What Will It Take To Close The Funding Gap For Black Female Founders?

Maggie McGrath
Written by Maggie McGrath
black female founders
Viola Llewellyn, cofounder of African fintech platform Ovamba, spoke at the Black Women Raise event in mid-January about the challenge in getting investors to invest in a company led by a black woman. AFP/GETTY IMAGES

If you’ve heard the statistics once, you’ve probably heard them a thousand times: Of the nearly $100 billion in venture funding that goes to entrepreneurs in America, less than 3% goes to female founders and just 0.2% goes to black female founders. 

There’s a growing consensus that venture capital’s race problem needs to be fixed.What’s less clear is precisely how to start closing the massive gulf. And at the inaugural Black Women Raise conference in Manhattan on Friday, a gathering of some 80 black female founders, a series of candid conversations laid bare the frustrations around the lack of an obvious path forward. In several raw moments of interchange, however, some answers started to emerge.

Investors “could ask different questions,” Charles Hudson, founder and managing partner of Precursor Ventures, said during a panel conversation with BBG’s Susan Lyne, First Round Capital’s Hayley Barna, and Female Founder’s Fund Sutian Dong. “There are all these questions—‘Well, do you think she can recruit? Do you think she can hire?’—I know what’s behind that question. It’s ‘Do you think she can get people to work for her because she’s a black woman?’ And people ask these, what on the surface sound like innocent enough legitimate questions about investments, but they’re not innocent. They’re loaded. And you learn a lot by the questions people ask.”

Despite the existence (and, arguably, preponderance) of these loaded questions, Hudson and the others cautioned the entrepreneurs in the room against becoming disillusioned with the traditional venture capital community. Instead, they said, minority founders should prioritize investors who have a track record of investing in entrepreneurs who look like them.

“Vet investors up front. Don’t let them waste your time only to give you a half-ass answer after you spend an hour with them or even two weeks later,” said Barna, who started her venture capital career after successfully cofounding e-commerce darling Birch Box. “Just ask, ‘Is this in your sweet spot?’”

black female founders
From left to right, Susan Lyne of BBG Ventures, Charles Hudson of Precursor Ventures, Hayley Barna of First Round Capital, and Sutian Dong of Female Founder’s Fund.BLACK WOMEN RAISE

Dong noted that investors should be self-monitoring for where they’re over- and under-indexing, too. “We’ve said we don’t like the ratio of founders in our portfolio. About half are nonwhite, but only two are African-American. So we asked our network who we should be talking to,” she said.

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Investing in black female founders

It can be hard, in an open and on-the-record forum, to ask the hard questions about investing in underrepresented founders—much less to receive forthright answers to those questions—but to the credit of the Black Women Raise attendees, no one shied away from speaking about the reality of her experience as a founder of color.

“Everyone talks about the ‘friends and family round.’ I raised $63,000; I am the friends and family round,” quipped Star Cunningham, founder and CEO of health management platform 4D Healthware. But underpinning her self-funding, Cunningham continued, was a lack of capital access. “I have debt, because I had to get it, because no one wanted to give me any money. So what are you, as investors, going to do to look at our companies differently?”

Barna’s reply: Don’t be afraid to talk about your distance traveled. “The same stories about people getting straight A’s from Ivy League schools isn’t what gets us fired up; it’s instead hearing about how someone put themselves through med school from driving an ambulance,” she said. “You might think that you’re not supposed to talk about your life story, but I think it’s an important data point in helping [investors] make the right decision.”

This isn’t to say that a little bit of information and clever storytelling will fix the funding gap for founders of color. Viola Llewellyn, cofounder of African fintech platform Ovamba, pointed out as much, saying that many of the investors she’s come across don’t seem interested in asking the questions that lead to the sorts of decisions Barna is referencing. 

“Here’s the problem: No one gets punished intellectually, emotionally, or financially for saying no to black women or to Africans. You will instead be congratulated if you don’t make the ‘foolish mistake’ of investing in something that doesn’t fit into the preconceived ideas of what success is,” Llewellyn said to Hudson, Lyne, Barna and Dong. 

“At what point do we find a way to tell the story of the fool that said no?” she continued, to applause from the room.

Hudson waited a beat, and responded with empathy.

“There’s a million reasons [for investors] to say no, but until we have more success stories, I think there’s always an easy out for people to say, ‘No one has proven to me that investing in this way and this type of person works out.’ It’s intellectually lazy and it’s wrong,” he said. “You have every right to be angry.”

Angry, yes, but also motivated. Among the clearest takeaways from the conversation is that one of the best ways to change the system is to start from within. In Silicon Valley and Arlan Hamilton parlance, fight pattern-matching with pattern-matching.

“More black women need to control capital, in whatever form that may be,” Dong said. “More black women need to be controlling capital to put that into companies run by black female founders.”

This article originally appeared in Forbes.


About Maggie McGrath

Maggie McGrath is an associate editor at Forbes and the editor of ForbesWomen, the Forbes vertical dedicated to covering all angles of female entrepreneurship and the most successful women in business. Previously, she was in charge of covering - and helping to oversee coverage of - the food and drink industry. She has edited the 30 Under 30 Food/Drink list since 2015 and the Just 100 since 2017. She's worked at Forbes since 2013 and in that time has written on everything from the student debt crisis to Triple Crown-contending (and winning) horses. Before coming to Forbes in 2013, she worked with TODAY show financial editor Jean Chatzky.