Being the most educated and entrepreneurial female group in the U.S., black tech women founders receive less than 1% of VC funding. And even if they succeed in receiving the cherished funding, its scale is usually about $36,000, comparing with $1 mln. figure for white male founders.Though some individial initiatives to fight this bias occur, there is a lot to be done in this field.

 

Pallid Statistics

If we appeal to official statistics, we will figure out that black women are known as the most educated group in the U.S., and they constitute the highest percentage of any group enrolled in college, as per the 2011 U.S. Census Bureau. According to the U.S. Department of Labor reports, «60% of black women are active in the labor market, but are grossly underpaid».

Also, and that is even closer to our theme, black women are the fastest-growing group of entrepreneurs in the country. As reported by the Institute for Women’s Policy Research, there was a 265% increase in black women-owned business between 1997 and 2014, as well as growth among all women-owned firms, which grew in revenues by 72 respectively. Overall, black women are responsible for over 1.5 million businesses all over the country, which generate more than $44 billion a year in revenue.

 

Where The Problem Lies

It is investigated that women start companies at twice the rate of men, but they receive funding much worse than their male colleagues. According to a study by First Round Capital, founding teams including a woman outperform their all-male peers by 63%, but female CEOs get only 2.7% of all venture funding, women of color get nothing – only 0.2%.

The fact of underfunding lies deep in the confluence of thoughts concerning diversity, use of technology, and economic policy. All these reasons lead to the difficulties of receiving funding from investors and creditors and securing lending. In this case racial bias goes beyond the common sense. And even if black women are funded, they get the short end of the stick – $36,000 as average. Only 11 of the 88 black women founders had raised $1 million or more in funding. White male startup founders, on the contrast, receive about $1.3 million in funding. The difference is quite significant, isn’t it?

In addition, black women normally don’t receive venture capital funding from heavy hitters, who are able to turn startup’s founders into stars, gaining attention of mass-media. As the result, a buzz occurs and ensures more interest from the public in making sure they known these «trendy startupers» and their products or services. Without this «circuit», a black women founder has to climb up by herself, competing with experienced heavy hitters. According to the results of digitalundivided’s proprietary research study about the state of Black women in tech entrepreneurship in the U.S. named #ProjectDiane, over 50% of black female founders received less than $100,000 in funding. Of 10,284 venture deals funded from 2012 to 2014, just 24 were with startups led by black women. To put it simple, that’s zero. It means that they are tapping resources outside of traditional venture networks: loans from family and friends, retirement accounts, credit cards, factoring, crowdfunding, grants, and personal savings. Here you may find the whole list of financial alternatives.

 

Blavity: Attracting Investors On Its Own

A vivid example of such underfunding is the tech and multimedia company Blavity, which is represented by a website for black millennials, covering all important for young African Americans issues, from tech to culture through a humorous and critical prism. Now it has an increasing total of over 120,000 followers across social media, while generating over 700,000 monthly unique visitors to its flagship site. The company was founded in 2014 by Morgan DeBaun, and 25-year-old Co-Founder Aaron Samuels. The idea came to DeBaun when she was studying at  Washington University in St. Louis. During the lunch time she gathered together with other black students and they were able to feel very comfortable, while were sharing the same table and thoughts. By that lunch table time the idea and the term was born. She admits: «That moment when everyone would come to the table from different classes, parts of the country, and ethnicities of the diaspora – that was Black Gravity, or Blavity».

Anyhow, even such a philanthropic initiative, which connects active members of black community with relevant perspectives and influencers, faces particular challenges. DeBaun states: «Is it possible [VCs] may be biased and would fund the same thing if presented by someone else? Of course. My cofounders worked at Palantir, Bain, and LinkedIn, [and have] Stanford educations». The main problem this black founder faces is securing funding on expansion and scaling the business. To create and curate the content on the website is an expensive thing, especially if we take into consideration a high competitive tech entertainment industry. Nevertheless, DeBaun is hopeful because Blavity by itself, via two successful conferences hold in 2016, has attracted investor attention.

 

Being Funded By Their Own Community’s VCs

Alright, now let’s move to the situation when on the chance a black woman founder is funded. Very often the money, by accident, comes from black community as well. In recent years, several black-owned VC funds and firms have been established and they are not surprisingly focused on funding black-owned businesses, that have lack of funding or haven’t received any funding at all. The list of key funders includes Magic Johnson Enterprises, with director of investment Ryan L. Smith heading up funding opportunities including Jopwell, ShotTracker, Walker & Co, and Uncharted Play; Erik Moore at Base Ventures; former Hollywood agent and entertainment VC Charles King at Macro VenturesMonique Woodard at 500 Startups, focusing on black and brown founders; and Arlan Hamilton at Backstage Capital. Other ventures that were funded by these key funders are already discussed Blavity, 21Ninety, On Second Thought, Airfordable, and Pigeonly.

I had a great time meeting with @target's African American Business Council today in Minneapolis, MN!

A post shared by Earvin "Magic" Johnson (@magicjohnson) on

Having money to keep the lights on and scale the business has been key for the women running these companies. While having the support of one’s community is crucial, without receiving initial support and feedback on the product offerings and positioning via funding, these companies have no way to be sustained.

 

Possible Solutions

Considering the fact that «the nation will be majority minority by 2044blacks are the largest and most engaged group of early tech adoptersblack spending power is at $1.25 trillion, and Hispanic buying power is at $1.3 trillion (which includes those identifying as Afro-Latinos)», increased between 2004 and 2014 to 95% in annual equivalent, it would be rather wise to invest in these kind of businesses, to receive good return on investment.

One of possible solutions is diversifying large VC firms. «Associate and partner ranks are on par with tech company diversity employee numbers, and those sourcing investment opportunities for the large VC firms resemble the companies they tend to invest in», – as Fast Company suggests. While many firms support the efforts of their portfolio companies to diversify in terms of employees and c-suite, there is not much being done in terms of their own firms.

Another possible solution is to raise a fund or allocate a portion of their current fund to only investing in people of color’s startups. If paired with a diverse associate or partner, who is devoted to sourcing founders of color to invest in, this strategy could create a kind of parity.

For example, Arlan Hamilton, was able to enter a very white, male industry in the field of VC. «I knew I wanted to, in some way, get more capital into the hands of high potential, underrepresented founders. I just didn’t know exactly how I was going to go about doing that», – she says. Today, she’s the managing partner of Backstage Capital, a venture capital firm funding startups led by underrepresented minorities: women, people of color, and LGBTQ founders. In a year, she’s backed 19 startups, 9 of those are led by black women.

Monique Woodard, who is a partner at 500 Startups, launched a campaign to invest $25 million — a “microfund” by the standards of Silicon Valley — to 100 black and Latino-led early-stage startups. «I very specifically wanted to work at the early stage when founders need the most help and the most support. That’s where you can make the most impact for black and Latino founders», — Woodard told USA Today.

The same opinion, but not the same opportunities, has Atlanta-based Cherae Robinson, who founded the Africa-travel-curation site and app Tastemakers Africa. She says that being a black woman founder is «a double negative». In a NY Mag interview she said that «As a black person, as a woman, I don’t have the connections to these networks of white males who are writing the checks».

Stephanie Lampkin, the founder of Blendoor, has raised around $150,000 in outside capital — a figure that almost pales in comparison to her white male peers in the same space. She thought that there was not any bias left. «That was a big revelation — that I’m not going to get support from the people who are most obvious. I do think my biggest check is going to come from an old random white guy somewhere who’s just sick of investing in the same people all the time».

Well, a lot of things in the field of eliminating the existing bias between funding white male tech founders and black female ones are to be done. «Years of institutionalized racism, sexism, and classism, as well as the pressures of being the ‘representative’ of an entire culture of people, has made failure a costly proposition to many potential Founders of color, especially Black women. Solutions must extend past the creation of scholarships or “remedial” accelerator programs within prominently white male accelerator programs and focus on an expanded definition of entrepreneurship, where calculated risks are encouraged and supported, and the goal isn’t assimilation, but valuing the potential of these markets», – according to BlackEntrepreneur.com.

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