Although Black women are the fastest-growing group of female entrepreneurs in the United States, they’ve long been slighted by startup investors and significantly under-funded. But in spite of the obstacles they face, some founders are forging ahead and continuing to thrive in their businesses.
In fact, the number of Black women who have raised over $1 million in funding has more than doubled since 2018, according to ProjectDiane, a biennial report released Wednesday.
The report, which tracks publicly-announced funding of Black and Latinx women-founded businesses, is compiled by digitalundivided, a nonprofit focused on supporting entrepreneurial women of color. It uses data from Crunchbase and Pitchbook to track crowdfunding, angel, seed and venture round investments. It’s possible the data doesn’t include some founders who are not listed in those databases or didn’t disclose funding publicly.
According to ProjectDiane, at the start of 2018, just 34 Black women had raised $1 million or more in outside investments for their businesses. But now, in data tracked through August 2020, more than 90 Black women have hit or exceeded that level. The numbers of Latinx women who’ve reached that milestone also grew quickly, although they remain incredibly underrepresented in VC circles, too. Still, it’s an impressive upswing that could signal a shift in a startup landscape largely dominated by White men.
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This milestone comes amid a backdrop of protests against systemic racism and an unprecedented push to support and buy from Black-owned businesses. Founders and advocates are hoping to build upon that momentum, but also wonder if the support being shown to Black-owned businesses, let alone those founded by Black women, is here to stay.
“Businesses founded by women of color are in focus now, and specifically those founded by Black women because of the racial reckoning,” said Lauren Maillian, CEO of digitalundivided. “But we want and we need to make sure that they continue to gain great investment moving forward.”
Bridging the funding gap is long overdue
The number of businesses owned by Black women grew 50% from 2014 to 2019, the fastest growth among all female entrepreneurs, according to American Express projections based on Census data. Black women make up nearly 14% of the female population in the US, but 42% of all new women-owned businesses during that time.
Many of these companies are small, local businesses and not necessarily seeking outside investors. That said, for those founders who are focused on scaling up quickly, there’s a huge gap between their entrepreneurial ambitions and the funding they’re able to secure: Black women have received less than 1% of venture capital funding, analyzed by ProjectDiane since it started tracking the data.
Perhaps not coincidentally, few Black women are in a position to make decisions on how capital is invested in startups. Only 4% of the VC workforce is Black, and only 3% of the people actually leading investments are Black, according to data from the National Venture Capital Association.
“You have this huge deficit within the ecosystem for Black women,” said Dell Gines, senior community development advisor at the Federal Reserve Bank of Kansas City who conducted a year-long study on startups owned by Black women released in 2018.
“Venture capital is by and large a network-based industry, where you have a series of gatekeepers and other hurdles to get in front of because there’s greater demand for capital than there’s usually supply. You also have these filtering mechanisms that traditionally don’t include people of color and women, because that’s how the networks originated.”
There’s been improvement in the last couple years, but not enough to close the gaps.
Collectively, Black women founders raised $700 million in 2018 and 2019, up from $289 million raised in 2009 to 2017, according to ProjectDiane. Despite the major increase, however, Black women founders accounted for just 0.27% of the $276.7 billion in startup funding raised by all companies in those years, as tracked by Pitchbook.
The dearth in numbers stems back to a number of well-documented reasons including unconscious bias, systemic barriers and gender and racial stereotyping. The missed opportunity and economic cost of not investing in Black women is huge, Gines said.
“If you improve the rate of Black women entrepreneurship — their ability to grow and scale — then you improve the entire community,” he said, pointing to research that connects entrepreneurship growth rates with economic growth.
Black women aren’t newcomers to entrepreneurship. Even before women could vote, they owned businesses.
“We’ve been entrepreneurs. As soon as we could actually control our own destinies, create our own and monetize our own ideas we’ve been doing it,” said Kathryn Finney, founder of digitalundivided and The Doonie Fund, which makes microinvestments in Black-women-owned businesses. “It’s just been times throughout our history where that desire, that force has been artificially depressed by outside forces.”
