Guest post by Kerty Levy.
Is Venture Funding Getting LESS Diverse?
Data from PitchBook shows that “Venture funding for female founders has hit its lowest quarterly total in three years.” While the report focuses on gender, it points to a bigger issue in funding and support for diverse founders in general. Venture capital investments are continuing to grow, yet that incremental funding isn’t going to women or people of color.
With so many people working hard to support female founders, founders of color, and other diverse representation in the startup ecosystem my goal here is to further amplify initiatives underway in an effort to help change the trajectory.
When Vern Howard Jr., the co-founder and CEO of Hallo, compiled data on VC funding for Black founders, he found a staggering lack of representation. Of the 1383 companies that met certain VC criteria in Q3 2020, only 31 of them — just 2.2% — had Black founders.
In the PitchBook report, Melissa Withers, co-founder of RevUp Capital, said: “With women founders crushing it on every metric — except VC fundraising — it is clear that the industry’s refusal to support these women is based on an unwillingness to adopt new processes for sourcing, evaluating, and selecting deals.”
How do we work to put the odds in favor of female and diverse founders? We need revolutionary shifts at every level of the process:
- Empowering and educating the next generation of diverse and female founders
- Supporting and funding existing early stage diverse and female founders
- Helping diversify funding sources
- Improving representation in startup leadership and boards
Empowering and Educating the Next Generation of Diverse and Female Founders
PI 515 was started and is run by Nancy Mwirotsi, who has a passion for working with students and exposing them to the tech and entrepreneurship skills that can give them opportunities they otherwise might not have.
When students are exposed to tech and entrepreneurship in school, they can build skills and envision a career path bigger than what others expect of them. They can especially do so when they get to see people like them succeeding in the field as founders.
“The students need steps,” says Nancy. “They need small wins to show them they can do it — show them they belong. I push a project-based curriculum and critical thinking. Go identify a problem, see if others have a similar problem, and figure out how to solve it.”
The entrepreneurial spirit exists naturally in kids, from what Nancy sees. “They’re already starting dog walking businesses, making cupcakes, holding lemonade stands — we need to support that,” she said. “We need to rethink how we expose kids to entrepreneurship. They can’t reach for excellence if they don’t see examples of it, and kids are rarely exposed to excellence in people of color in our current entrepreneurial education system.
In working with refugees, including those of middle school and high school ages, she sees them having a hard time seeing a pathway to success. “It felt like the system wasn’t designed to see what success could look like. They’re being told to go work at the meat plant and that would be success. No one was showing a better path forward.”
As a founder herself, Nancy knows the importance of supporting and funding diverse and female founders. “We need to fund innovation, regardless of where it’s coming from — women, people of color, LGBTQ+ individuals. It’s easier and less risky to fund a known entity, like a new Google data center, than it is to fund innovation. We have to work toward funding innovation so it can happen more quickly and be supported no matter how big the founder’s network is.”
PI 515 is helping build a pipeline of tech- and entrepreneurial-educated students who can see what startup success can look like.
Supporting Existing Early Stage Diverse and Female Founders
The PitchBook reporting shows that VC funding is going to founders with existing networks, connections, and resources — often not the situation for underrepresented and female founders. While it’s not a silver bullet, helping diversify the early stages of entrepreneurship is vital to diversifying later-stage startups that are getting to fundraising rounds.
There are many initiatives at work to build the pipeline of founders. Here are just a few of the existing organizations leading this work. They are creating access to the capital, education, and community that underrepresented founders need to launch and scale their businesses.
Blacks in Technology Foundation is the largest community of Black people in the technology industry.
Camelback identifies, develops, and promotes early-stage underrepresented entrepreneurs with the aim to increase individual and community education as well as generational wealth.
Since 2012, digitalundivided has been building a world where ALL women of color own their work.
Divinc mobilizes communities, executes programs, and establishes partnerships that foster diverse, equitable, and inclusive cultures.
The Female Founders Alliance is on a mission to accelerate the success of venture-scale women and non-binary founded companies.
Founder Gym is the leading online program training underrepresented founders on how to raise money to scale their tech startups.
Future Females is a movement to inspire more female entrepreneurs and better support their success.
Get Sh!t Done helps female entrepreneurs who are building scalable businesses gain and grow traction to put them on a path to doing so on their own terms.
Lunar Startups is a nonprofit dedicated to unlocking economic empowerment through inclusive entrepreneurship. It specializes in growth, connection, and innovation for Black, Indigenous, people of color, LGBTQ+, women, and non-binary entrepreneurs.
ParentPreneurs exists to provide money, tools, resources, and social capital for Black ParentPreneurs so they can be the best parent and entrepreneur possible and so they can be great spouses/partners and leave a legacy for their children.
Seed Spot is a nonprofit organization dedicated to supporting all social entrepreneurs creating a product, service, or technology that improves lives or makes the world a better place.
StartOut’s mission is to increase the number, diversity, and impact of LGBTQ+ entrepreneurs and amplify their stories to drive the economic empowerment of the community.
Venture for America is a diverse and inclusive community of startup leaders and founders creating economic opportunity in American cities by mobilizing the next generation of entrepreneurs and equipping them with the skills and resources they need to create jobs.
Helping Diversify Funding Sources
Diverse and female founders are more likely to support other diverse and female founders. Venture capital isn’t exactly swimming with diversity, but there’s work being done to change that.
For example, the recently launched Acrew Diversity Capital Fund is working “to diversify the ownership and leadership of leading growth stage companies through value added capital.“
A diverse network of equity partners for pre-IPO companies can result in women and people of color gaining seats on tech’s historically white, male-dominated capitalization tables. Acrew founding partner, Theresia Gouw, told CNBC, “Diversifying who gets to have a shareholder’s seat at the table, we think that’s going to have massive positive impacts for public companies going forward.”
Diverse and female founders need VC support beyond the accelerator/incubator stage, as well as the networking, resources, talent, and opportunities that come with these. Here are just some of the VCs that are not only run by diverse leaders but that also focus on underrepresented founders as part of their investment thesis.
AllRaise started as a call to action. Today, it’s a community, a movement, and a rallying cry centered on the belief that our personal ambitions can and will include the prosperity of all women.
Backstage Capital sees that the less than 10% of all venture capital deals going to Women, people of color, and LGBT founders as the biggest opportunity in investment. Backstage Capital has invested more than 170 companies led by underrepresented founders.
BBG focuses on female founders and backs the new wave of entrepreneurs who are reimagining daily life and creating market-defining products and services that make our work, play, and home lives simpler, better — and more satisfying.
Black Ambition’s goal is to fund bold ideas and to help reduce barriers to capital. Black and Latinx entrepreneurs are eligible to receive mentorship and win up to $1,000,000 in funding.
Black Angels are the antidote to the so-called 2% problem in Silicon Valley. They believe that the abundance of national Black wealth and expertise combined with the youthful Black genius and tech talent will produce successful next-generation technology companies with Black techpreneurs at the helm.
Black Girl Ventures funds and scales tech-enabled, revenue-generating businesses (under $1M) founded by people who identify as Black/Brown and women.
Blck VC empowers and supports Black investors while increasing diversity in venture capital.
Chloe Capital, in partnership with foundations, universities, and corporate innovators, has set out on a national tour to #InvestInWomen.
Divvyd works with teams that are actively seeking to raise capital and are self-launched, self-scaled, or recent graduates of an incubated or accelerated cohort.
Harlem Capital Partners is on a mission to change the face of entrepreneurship by investing in 1,000 diverse founders over the next 20 years.
HBCUvc’s mission is to direct how capital is formed and distributed to increase opportunities for Black, Indigenous, and Latinx innovators.
Kapor Capital believes in the power of transformative ideas and diverse teams. They are an Oakland-based fund that understands startup companies have the ability to transform entire industries and to address urgent social needs as they do so.
Republic is a private, crowdsourced investing platform for investors seeking high growth potential.
SoGal’s mission is to redefine the next generation of diverse entrepreneurs and investors.
Women 2.0’s driving force is to push conversation forward and take and encourage direct action around equity and equality, with a particular dedication to women-founded and early-stage companies.
Zane Ventures sees and invests in diverse founding teams, bridging the gap from Seed to Series A and beyond with dollars, education, and exposure.
Increasing Diverse and Female Representation on Startup Boards
Along the same lines as investment in startups is board representation. Right now, board representation for growth-stage startups is pretty homogeneous.
Organizations working to connect qualified, diverse board members with open board roles include:
Techstars’ Commitment to DEI
Andrea Perdomo, Network Catalyst — Diversity, Equity & Inclusion Strategy & Programs at Techstars, is helping the organization move things forward:
“People of color, women, people with disabilities, and people who identify as LGBTQ+ are not engaging in high-growth entrepreneurship at rates equivalent to their representation within the rest of the world. When they do, they have a more difficult time getting the visibility, funding, and support they need to scale. This is true in the U.S. and around the world, regardless of how diversity is defined in the local sociopolitical context. This challenge is complex and the Kapor Center’s report, The Leaky Technology Pipeline, does an excellent job of defining the intersecting factors that lead to today’s results.”
Techstars Deal Flow Program: Techstars partnered with Harlem Capital Partners, a New York-based early stage venture capital firm, and Samsung Next to launch a joint partnership on recruiting and investing in diverse founders to build the next generation of world class businesses. All Managing Directors also search for diverse founders in their local or vertically focused markets.
Techstars Foundation: The Techstars Foundation vision is to stimulate innovation and positive social and economic global change through empowering underrepresented communities and entrepreneurs.
- Grant funding to 18 nonprofit organizations that are making meaningful and measurable impacts on entrepreneurs from underrepresented communities
- More than 350 donors have contributed more than $1 million since 2015
- Several organizations mentioned in this post have received funding from Techstars Foundation
More to Come: We are working on other exciting programs, launching soon. Keep an eye on the Techstars news space for upcoming announcements.
We know that the programs and initiatives described are only the first steps on our diversity, equity, and inclusion journey and continue to seek opportunities to partner with and build new programs to support DEI and entrepreneurship among underrepresented communities.
Big change can only happen if we work together and uplift the great initiatives in our communities. And, this blog covers only a small fraction of all of the initiatives out there. If you’re working on something that helps change the trajectory, please comment and I’ll continue to amplify.
Kerty Levy is the Managing Director of Techstars Iowa. This story was originally published on Medium.