Now’s a great time to start investing in women of color
We’re living at a time when uncertainty is the only thing we can be certain about. A global recession is looming, and countries around the world are facing unprecedented challenges. It’s time we reevaluate what works and what doesn’t—and which voices are part of that conversation.
One voice that we should include is that of women of color. Recovery requires resilience, and women of color share the intimate lived experience of overcoming insurmountable challenges. Within a difficult time, there has never been a better moment to imagine a more functional, fortified future.
WHY WE NEED TO INVEST IN WOMEN OF COLOR
Creating a better future requires investment. Unfortunately, women and other entrepreneurs that aren’t cisgender men only command a tiny stream of venture capital funding. In 2020, women-led startups comprised only 2.3% of VC funding, a number that’s worsened over time—down from 2.8% in 2019. And out of those statistics, only a sliver of a sliver goes to women of color, despite businesses touting the virtue of diversity.
For women of color who are successful in raising capital to realize their dreams, that investment falls off a cliff between the seed and Series A stages. And those seed rounds are far smaller than rounds raised by white and male-led companies. In 2020, Black women raised $125,000 in a median seed round, while Latina founders raised a median of $200,000. Yet the average investment for businesses not helmed by women was $2.5 million.
To be clear, investing in women of color isn’t a risky bet. Research in the U.K. demonstrated that companies with strong female representation on the executive level were 25% more likely to have above-average profitability. Businesses with one-third of their executive roles filled by women also outperformed companies with worse gender parity. Bringing just three women on board in leadership roles resulted in better business outcomes on measures of financial performance. And studies have found that women-owned startups delivered investors twice the bang for their buck per dollar than companies led by men.
WHAT INVESTORS CAN GAIN FROM INVESTING IN WOMEN OF COLOR
There are also massive market opportunities in addressing the needs of women and other people who are not cisgender men. For example, the Femtech slice of health technology is poised for explosive growth and is likely to become more than a $3 billion industry by 2030.
Unsurprisingly, they’re overwhelmingly led by women, who are attuned to a variety of unmet needs and areas for innovation that their male peers have largely overlooked.
LOOKING BACK AND MOVING FORWARD
If the limited data we have can model success beyond the white male mold, then history can too. Silicon Valley loves to reinvent the wheel—or the subway —and investors often follow, but the same tech industry that soaks up so much venture capital often falters when it ignores history outright. As a result, they’re missing out on lessons that could show us many bright paths forward.
History shows us that before colonization, Indigenous communities in North America cultivated rich agricultural practices, farming the land while revitalizing it. As environmental disasters mount, government agencies and researchers are turning to Indigenous leaders for everything from restorative controlled burning for wildfire prevention to drought-resistant farming and sustainable salmon harvesting to restore flagging fish populations.
Indigenous people were also early examples of successful entrepreneurship on a global scale. A phenomenon that textbooks and history books fail to explore fully is that before European colonization, Indigenous communities had functional, sustainable economies in place—but ones that bore little resemblance to their European counterparts. First Nations communities built a massive entrepreneurial ecosystem around fur trading based on traditional sustainable hunting practices.
The lie of colonialism tells us that we can discard the past and that some practices and perspectives matter while others don’t. But that lie doesn’t serve society in the long term. At best, failing to amplify and elevate underrepresented people is a missed opportunity. At worst, it’s the first decision in a cascade of failures that leaves vast swaths of society out in the cold.
For as long as North America has been colonized, white men have largely shaped its vision and held positions of power. But that needs to change if we want to make the world a place where everyone can thrive.
Without investing in under-represented communities, we’re likely to repeat the mistakes of the past as we collectively face down one of the most precarious phases of global uncertainty in decades. Embracing change through action, investment, and real economic empowerment is one of the only sure bets on an uncertain future.