Out of $85 Billion in VC Funding Last Year, Only 2.2 Percent Went to Female Founders. And Every Year, Women of Color Get Less Than 1 Percent of Total Funding.

“You’ve clearly got what founders are made of, but I hope you're not planning to get pregnant anytime soon".

people of colour
As the co-founder of comprehensive maternity healthcare company Mahmee, CEO Melissa Hanna is an expert when it comes to fielding questions about prenatal and postpartum care, but she was shocked that she would be asked to discuss her own body as part of the fund-raising process for her business.  It was 2015, and she was meeting with a thirty-something, white, male venture capitalist who was close to putting $100,000 of early-stage funds into the company.  As soon as he said it, Hanna recalls, he “kind of cringed a little bit, even knowing that he’d said that out loud. But then he said, ‘Yeah, you know, I mean, female founders …’ and left it hanging in the air.”

At the time, Hanna had been running her company for nearly two years, with growing revenue and brand recognition to show for it. The deal could have been a fruitful one for both parties, but the comment brought any potential working relationship to a halt. She recalled to Entrepreneur how she volleyed a question right back.

“I said, ‘Yeah, I hear you. I understand your concern. I'll let you know I'm on birth control, I'm on the pill. And I hope that you also ask all of your male founders, when they’re pitching, if they're using condoms. You do that, right?’ I just leaned into it,” Hanna said. “If someone is going to pointedly reject you on a factor like that, you have to just be so on the nose about it back with them. They did not respectfully engage in that conversation with me. So, why should you save them from their own inappropriateness?”

She recalled another meeting that took place about a year later, that was particularly eye-opening about what she was up against. The company’s CTO Sunny Walia was with her. A significant chunk of the time in the room with the VCs was spent on her background and credentials, discussing things like what her college thesis topic was and who had paid for her education. Up until that moment, Hanna said, she had thought that line of questioning was just something all founders went through.

But after the meeting ended Hanna said, Walia expressed surprise. Prior to joining Mahmee, Walia’s previous CEOs all had had fairly similar backgrounds: wealthy, older white men who were building tech companies, who had track records and existing relationships with many people in the investing space. None of his meetings with them had gone like this one. Hanna said that moment crystallized what she was beginning to understand: as a female founder of color in her late 20s who was effectively a stranger in these rooms, she was working with a completely different set of expectations to the white, male founders that Walia had worked with in the past.
“To have had a room of VCs spend one-third of my time with them, debating me and my credentials and my capabilities, before I even got to pitch what the company was doing: That is the challenge of being a ‘non-typical founder,’” Hanna said. “In a nutshell, you don't get as much time, you don't get as much money. You don't get as much respect. And yet you're still expected to make the same returns.” But, she is quick to add, “This is not a ‘woe is me’ kind of story, this is not about being a victim of Silicon Valley, it’s about being successful despite the odds against us.”

The percentage of venture-backed companies with female founders has been stuck at approximately 17 percent since 2012. In 2017, women only got 2.2 percent of the total VC funding for the year, which was $85 billion.  “If you [the investor] sit down and you think to yourself, this person couldn't possibly build a billion-dollar company, if you start the meeting with that mindset, how is someone supposed to pitch a billion dollar idea to you?” Hanna explained.

According to DigitalUndivided’s biennial Project Diane study, which looked at the state of black women founders in the United States, since 2009, businesses led by this cohort have raised $289 million of the total $424.7 billion raised during this period -- or just .0006 percent of the pie.  A Stanford University survey in 2016 found that roughly 1 percent of all Latinx-owned businesses launched between 2007 and 2012 in the United States fundraised with venture capital or angel investments.

On the other side of the table, a 2016 study conducted by Deloitte and the National Venture Capital Association found that just 2 percent of investment professionals are black, 1 percent are Latinx and 15 percent are Asian/Pacific Islander.  “The underlying issue for why there isn't more money going to women and underrepresented minorities is that those are not the people who are around the table making investment decisions,” said Susan Lyne, managing and founding partner of BBG Ventures, an early-stage fund focused on consumer internet and mobile startups that have at least one woman founder. “Changing or increasing the diversity among the investment partners is what's going to have the long-term impact on funding.”

As of 2017, among the top 100 venture capital firms, eight percent of partners are women, and eight firms in the top 100 added a female partner for the first time last year.  Recent projects have identified black and Latina women leaders in the VC world. These include The List of Black Women in VC, spearheaded by Sydney Thomas, an investment associate and head of operations at Precursor Ventures and the List of Latinas in VC, from Unshackled Ventures senior associate Maria Salamanca and Jomayra Herrera, an investor at the Emerson Collective. The two lists contain 64 and 28 women, respectively.

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Source: Entrepreneur Europe



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