As more Black women enter the startup world, many are struggling to secure venture capital funding compared to their white male counterparts. In 2017, women received nearly 2.2 percent of the $85 billion available in venture capital funding.
According to the ProjectDiane2018 report by digitalundivided, the numbers were even smaller for Black women. Black women represented .0006 percent of the $424.7 billion in total tech venture funding raised since 2009 and a majority of the funding was raised in 2017.
The dismal rates at which Black women receive funding reflects a larger issue with diversity in the tech and venture capital spaces. The National Venture Capital Association (NVCA) and Deloitte released a report in 2016 that showed that Blacks accounted for 3 percent of the VC workforce and that women accounted for 45 percent. Black people only comprise 2 percent of senior positions at VC firms.
“Research shows that diverse teams make better decisions and, with this baseline measurement in hand, we now turn to developing the tools and resources that will empower all venture firms to take action,” President and CEO of NVCA, Bobby Franklin, said in a press release.
In an analysis by the Wall Street Journal, 71 of the top venture capital firms in the U.S. were comprised of less than 10 percent of women and 25 percent people of color.
“You have these huge VCs and people think they’re geniuses— they’re not,” Backstage Capital Founder Arlan Hamilton said during a New York City event.
This year, BackStage Capital, a leader in minority-focused VC funding, launched a fund for Black women founders with a goal to invest more than $36 million. BackStage Capital has invested in more than 100 founders in underrepresented groups.
“Black women are some of the best hackers this country knows,” Hamilton said. “We know how to figure things out.”
Mariah Lichtenstern, a founding partner of DiverseCity Ventures, said that breaking biases within VC firms takes more than one person.
“There can’t just be one seat at the table, there needs to be multiple diverse perspectives to actually change the biases,” Lichtenstern said. “When you have more representation of women and POC, now they’re not having that pressure to conform to this group that they’re assimilating into.”
Lack of diversity is nothing new to the tech industry and VC firms are no different. As Black women increasingly enter VC spaces, they are directly and indirectly, becoming responsible for diversifying who gets VC funding.
Lichtenstern’s role at DiverseCity Ventures has helped her elevate Black women founders, although the firm is not specifically focused on minorities and women entrepreneurs. Lichtenstern said that she is aware of the value that people of color and women bring and makes sure to “not overlook them or underestimate them.”
Shauntel Garvey, a general partner at Reach Capital, said that investors need to admit that they have an issue with bias before the diversity issue can be solved—and that they often don’t recognize that they have biases. Reach Capital has developed a specified list of characteristics and personality traits it looks for in founders to encourage objectivity when disbursing funding.
“We make sure that you can apply them to people from different backgrounds,” Garvey said. “Maybe when you think of someone who is talented, you’re only thinking of people who went to Stanford. That’s only one measure of talent. Again, that can be an inherent bias that you have.”
BackStage Capital’s Principal and Director of Deal Flow, Brittany Davis said that there are two factors that limit many investors from recognizing the opportunity to invest in Black women—pattern matching and the lack of network referrals of Black women to venture capitalists.
“The bigger disconnect I see is that many traditional VCs are still pattern matching, whether consciously or not, for the demographic profile of founders who have been successful [in] building big businesses historically,” Davis said.
Davis said that venture capital is a “relationship game” and that founders need warm introductions for many traditional venture capitalists to invest.
“So often, VCs invest in deals shared with them in their network – and many don’t have a diverse group of investors sharing deal flow with them or really know that many diverse founders,” Davis said.
Increasing diversity and elevating Black women in venture capital cannot be the responsibility of one group or firm if real change is to be made. It will take a combination of traditional investors coming to terms with their biases, data-driven results, and Black women in leadership roles at VC firms to increase the amount of funding that Black women receive.
“Backstage can’t do everything on our own and we can’t set the standard for doing it all on our own,” Hamilton said about propping up underrepresented founders. “We shouldn’t have to walk into meetings with founders just to make sure they are heard.”