Funding early-stage resources — how to help underrepresented founders
As a female founder of color in my late 20s, walking into a room of investors is a different experience from the majority of founders out there. Talking to other founders who are from similar molds, I found a common theme of having to work at least 2x as hard and show way more traction before investors and resources would take us seriously.
I knew the stats, those annoying stats that keep getting bombarded at us, like how 17% of venture-backed companies are female founded, globally. You know what that percentage was in 2012? Yep, it was 17%. Oh, and for the same 7 year stretch of time, fully female founded companies have been stubbornly stuck at attracting only 3% of total venture dollars.
The number of female-owned businesses has grown 58% from 2017 to 2018 (compared to 12% increase for all other businesses), and the number of black-female-owned businesses was 3x that (by the way, to add insult to injury they raised only 0.0006% of the total venture dollars pool). It doesn’t make sense. Please stop saying this is a pipeline issue, it isn’t.
The stats that really got me? At seed, fully female founded teams raise 82 cents on the dollar to male-founded teams. For early-stage, we raise 77 cents on the dollar to men.
When you start digging into the root causes of this predicament, there’s some agreement that the lack of female venture capitalists (~10% in 2019), and the lack of access to the right mentors, resources, and investors were partly to blame. The third reason, and in my opinion the most glaring?
Women and minority founders are judged on performance, while more traditional founders are judged on potential.
Can we talk about the hundreds of presentations with no previous traction that were pitched by tech bros that got funded? Did ya’ll read about the guy who raised $1.6M for just putting water into tall-boy cans? Or my favorite, Juicero, the $400 device that raised $120M, that ended up pressing juice at the same rate as a user could with her bare hands. It’s even funnier, since investments in female-owned businesses have a higher return than their counterparts.
While this situation has been a nagging frustration for a while, I chose to write this blog now because, well, I had an experience that remarkably let me experience some of these root causes.
Recently, our startup pitched as part of an accelerator application after a pitch hiatus of 6 months. We were looking for 3 things (funding was not one of them) from this accelerator -
- Mentorship
- Guidance/Education
- Introductions to Investors
There were 5 judges in the room — 4 of which were men. I was the only person of color standing in that room. We’ve had 9 months of traction and PLENTY of mess ups and lessons learned along the way. We were brutally honest with what happened over the last several months and asked for help to get us back on track and ready to scale again.
We were going into this pitch ready to talk about our business, trials and tribulations and hone in on the key areas we need help to spur growth. But, things didn’t quite go that way — do they ever?
In our Q&A, the conversation was dominated by two of the male judges honing in one one slide about our performance several times over. Not only did we drill that point to death, but none of the other judges were even able to ask questions or weigh in.
Looking back on the experience, there are probably 100 things I could’ve done differently while I was in that room. Hindsight’s a bitch.
It’s a frustrating chicken or egg situation — if we’re going to be judged on performance, help us with the resources to prove performance. But we can’t get those resources, until we prove performance.
If we’re going to continue to be judged on performance, we need guidance. Mentorship. And yes we need money, not a lot of money but enough (we can be pretty efficient). Without these things, how are we supposed to get more women past early-stage!?
In our own quest for these very things, we’ve stumbled upon some note-worthy resources that are putting their money where their mouth is —
- Bumble is doing a great thing with Bumble Fund, not only targeting founders who are underrepresented in the system, but also providing the small checks ($25k to $50k checks) that we need AND a platform for founders to get access to community, investors, resources, and experts
- Backstage Capital invested $5M into 100 startups with underrepresented founders (~$50k per check on average). Their small checks come along with access to experts, mentors, and introductions to other investors
- iFundWomen, a crowd-funding platform focused on early-stage female founders, not only provides access to capital but also provide coaching, connections, and creative resources to help these startups be successful from the beginning
- Fearless Moguls puts together a competition focused specifically on female founders of color, with small checks under $100k. Not only does this group of women invest in these underrepresented founders, they’re putting a team of mentors and influencers together to help these startups get to the next level
I wish I could say the list could go on and on, but it sadly doesn’t. While there may be a few more groups than the ones I listed above, it’s not proportional to the number of founders that need help. While many suggest going to friends and family for their first source of capital and advice, it’s important to point out that there are a lot less women and people of color that have these kinds of networks with money to give us when we’re starting out.
Laurie Felker Jones wrote an extremely vulnerable and no-holds-bar piece about the recent closing of her startup here in Austin recently. It’s well worth your time to read, but there is this one paragraph that hits home the most with me -
“In the meantime, Austin has 80+ accelerators but for founders without access to early capital — in the first two years — they die in pre-seed. The result is that Austin has an incredible entrepreneurial workforce, but the funnel for founders/exits is broken. And, like everything, the deficit affects the underestimated most. There’s a particularly acute leak in the pipeline for non-traditional founders.”
Mentorship, guidance, network-building, and small checks need to come early-stage if we’re ever expecting to close the gaps for female and minority founders.
