It’s no secret that there’s a major problem with venture capital firms (VCs) and investing in women of color. The climate is not favorable, to say the least. Although this is a known fact, diversity and inclusion still aren’t on the agenda of many venture capital funds.
According to a digitalundivided study, Black women-led startups have raised $289MM in venture/angel funding since 2009, with a significant portion of that raised in 2017. This represents .0006% of the $424.7 billion in total tech venture funding raised since 2009.
Instead of leveling the playing field, VCs are continuously displaying bias and sexist attitudes towards women of color. Black women founders, especially, are subjected to discrimination from VCs that cannot be quantified in studies. This is partially due to a lack of cultural understanding and awareness.
Whether this lack of cultural acuity is ignorance or straight-up unwillingness, is yet to be discovered, but women of color aren’t being assessed fairly. Sure, an entrepreneur should expect tough questions in a VC meeting. Of course, investors should want to know as much as possible about a company or idea before handing over their cash. However, asking inappropriate and downright disrespectful questions is not okay.
For example, standard VC vetting questions about barriers to entry suddenly turn into questions about plans to have children, as if the ability to have children is a potential obstacle to gaining entry into a certain industry. These kinds of sexist attitudes are a part of the problem and contribute to the incredibly low percentage of Black women entrepreneurs who receive funding from VCs.
Racially biased questions have been said to be used by VCs in an attempt to scare women of color from continuing to move forward in the funding process. During the Black Women Raise Conference, a group of women founders had the chance to ask VCs questions about navigating fundraising for their potential startups.
One founder, Asmau Ahmed, asked the panel of VCs, “Are we as Black women (just fundamentally) higher risk investments for you?” To which all four of the panelists immediately answered “no.” Charles Hudson — founder and manager of Precursor Ventures — elaborated further:
“I think you (VCs) could ask different questions. I think — I think there’s all of these like questions that I now understand —‘Well, do you think she can recruit? Do you think she can hire?’—I’m like I know what’s behind that question. It’s ‘Do you think she can get people to work for her because she’s a Black woman?’ And people ask these, what on the surface sound like innocent enough legitimate questions about investments, but they’re not innocent. They’re loaded. And you learn a lot by the questions people ask.”
Fortunately, women of color aren’t waiting around to answer these illegitimate questions from VCs that are already hesitant to invest in Black women entrepreneurs. There are VC firms with Black women who hold leadership roles on the rise. Hopefully, the emergence of Black-owned and women-led VCs will give women of color a fair chance to pitch to a panel that innately understands her culture.