It was the stat heard around the startup ecosystem: only 11 black women had ever raised more than $1 million in venture capital as of 2016. And that year, only 0.2% of all VC funding went to startups founded by black women.
Those were the rather depressing key findings of ProjectDiane, a pioneering study initiated by investor Kathryn Finney, founder of digitalundivided, an Atlanta-based accelerator for high-potential women entrepreneurs of color she founded in 2013.
Since then, however, that figure has more than tripled, according to ProjectDiane’s 2018 report, released at theForbes Impact Summit on June 13 in New York City.
To date, 34 black women have raised upwards of $1 million each from VC firms, up from 11 two years ago, including Mented Cosmetics’ cofounders KJ Miller and Amanda Johnson, Camille Hearst of product recommendation site Kit, and visual search engine Plum Perfect founder, Asmau Asmed.
Other findings in the updated 2018 study show signs of progress. The pool of funds raised by black women founders increased 500%, from $50 million in 2016 to almost $250 million in 2017.
There are also 2.5 times as many startups founded by black women in 2018 than there were in 2016.
Still, significant challenges remain. The average investment in black-women-led startups (both self-reported and tracked via startup databases) has increased just $6,000 since 2016 to $42,000. That is a fraction of the $2.1 million awarded on average to male-founded startups.
And most of the funding is still coming from the usual suspects: firms like Kapor Capital that have a history of supporting underrepresented founders.
But perhaps what is most shocking is that the median funding raised by all black women is $0. While more black women are crossing the $1 million funding threshold, the majority of black women-led startups do not raise any money.
Finney remains focused on the bigger picture and pushing the discussion forward. “It’s not just about getting money to 34 on the list who raised over a million,” she said. “It’s how we create a system where anyone who has the idea feels like they can actually go and operationalize that idea, and turn it into a company.”
For the full ProjectDiane 2018 report, conducted in collaboration with JPMorgan Chase, the Case Foundation, and the Ewing Marion Kauffman Foundation, click here.
Finney spoke with Forbes before the report’s release to talk about what’s next for women of color in the tech world.
When digitalundivided launched the first study in 2016 Finney had no idea how widely the stats that emerged would get shared and quoted. In 2016 the business media and tech community were just starting to talk about engaging women of color and searching for data, and digitalundivided was there first. And the numbers spoke for themselves.
“When you qualify a problem and it’s that bad, you can’t go back to business as usual," said Finney. "You have to do something about it.”
With her research, Finney sought to find new patterns and actions accelerators can take more to bring black women founders into the pipeline.
Accelerators are not working for black women founders
Black women founders are underrepresented in top accelerator programs. Further, the women who have raised over $1 million in VC funding who went to an accelerator raised less money than those who’ve raised over $1 million without having participated in an accelerator. This is counter to findings that accelerator programs open up both networks and opportunities for funding.
The pipeline needs to expand beyond the urban areas and Silicon Valley
People of color don't necessarily have the family-and-friends network that can help support them while they're building a business. “We need to lure the startup ecosystem from the big cities to the outskirts where living expenses are lower,” says Finney. “It’s bringing New York to Newark, Atlanta to Savannah, Chicago to Milwaukee.”
Families need to be involved in the accelerator process
Women founders are often the first in their family to enter the tech startup system. Their families don’t understand why they are so busy, why they are traveling, why they may need someone to watch their children. To counter this, digitalundivided requires their accelerator participants to invite their close friends and family to Demo Day to get buy-in. This is especially important for black women. “People think we don’t need support,” said Finney. “We need more support.”
Finney knows will be a long road but she's encouraged by the impact so far. When she saw the recent Vanity Fairspread featuring 30 of the black women who've raised more than $1 million, she was moved. “I don't think there’s ever been that many black women in a picture in Vanity Fair ever,” said Finney. “I imagine a young black girl looking at that and saying, ‘I could be there.’”