Why 2021 Is Poised To Be A Pivotal Year For Women Of Color Founders
After surveying over 280 female founders globally in FLIK’s 2020 Q4 Report, it was revealed that, last year, 72% of early-stage women founders were unsuccessful in fundraising. The data shows that female founders have been marked by shrinking financial runways, disappointingly and disproportionately low funding rates, and a lack of resources dedicated to increasing the female founder pipeline.
Women founders have been disproportionately affected by the devastating economic impacts of COVID-19, and women of color – an even more underserved population within women founders – will need particular support in increasing their representation in VC funding if they are going to make up the ground lost in 2020.
Women of Color Founders Are Here, And We Need to Pay Attention
As female founders continued to increase their percentage of funding across the board, women of color continued to disproportionately contribute to the number of successful companies launched year over year; however, they saw very little increase in the percentage of funding. According to Fast Company, women of color accounted for 89% (1,625) of the new businesses opened every day in the US from Q4 of 2018 to Q4 of 2019. Women of color were quickly accelerating their positions in the entrepreneurial space as the up-and-coming powerhouse founders. Despite this, Harlem Capital reported in 2019 that 77% of fundraising allocated to female founders in 2019 went to white women founders, even though only 52% of the total fundraising companies were white women-owned. This disparity between the percentage of white and WOC startups owned and funded is an important factor in how the entire VC and startup community looks at representation. While it is thrilling to see female entrepreneurship as a whole getting an increasing fraction of the total venture capital dollars deployed, the community must take in consideration how race and background play a role in where those dollars go.
How Female Founders Were Affected by 2020
FLIK’s 2020 report also found that fundraising success rates were even lower than what female founders predicted earlier in the year in the 500 Startups Q2 report, where 52% of female founders thought they could make their initial 2020 fundraising goals.
Genevieve Jurvetson, Co-Founder at Fetcher, gave her opinion on the matter, saying that “COVID-19 has led to a feast and famine, fear-driven market for capital, where investors may rely more heavily on instinct. We know ‘instinct’ is often colored by implicit biases. These deeply entrenched biases rarely bode well for minority founders [like women]”.
Investors, like many of the founders, panicked during COVID-19, and decided to invest in established founders in their predominantly white, male networks, leaving women of color disproportionately affected by a lack of expected funding. When the community thinks about the future of female founders, successfully closing out early rounds of funding is imperative not only for increasing the number of successful female-founded startups, but also for increasing the number of women who find fundraising to be a viable option for their startup.
“COVID-19 has led to a feast and famine, fear-driven market for capital, where investors may rely more heavily on instinct. We know ‘instinct’ is often colored by implicit biases. These deeply entrenched biases rarely bode well for minority founders [like women]”.
Black Women Are Poised to Be the Community To Watch in 2021
Black founders in particular are an important part of the momentum for women of color who may be disproportionately affected. Although there has been talk of change and more dedicated funding for this underrepresented group, particularly following the BLM protests earlier this year, Black women founders fear that this talk is short term and won’t lead to lasting action.
While some may believe that black women will make sustained gains in fundraising due to the awareness of BLM this year, respondents to the FLIK report predict otherwise. The majority of respondents (50.2%) believe that the increase in funding for black founders was only going to be short-lived.
Nnenna Umelloh, Founder of Black Hair Management, told FLIK, “In light of the BLM movement, there's been more talk around supporting Black Founders without meaningful actions. Everyone says that they want to help and be a part of the solution, but we end up running around wasting more time chatting with people who have no intention of writing a check. There needs to be more real action and long-term commitment. Less talk. More action.”
VC has always felt like an exclusive club, and 2020 has proven that when investors get frightened, they retreat into investing in old habits, including investing in primarily white, male founders. While BLM may have brought more light to Black women founders, women of color will still be disproportionately affected in the COVID-19 fundraising contraction.
“In light of the BLM movement, there's been more talk around supporting Black Founders without meaningful actions. Everyone says that they want to help and be a part of the solution, but we end up running around wasting more time chatting with people who have no intention of writing a check. There needs to be more real action and long-term commitment. Less talk. More action.”
Moving Forward
Communities that connect women of color to investors and fellow founders are going to be pivotal in helping to bring more equity for women of color in fundraising. It is going to take more VCs dedicating long term investments to women of color, more women-focused investor networking opportunities, and naturally-grown communities of women of color founders to have women of color regain the momentum they had as we head into 2021.
While the numbers may be grim, if women of color have proven anything in the world of entrepreneurship, it is that they are beyond resilient and will make space for themselves at the table with their perseverance.