New report shows just how bad Silicon Valley is at funding black women’s startups

0
35

Many writers are employed to talk up the issue of tech’s lack of diversity. Unfortunately, those writers have been working with scarce data on the topic to illustrate the problem.

California-based investment firm digitalundivided has released its first report from #ProjectDiane, “a proprietary research study about the state of Black women in tech entrepreneurship in the United States.” The report contrasts the increasing number of black female entrepreneurship ventures throughout the country with their deafeningly silent presence in Silicon Valley.

The rate of growth of new businesses founded by black women has been an explosive 322% since 1997, far higher than the 91% rate of black men. In fact, it’s the highest rate among demographic groups in the United States.

 

Black women led businesses are booming in the US but not necessarily in the tech sector (infographic, #ProjectDiane)
Black women led businesses are booming in the U.S. but not necessarily in the tech sector (infographic, #ProjectDiane)

When it comes to technology startups, however, there is a major gap. Only .04% (yes, 2/5 of a percentage point) of the startups led by women in the U.S. (~2,200) are led by black women.

Black female tech founders relative to white female tech founders (image, #ProjectDiane)
Image credit: #ProjectDiane

“Black women founders have the drive and skill to lead successful startups that can have a profound impact on their communities,” says the report, written by digitalundivided (DID) CEO Kathryn Finney and Marlo Rencher. “However, they continue to be severely undercapitalized with little to no structures to acquire the funding and social capital necessary to scale a successful startup.”

Of the founders surveyed by the study, only 12 had raised more than $1 million, led by Kiverdi ($40 million), since-acquired Pathbrite ($12 million) and Sweeten ($7.3 million). DID runs its own accelerator program, but the most apparently prolific investors in black women’s startups is angel investor Joanne Wilson, Gotham Gal Ventures and their frequent corporate venture partner Comcast’s Catalyst Fund.

Perhaps glaringly, black female founders in New York had better luck raising money than in California. That contrast might deserve more investigation itself, as to why the better funded Silicon Valley is not raising as much money or hiring as many black females as the New York startup ecosystem. Interestingly, founders in Ohio and Washington D.C. have higher funding rates than the Big Apple, but this might also be statistically insignificant because of just how few founders there were to collect data from.

Under-represented relative to the U.S. population

DID is focused on “investing where others won’t,” focusing on black and Latina women founders. That has led Finney to develop the organization’s BIG Accelerator to promote tech in those demographics in small startups and the dominant corporate titans of tech. But as commonly pointed out by tech writers, those giants have under-represented the American black population inside their offices.

CEO Jean Brownhill Lauer of Sweeten with her team
CEO Jean Brownhill Lauer of Sweeten with her team

“The numbers are shocking when looking at individual companies, especially those based in Silicon Valley,” the report goes on. “At Facebook, 3% of new employees (36 out of 1,213) in 2013 were Black, and the company currently has only 81 Black employees in a U.S. workforce totaling 4,263. Less than 2% of Google’s total workforce is Black. Similar numbers are reported for other ethnic groups like Latinos.”

The report does not insinuate this is the fault of bad hiring practices, nor does it ponder a lack of educational opportunities or other possible causes to the low count of black employees in major technology companies. Even so, it does find some stark differences between employees and users of a certain well-worn app. While contrasting the small number of female black employees at Twitter for instance, it points out that there are 14 black women in the entire 4,000-strong work force (.004%), despite Twitter’s user base having a sizable black population (27%, though the report doesn’t estimate how many of those are women).

“The industry sees diversity and inclusion primarily as a human resource issue, but not a market opportunity. As a result, the industry tends to fund inclusion initiatives, and leaders, that focus more on assimilation into current systems rather than those with bold ideas for diverse market penetration and adoption.”

Which campuses encourage black female entrepreneurship?

The report is more of a survey and leaves some questions unanswered. While it goes into meticulous detail on percentages and real numbers of women, blacks and black women who are working in startups or major tech firms, it often does not contrast those numbers with the representation of other minorities or whites in the same spaces.

One place where the report does do this is locating the schools black female tech entrepreneurs hail from. Harvard, Northwestern and Columbia were over-represented here, none of which are schools in tech-heavy California. By contrast, white male tech entrepreneurs tended to come from California campuses such as UC Berkeley and Stanford (as well as UPenn). Among black women, Stanford was tied for 10th with Ohio University and Spelman College (a highly regarded HBCU, or Historically Black College and University).

Black women founders tend to come from different schools than do white male entrepreneurs (image, #ProjectDiane)
The schools black women founders tend to come from in comparison to all founders. Image credit: #ProjectDiane

Some other findings might be obvious, like the greater likelihood that black female founders who had been through accelerators or incubators had received more funding than those who had not. But the survey only found five black women who had been through the top accelerators in the U.S.: Y Combinator, Techstars and 500 Startups.

The most critical recommendation from the report is to support more long-term programs to promote black women (and implicitly, other seldom-represented groups) in the tech world. Rather than “one-off hackathons,” the survey suggests committing to ongoing programs like Girls Who Code and to create more programs like digitalundivided’s own BIG Accelerator.

“There’s an acute need for incubator and accelerator programs that understand the cultural and structural challenges Black women face as startup founders,” the report asserts.

The report was written by founder and Managing Director of digitalundivided Kathryn Finney and Cleary University’s Executive Director at the Center for Innovation and Entrepreneurship Marlo Rencher.

LEAVE A REPLY

Please enter your comment!
Please enter your name here