “What they don’t realize is that there’s all of this rich, promising talent out there who will help them be more successful and create more solutions and products that are relevant to an increasingly diverse marketplace.”
Turning the tables on investors
Phaedra Ellis-Lamkins is in the vanguard of those remaking Silicon Valley’s image of black women. Her tech startup, Promise, is down one flight of stairs in a historic 19th-century building in Oakland. The airy, upscale offices with exposed brickwork and duct work are below street level. Ellis-Lamkins jokes it’s the “garden” level.
Promise is working on “decarceration,” keeping people – mostly poor or of color – out of jail who don’t need to be there. She secured $12 million and the confidence of venture capitalists, in- cluding First Round Capital and Jay-Z’s Roc Nation.
From the start, Ellis-Lamkins was picky about whose money she would take. “I felt like I was interviewing them: Who could help build the vision I wanted, who could give me the capital I wanted?” she says.
One investor with
FOMO (fear of missing out) pursued her relentlessly, then began the meeting by directing her to pitch him. “Pitch you?” she replied. “You asked to meet with me.”
No one in this data-driven industry quantified the dearth of black, female entrepreneurs in tech until Kathryn Finney, an epidemiologist trained at Yale University, funded a research initiative, ProjectDiane, named for 1960s civil rights leader Diane Nash. Her first report in 2016 found that 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 progress is frustratingly slow for those trying to reverse entrenched pat- terns of exclusion. From 2009 to 2017, black women raised $289 million, or 0.0006 percent of the total $424.7 billion of venture capital raised, ProjectDiane found.
“Every black woman I know, whose credentials are just as good as mine, has had trouble raising money,” says Lisa Gelobter, a former tech executive at BET Networks and chief digital service officer in the Obama administration’s Department of Education.
Her Oakland startup, tEQuitable, which helps companies and employees proactively address workplace issues such as discrimination and harassment, raised $2 million but didn’t always have the easiest time doing it. She was told by one investor in Silicon Valley, where technical expertise is prized, that Gelobter and her co-founder were “too technical.”
Held to higher standards
A report from Morgan Stanley found that investors see fewer pitches from women and minority entrepreneurs, and when they do, they hold those entrepreneurs to higher standards.
Before Melissa Hanna could begin her presentation at a venture firm a couple of years ago, she was questioned for 20 minutes about her background, where she received her MBA and law degree, even where she went to high school. Hanna, co-founder of Mahmee, a Los Angeles tech company that works with health care systems and insurance companies to get women access to maternity care, didn’t think anything of it until her chief technology officer, Sunny Walia, told her, “I’ve never seen that happen.”
“You realize how many questions they asked about you,” he said, “how many things they challenged about your background?”
“Until investors sit across the table from someone who is unlike anyone they have ever invested in before, hears them out for who they really are and says, ‘Wow, you have the potential to lead a multimillion-dollar or billion-dollar company,’ we are not going to see the metrics change,” Hanna says.
‘Like a punch to my stomach’
Over the life of her company, an online marketplace called Sweeten that matches homeowners and small businesses with vetted general contractors for major renovations, Jean Brownhill has pitched 350 investors, she says. More than $1 billion in residential and commercial construction projects has flowed through the platform.
Two years after starting Sweeten, Brownhill strode through the door of a Greenwich Village coffee shop in New York City in the summer of 2013 to pitch a prominent tech investor. One of his first questions caught her off guard. He wanted to know whether her father had been around when she was growing up. “It felt like a punch to my stomach,” she recalls. “On the outside, all I did was smile. I remember making a joke and pulling up a photo of my dad on my iPhone.”
Ten minutes later, the conversation was over, and they shook hands. “The first thing I did when I got back to the office was wash my hands,” Brownhill says, “and get back to work.”
These days, the checks come easier. While presenting at a meeting held by one of her investor’s limited partners, she peered out at the sea of mostly white men over the age of 50 and realized she had access to a professional network of investors that for years was tantalizingly out of reach.
“There aren’t that many opportunities for us to build those kinds of meaningful personal connections,” she says, “and that makes it tougher every which way you slice it.”
Creating alternatives
Most black women don’t raise any venture capital. Increasingly, that’s by design. They are bootstrapping their companies or exploring alternatives such as smaller local funds or family funds. Crowdfunding and initial coin offerings, which deal in cryptocurrencies – have caught on.
In 2012, frustrated by her hunt for a replacement part to fix her grandfather’s tractor while working for an industrial distributor in Atlanta, Jewel Burks came up with Partpic, software that lets you point a smartphone camera at a piece of hardware to find a replacement without knowing the name of the supplier or the part. She had a hard time getting venture capitalists on board. “They had trouble matching who I am with what Partpic was,” she says.
Burks raised more than $2 million in seed funding and closed deals with distributors and retailers. She demoed Partpic for President Barack Obama. In 2016, Amazon swooped in and bought her company.
A growing number of diversity funds, including New Voices, a $100 million fund from Sundial Brands CEO Richelieu Dennis, give black women more options. A new crop of venture firms started by black men – Precursor Ventures’ Charles Hudson, Equal Ventures’ Richard Kerby and Cross Culture Ventures’ Marlon Nichols and Troy Parker, who say they invest in founders from all backgrounds without bias – level the investment playing field even more.
Burks, an adviser and investor, says she’s researching new funding models for women and people of color.
“I am personally more interested, not in a conversation about how do we get traditional venture capitalists to invest in more black-founded companies,” she says, “but how do those of us who care create new, inclusive models which are designed specifically for founders whose businesses have historically been undercapitalized.”
Four years ago, Arlan Hamilton, a former music-tour manager, came to San Francisco with the goal of backing underrepresented entrepreneurs. She was so broke that she met with tech investors by day and slept on the floor of the San Francisco airport at night until one of them cut her a check.
Of the 100 companies Hamilton has funded, 38 are led by black women. Last year, her investment firm, Backstage Capital, dedicated a $36 million fund exclusively to black women. She calls it the “It’s about damn time fund.”
“If there is anyone we should double down on, it’s black women,” she says.
In December, Hamilton joined tech entrepreneur Jeff Rosenthal for his podcast, Art of the Hustle. Rosenthal recalled an investor, when backing a new venture of his, telling him, “If you lose my money, you will make me double on the next one.”
“Wow, amazing,” Hamilton said. “I have never heard those words in my life.”
“That feeling of privilege that Jeff felt is the same privilege I am trying to provide for black women,” Hamilton says. “I am trying to put them in an Iron Man suit and let them fly.”