Last year, Fast Company did a deep dive into the world of black women founders; the money (or lack thereof) that they raise, the challenges they circumvent, and what could be done to alleviate some of their problems. Then, Elizabeth Holmes, who raised $750 million, was found to have no viable product. Questions were asked about what that would do to women founders, and particularly would it have any chilling effect on black women founders.
Founding starts with funding. While Richelieu Dennis, founder of Shea Moisture and owner of Essence Ventures, recently launched the $100 million New Voices Fund to resolve the disparity in funding by investing in companies owned and/or managed by women of color, there are larger systemic issues at play. An analysis of a data set of roughly 900 venture capitalists in the industry released last month found that 40% of all investors attended either Stanford or Harvard. The assessment, by venture capitalist Richard Kerby, partner at Equal Ventures, also found that the industry was 70% white, 82% male, and only employed eight black women and two Latinas. With such homogenous and insular industry statistics as these, it can easily lead to underfunding, or not even finding, good technology and founders born of these communities. What does this mean a year later for the future of inclusive innovation, particularly for the demographic that Nielsen has shown sets trends, are early adopters, and drive culture?
The last year has shown some small victories, seeing the latest round of $1 million+ raises see two additional black women join the ranks of the small number of black women with such funding rounds. In April, Vanity Fair featured 26 women of color who have raised $1 million in outside funding, including 16 black women.
One of those women, cofounder and CEO of Blavity, Morgan Debaun, closed a $6.5 million Series A funding round in July, after raising $2 million last year. Reflecting on her fundraising experience, she notes that it isn’t too different from other founders, but for some interesting isolated issues underrepresented founders face. “Raising a Series A after a seed round is hard for everyone. You have to make sure you’ve shown the ‘right’ kind of progress VCs are looking for, and metrics have to be on point,” says Debaun. “That said, metrics are sometimes not comparable. At the later seed and Series A stage, it’s about comps being comparable to similar companies [as yours]. Therefore, if your comps don’t line up mostly because you’ve been underfinanced, it can be difficult for people to look past that.”
WHAT WILL REALLY MOVE THE NEEDLE
Debaun points to one possible suggestion that could help with underfunding and finding good investments–more black VCs with decision making authority. “A great way to help move the needle would be having managing partners and black VCs in these large firms that can make decisions. What we need to work on is building a network so that we don’t have to go outside of our networks and communities to raise, and larger black VCs that can lead raise rounds.”
Marlon Nichols, managing partner at Cross Culture Ventures, is heeding the call. Backed by Silicon Valley Bank, Nichols started the VC Apprentice program for women of color. “We founded this program between looking at the number of women of color as founders, and then those funding them in the venture space, which is around .002%,” says Nichols. Nichols pitched the program to Silicon Valley Bank as a preparatory program for a woman of color who see all aspects of the business–fundraising, evaluating pitches, deals, building a network in the venture space, selected through an application process. Nichols explains, “The participant becomes a part of the team should all go well, and she’s well versed and experienced to hit the ground running as soon as she starts. We get the benefit of her lens as a diverse woman as we look at diverse deals.”
The program will expand to two or three participants next year, though Nichols acknowledges the firm won’t be in a position to retain them all, but sees great benefit to the VC ecosystem–“If we can train them, then they can be in the pool of candidates that a firm looks at when they are looking to hire someone new on their team. It’s about the creation aspect, as I don’t believe in lack of pipeline. So, let’s kill that excuse by creating and bringing in talented people of color and making them ready to join VC firms.”
The first apprentice, Jennifer Richard, is an MBA student at the Haas School of Business. A first-generation college student, she says she “didn’t pursue a math or business degree in undergrad due to lack of understanding nuances or unspoken rules around those fields. It’s a large reason why I pursued an MBA, and it gave me the confidence to complete with white male counterparts.” In the program, she has written memos, created models, evaluated deals, and made decisions on investments. Richard says she is more than prepared to be a VC upon completion, and Nichols agrees.
“THE BLACK TAX”
This progress spurs hope, and financial interest from funders, for founders like Sevetri Wilson. Founding her incorporation, exemption, and compliance subscription platform, Exempt Me Now, in New Orleans, proved to be a barrier to finding funding. “I had to put myself in places to meet investors and other founders, like conferences,” Wilson says. Another interesting aspect to funding via black VCs is what is known as “the black tax,” which is the fear of funding founders of color due to them being held to higher standards and with greater expectation. Wilson has also seen this, noting, “If you invest in someone and it goes wrong, it will be that much harder for the next black founder; I understand.” While difficult, none of this has been an inhibitor for Wilson, as she says, “We’ve raised $2 million in total, and currently raising another $1 million to close this fall.” But she is also hopeful for the success of Nichols’s program, as it will lower the level of fear in investing in black women, and create more black women investors. As Nichols simply put it, “You go find them, or you create them. But not having them, period, is not something we can, or should, deal with.”