Black Founders Have A 99% Chance of Failure
Stop Telling Us You Support Diversity, Equity, and Inclusion
Some may call me an overachiever. I say I don’t like to fail. It is not in my nature to fail. In high school, I was on the dance and swim team, in addition to being President of the Theatre Guild. Except, the tech startup life basically seems to be all about failure. Then, for me, as an African American female raising money in tech I have a 99% chance of failure and I’m not okay with that.
Most startups fail. Whether it be one reason or another, the average tech startup founder has to do something special to be seen. Then, they work twice as hard to be heard. Well, the unfortunate truths of fundraising while Black is that not every investor is comfortable writing checks to people of color.
In 2018 I think the percentage of investments made in women went down from 4% to 2%. Fast-forward to today and black women receive 1% of the investment dollars in the startup ecosystem and even that has gone down since last year. According to Crunchbase, there was a 48% drop in VC funding going to female founders in the third quarter of 2020 — from $841M in Q2 to $434M in Q3.
After the murders of George Floyd, Ahmaud Arbery, and Brionna Taylor nearly every single one of the firms represented at Inside.com Presents: Meet Our Fund Day made a pledge of solidarity, a commitment to fund, or held black founders office hours, and yet only 93 Black women have raised a million dollars or more.
I was ready for today! I’m not usually one to submit questions early (registration sign up or whatever) but I did my homework for this event. I painstakingly combed through the portfolios and type of founders those firms invest in and I carefully submitted questions weeks before the event. Questions about the number of founders they’ve invested, if the firm reanalyzed their selection criteria, or work they’ve personally done to make a change. We should have been allowed to ask the same no-nonsense metric, milestone types of questions these VCs ask startup founders.
Freestyle VC would have been a fantastic place to start a real conversation about the future of investments. Freestyle’s investment portfolio is primarily made up of male founders it would have been nice to see something in their deck address that fact. However, because none of the diversity and inclusion questions that I, or any other participant, submitted were read neither founder made any mention of their future goals to invest in founders of color I read it as a signal that people who look like me aren’t welcome at Freestyle. Having spoken to people at Freestyle I would not have thought that before this.
There were several motivations behind the comments I made today and I think we should address some of those comments. Why? Because it is time for the ecosystem to start having real conversations. I’d like to address JCal’s statement “There’s more than white guys here.” Yes, there were more than just white guys in the audience! If you didn’t want to talk about diversity and inclusion then why not just say print White Guys Only on the flyers? Because you can’t. Because the social commentary of today says it is not socially acceptable to not welcome everyone. So take a deep breath, put on your big boy pants, and get used to having conversations about inclusion for the rest of your life. We “not white males” (disgustingly poor choice of words) have every right to ask these million-dollar firms serious questions. We have the right to ask those venture capitalists the same hard-hitting questions they ask us when we’re the ones pitching.
“Hmm, not very diverse.”
The entire team of Klein Perkins was diverse however, in my opinion, the investment team was not very diverse. It was concerning. From my understanding, most of the decision-makers at KP are male or from the AAPI community. Again, there is absolutely nothing wrong with that! However, that signals to me that KP is not a place for founders who look like me and I should not be ashamed to admit it out loud.
Contrary to what you may think this narrative is not about the lack of investment in Black and Latino founders. This narrative is about accepting the things I cannot change, courage to change the things I can, and wisdom to know the difference.”
I can accept that venture capital firms are not comfortable funding founders of color, but I don’t have to like it. If I’m going to fail then why not fail loudly and with passion? If I’m going to fail I want to go down in a blaze of glory.
In my experiences as a startup founder, I’ve had investors try to convince me to quit so that they could eliminate the competition of a startup in their portfolio. I’ve presented investors with letters of intent to buy and purchase orders for thousands of dollars that I couldn’t get financed. Investors said they were one-offs. And I’ve been rejected in multiple ways over the years so what I don’t need is someone who gives zero fucks as Roy Bahat from Bloomberg Beta put it.
Dear White investor, you know you aren’t going to invest in me and so do I. So let’s stop pretending.
If only 1% of the $300 billion investment dollars circulating the market makes it into the hands of Black female founders like myself then that means I have a 99 percent chance of failing to raise money for my company. Who would be happy about that?
“There is still so much for the venture space to learn about how the market of underserved communities are as financially attractive (if not more) than markets that house the gaming, NFT, and sneaker communities,” said Aubrie Pagano (Alpaca VC) and Lolita Taub (The Community Fund) in their co-authored Medium article Not Niche! The Underserved Communities Market by the Numbers.
Today VCs continue to be 80% white, 84% male, and investing the majority of venture capital funding into white, male founders (85% or $136.5 billion in 2019, according to Pitchbook and the National Venture Capital Association). By not heavily investing in women and minorities the VC industry is robbing their LPs of an opportunity to maximize returns.
Seeing as though most of the Black-owned venture capital firms are scheduled for tomorrow (Day 2) it will be interesting to see how conversations about race, racism, and the lack of diversity in the ecosystem.
