Despite being the fastest-growing group of business owners in the U.S., black women face a unique set of barriers when it comes to accessing the capital they need to invest and scale their companies. Back in 2016, digitalundivided, an accelerator for high-potential entrepreneurial women of color founded by Kathryn Finney, produced the very first study that quantified the challenges that black women founders face in raising funds. The report, titled ProjectDiane, revealed that fewer than a dozen black women had raised more than $1 million in venture capital—ever. The study also found that just 0.2% of all VC funding was allocated toward startups founded by black women.
“The fact that only 11 startups led by black women have raised more than $1M in outside funding is striking for two reasons: (1) In tech, raising at least $1 million is an indicator that a company is at the later stages of seed funding and is moving from proving the market to growth, and (2) the average amount raised industry-wide by startups that ultimately fail is $1.3 million,” wrote Finney in 2016 about the depressing findings.
Now, two years later, the ProjectDiane 2018 study shows that more black women have gained access to venture capital since 2016. According to the new report, which was conducted in collaboration with JPMorgan Chase, the Case Foundation, and the Ewing Marion Kauffman Foundation, the number of black women who have raised upwards of $1 million from VC firms has more than tripled from 11 to 34. The number of startups founded by black women has also increased 2.5 times from 2016 to 2018, jumping from 84 to 227.
Other findings in the updated study show that funds collectively raised by black women founders increased from $50 million in 2016 to nearly $250 million in 2017, one of the most remarkable stats that jumped out at Finney. “A couple of things [in the study] stood out, but the biggest is that there has been a 500% increase in the [amount raised by] black women-led startups,” she told Black Enterprise. “That’s exciting. That happened in the past two years. It shows that there’s growth and opportunities for us in this space.”
Yet, despite the progress, Finney acknowledged that black women founders remain severely underinvested. “There’s still a long way to go. There are only about 220 black women-led startups, we need to increase that quite significantly,” she said. Plus, black women received just a tiny fraction of investment compared to startups led by men, which were granted $2.1 million on average. Black women-led startups, on the other hand, have increased by just $6,000 since 2016 to $42,000. But perhaps what is most alarming is that the median funding raised by all black women is $0. This means that the majority of black women-led startups do not raise any money at all.
These findings underscore the importance of the data collected in ProjectDiane and the impact of organizations, like digitalundivided, that work to elevate women of color as business leaders. Before the first ProjectDiane was released, “I think people didn’t really understand the problem because they couldn’t see the numbers,” Finney told BE, adding, now that the problem has been quantified, we can work toward solutions.