Social and Financial Capital: Resources To Help Close The Black Female Funding Gap
There is a disconnect between the rate of women starting businesses and accessibility to the $300 billion in venture capital funding available in the industry. According to Crunchbase, global venture capital funding that went to female founders dropped from 2.9% to 2.3% in 2020. The statistic is even more unforgiving for Black female founders, who receive less than 0.35% of the total venture capital funding in the United States.
As a Black female founder myself, I have witnessed countless close friends and colleagues navigate challenges while attempting to tap into the traditional market. In honor of us rounding out Women’s History Month, let’s explore what’s holding us back, what funding alternatives are available, and examples of phenomenal Black female founders who have successfully funded six-figure businesses in unconventional ways.
What’s Holding Us Back
Too often we see entrepreneurs having to resort to bootstrapping to fund their businesses, and Black female entrepreneurs are not exempt. As we saw during the peak of the pandemic, many business owners were faced with tough financial decisions where they had to both identify and choose how to allocate limited capital resources. Many business owners had to choose between funding employee payroll, paying past due invoices that were extended beyond typical net 30, 60, and 90-day terms, fulfilling rent or mortgage obligations, and/or worse, choosing whether or not to shutter the business altogether.
Exacerbating these general market forces is the sector-wide deficiency of Black faces, whether male or female, within venture capital circles. According to research spearheaded by Equal Ventures, 70% of venture capitalists are white, 26% are Asian and only 3% are Black. Of these venture capitalists, only 14% are women.
This lack of inclusion is especially applicable in the startup industry, where it is important for business owners to establish trust from investors in a corporate environment where investors tend to favor those coming from similar backgrounds.
Resources to Help Close the Funding Gap
1. Mentorship and Networking
Global communities like Astia and Million Dollar Women provide mentorship and networking opportunities to forge relationships with leaders who can make introductions, advocate for a seat at the table, and help accelerate success. Increased representation reduces barriers to funding for Black female founders. Plus, firms with women on their team are statistically more likely to fund a management team with women.
2. Crowdfunding
While it is no secret that VC funding circles and the startup landscape lack diversity, the existence of crowdfunding has created an equitable digital space for Black female founders to thrive. Platforms like Kickstarter and GoFundMe allow women of color to tap directly into their audience and also with people who are already interested in their projects and ventures to garner financial support. This also alleviates the need to get investors on board by replacing the “membership-only” tag with access to the network effects of their followings and the large audience size that crowdfunding provides. Thus minimizing the risk of having limited to no funding because of gender or racial bias.
Additionally, another funding source for Black female founders comes in the form of equity crowdfunding. The advantage of choosing equity crowdfunding over traditional funding sources is that it connects funders and supporters directly to the company and the vision of the founders by giving them equity shares proportional to the amount of money they commit to the project. Some of the most popular equity crowdfunding platforms include Fundable, SeedInvest, WeFunder, and LocalStake. Equity crowdfunding is often deemed an attractive investment method by investors because instead of the rewards incentive synonymous with traditional crowdfunding, they receive a direct interest in the company and its growth prospects.
3. Business Grants
Business grants are also another attractive option for Black female founders. There are many organizations and government programs that offer grants to help founders to fund and grow their businesses. An organization called IFundWomen (IFW) assists women entrepreneurs in finding business grants. The IFW website has a list of grants that women can apply for that are either offered by IFW’s partners or by IFW itself directly. Similarly, Hello Alice is another portal that, while not providing direct funding, has multiple partners that help women entrepreneurs to find funding, mentorship, and other business resources to help their ventures grow. Girlboss Foundation is another organization that is a great resource targeted specifically for women, while last but not least, the U.S. Government also offers grant programs at Grants.gov.
4. Accelerators and Incubators
Not to be overlooked in the funding space are incubator and accelerator programs. While incubators and accelerators do not offer funding directly, they do, however, offer startups intangible benefits, such as mentoring, networking, and office space which can alleviate some capital needs and also provides benefits that can’t be measured by a price tag. Additionally, incubators and accelerators—through the nature of their businesses—do help entrepreneurs prepare for and position themselves for capital opportunities considering the fact that these programs are typically within the gaze of angel investors, if not accompanied by a VC or early stage investment firm. These benefits, however, can be potentially more advantageous to new minority-owned businesses than they are for more established entrepreneurs.
An example of an accelerator or incubator program is the New Founder School which has a subscription program that helps entrepreneurs access resources and support to build and grow their startups. In 2017, investment firm Morgan Stanley launched a program called the Multicultural Innovation Lab, which is an accelerator that has helped start-up companies collectively raise over $50 million.
6. Venture Capital Funding and Angel Investments
Even though the funding opportunities are still limited, the interest in increasing funding sources for entrepreneurs continues to grow every day. However, the bright side is that this funding gap is continually becoming more recognized. The increasing participation of women of color in the startup industry is hard to ignore and the disproportionate funding that exists has garnered the interest of many investors. The number of investment companies catering to women and minority groups has increased and is changing the face of Silicon Valley one company at a time. Companies like Pipeline Angels host summits and pitch competitions that allow entrepreneurs to make themselves visible and available for collective investment opportunities. These environments provide a platform for angel investors and entrepreneurs to tap in directly and make meaningful connections. The companies involved also recognize that entrepreneurs of color, especially women, do not always have a strong business network and therefore continue to find ways to facilitate deeper relationships between founders and investors.
There are also other venture capitalists and investors such as Golden Seeds, SheStronger Capita, Female Founders Fund, and Pelican Venture that has prioritized women entrepreneurs and women-led businesses. There is a collective recognition that there is untapped potential in underrepresented and underserved groups of entrepreneurs, especially women entrepreneurs. Therefore, they prioritize providing these groups the funding and the assistance that their businesses need.
Black Female Founders Who Have Successfully Funded Six-Figure Businesses in Unconventional Ways
Black women consistently outpace other groups in terms of participation in independent entrepreneurship. Despite this statistic, the number of Black women who were able to raise over $1 million in funding in 2021 remained small. While this accomplishment is commendable considering year-over-year increases, the fact remains that Black women are quite underserved with regard to venture capital funding. Here are three Black female founders who are very vocal in sharing their journey and resources with the community.
Deidre Mathis, Wanderstay Hospitality Group
Deidre Mathis is a renowned world traveler and author who made history as the first Black woman in the United States to own a hostel. When creating Wanderstay Hospitality Group, she raised capital in a variety of ways. In addition to getting a small business loan, Mathis ran an Indiegogo campaign to help get the Houston community excited about the project.
She has won over $95,000 in various pitch competitions, secured over $1.7 million in bank financing, purchased 2 brick and mortar buildings, and has secured over $5,500 in Crowdfunding campaigns. In efforts to support fellow Black female founders, she is often a Keynote speaker, shares resources, and provides pitch competition coaching services.
Claire B. Soares, Up in the Air Life
Claire B. Soares is the founder of The Self Funded CEO Coaching Program and the mastermind behind the multi-million dollar flagship luxury travel company, Up in the Air Life. Soares invested and reinvested everything on her own. She had to learn everything from marketing to building teams, systemization of processes, and outsourcing abroad so that the company could afford a full staff. During the peak of the pandemic, she started a Coaching Business to help other entrepreneurs escape their 9-5 to build a business and life of freedom using her unconventional strategies to success.
Renae Bluitt, She Did That
I also highly recommend watching the documentary by Brooklyn, a New York-based filmmaker and founder of Crush Media, Renae Bluitt entitled, ‘She Did That.’ This Netflix release offers an intimate peek at the passionate pursuits of Black women and their entrepreneurship journeys
Bluitt also hosts an Apple podcast where each episode offers front-row access to Black female founders who are forging their own paths, finding financial freedom, and harnessing their passions to create more meaningful and fulfilling lives. I tune in weekly to find out why and how she did that.
A Final Word For My Fellow Black Female Founders
As we continue to identify sources of seed capital for entrepreneurs of all demographics, Black women around the world are disproportionately affected by the lack of traditional capital funding resources. Despite these challenges, Black female founders are strategically finding alternative methods to fund their businesses with great success.
The reality is that no one has the right answers to the question of “How do we increase the availability of traditional capital funding sources for Black women entrepreneurs?” Be that as it may, this generation of entrepreneurs are committed to executing their passions by any means and are trailblazing unique paths to accomplish their goals.
To my fellow Black female founders, remember that despite all that is thrown our way, we got this and I am rooting for you. Continue to pursue your passion with as many unconventional methods as possible and define success on your terms!
PS: There are many ways to start learning about this funding gap and what to do about it! One of the best ways to get started learning and connecting with others is to join an accountability community!
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