If the future of the tech industry is to be a culture of inclusion and diversity, then women founders and founders of color need funding. Although Google, Twitter, Pandora, Facebook and other tech companies released their diversity data last year, there is less data on the demographics of who investors are funding. This needs to change.
According to CB Insights’ data from 2010 on VC investments in the U.S., only 1 percent of VC-funded startup founders are black, whereas black people make up over 11 percent of the U.S. population. Meanwhile, 87 percent of VC backed founders are white and 83 percent of all founding teams of these companies are all white.
Since the number of underrepresented investors is so low, how many other investors are willing to be a part of the solution? One way to find out would be to expose the demographic data of VC firms.
Kanyi Maqubela, a partner at Collaborative Fund, released his firm’s diversity data on his blog and called to other venture capitalists to do the same. Collaborative Fund’s data shows that 28 percent of its investments are in companies with women founders and 8 percent with black and Latino founders.
Maqubela is one of a few underrepresented investors at a high-profile firm. He says at times it’s lonely to be a black man and an investor. “The times when it’s most lonely is when I am with my VC peers because there are very few general partners at venture firms that are black men — in fact, that are non-white men from any demographic.”
Maqubela says he feels a high level of responsibility to diversify investing. And although he made a call to action for other VCs to be transparent with their diversity data, so far there have been few responses. He says this is because “they don’t have to and no one has held them accountable or pushed them on it.”
Semil Shah, an investor at Haystack, posted his data on Twitter in February 2015:
Haystack so far:
72 co's, 4 acq'd
11 raised big VC $
12 HQ'd outside SV, 1 int'l
1 female founder, 1 URM founder
11 @ YC, 3 @ 500
1 unicorn— Semil (@semil) February 10, 2015
More recently Michael Seibel tweeted about the demographics of this year’s batch of Y Combinator funded companies:
19% of YC companies in this batch have at least one black or latin founder @sama @ycombinator
— Michael Seibel (@mwseibel) June 30, 2015
Even the White House knows this. CTO of the United States, Megan Smith, spoke to The Washington Post on the issue of lack of funding for diverse candidates:
“In venture capital, three percent of venture funding is going to women and less than one percent to people of color. People across the country have extraordinary ideas for startups. We need to leverage that talent on behalf of our economic future. We need to support VCs to overcome their biases.”
By leaving out women and people of color, you are missing out on millions of innovative minds. The data on VC funding, specifically for women of color, is even more dismal and practically non-existent. As often as we are seeing conversations about the lack of diversity in tech, women of color often get left out of the conversation. Women of color experience the double oppression of gender and race, which presents a complex struggle.
In response to Megan Smith’s comment, Laura Gomez, founder of Atipica, a data-driven technology that interrupts bias in the recruitment process, tweeted a call for action for data on how much funding women of color receive from VCs:
https://twitter.com/laura/status/619209109410316292
https://twitter.com/laura/status/619210718240473088
Kathryn Finney, the founder of Digital Undivided, which works to disrupt pattern matching in tech by identifying, training and supporting diverse founders, collected data from hundreds of black women founders for #ProjectDiane, a data initiative to find out how much funding black women founders receive. Her findings showed that black women typically raise around $36K in funding for their endeavors.
#ProjectDiane inspired Finney to make a documentary, called ReWriteTheCode, to put the spotlight on black women founding companies. It explores the intersection of gender and race in tech through discussions with black female founders of tech companies. Finney was able to raise over $50,000 on Kickstarter to fund ReWriteTheCode, but she said there was largely a lack of financial support from Silicon Valley.
Finney says that as a female founder of color, there are far more obstacles to face in pitching business ideas. She shared an experience in which she was training a female founder of color:
“One of her advisers was a white guy VC, well-known and beloved guy, but the first 30 minutes of an hour meeting with him, she spent convincing him that she even deserved to be there. Then she only had 30 minutes left to pitch her company.”
VCs may not be aware of the unconscious biases responsible for such experiences. A lot of founders of color can’t even get into a pitch meeting. As an underrepresented person in tech, you are one of few, which limits your network. Given that many, if not all, VCs rely on network recommendations for both introductions and due diligence, this creates a barrier that must be overcome.
So what is it actually like to be an underrepresented founder? Jhamar Youngblood, founder of mass messaging app, Blastchat, wrote about his struggles with funding in his Medium piece “Black Ideas Matter.” He struggled to receive money from a fund that targets underrepresented founders in tech. During his fundraising efforts, he said he was constantly asked about how long he and his founding partner have known each other, and what other projects they have done together.
If tech culture is truly going to change, companies and executive boards need to be diverse. Sukhinder Singh Cassidy, founder of Joyus, a video shopping experience company, just launched a platform, BoardList, to increase the number of female board members.
Wayne Sutton, a co-founder of Buildup, a nonprofit organization that aims to connect, mentor and educate founders of color, says “most investors look for referrals, so with Buildup our goal is to build relationships with the entire tech ecosystem so that companies that come through our program will be able to go on and get access to the investment opportunities where there wouldn’t have been able to our their own especially as a minority.”
Sutton recently started an Indiegogo campaign for a fund for underrepresented startup founders after having a conversation on twitter about the reality of raising money as a black founder. His tweetstorm got the attention of an investor, who privately messaged him and promised to match $100K if he was able to raise $100K first.
Raising💰 as a startup founder is hard, raising 💰 as a black startup founder 50x harder, raising💰 to invest into diverse founders 100x harder
— Wayne Sutton (@waynesutton) July 24, 2015
https://twitter.com/waynesutton/status/624742613116063745
We need more initiatives like Finney’s, Singh Cassidy’s and Sutton’s, that give women and people of color the opportunity to be in high positions of power in tech companies and start their own companies.
Many tech companies have the released their demographic data in the last year, but VC firms have not done the same. The data is lacking likely because the numbers are low, even lower than the workforce. Do high-profile tech investors actually care about diversifying the tech industry?
The only way for investors to show us that they care about diversity is for them to put their money into the companies run by underrepresented founders. So this is a call to action to investors: make a serious commitment now to invest in these companies so there can be a chance of an inclusive tech industry.
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