Venture Capital Firms Pledged to Write More Checks to Black Women Post George Floyd, But They’ve Fallen Short of That Promise

The nationwide racial reckoning triggered by protests over the murder of George Floyd in 2020, saw a number of venture capital firms pledge to make racial and gender equity part of their business strategy. 

But two years later, have they followed through? 

Photo by Roberto Hund from Pexels

There are some indicators that start-ups owned by Black women were able to reap some of the benefits of these pledges.

An analysis by Crunchbase found that “startups with at least one Black woman as a founder … raised around $494 million” in the first half of 2021, more than the previous five-year high.

But venture capital funding to companies founded by Black women remained a tiny sliver of what had been spent as of July 2021 — just 0.34 percent of the total.

Start-up accelerators and incubators and venture capital funds aimed at Black women — many of them created by Black women themselves — are trying to make sure Black female founders get their share of the VC pie. They provide a place where these entrepreneurs can access training, get help with their pitch decks and network with other founders and funders.

Socioeconomic obstacles and institutional racism can stack the deck against Black women’s businesses, regardless of where they’re getting their funding. 

Most Black women — 61 percent of them, according to the Global Entrepreneurship Monitor — self-fund their businesses. This is despite the fact that as a group, they are more likely to have lower household incomes and higher amounts of educational debt. When an entrepreneur has to scrape together money in this way, they risk being undercapitalized and running out of money before the business can grow. 

Lower income and higher debt can also make them less attractive to lenders. A Goldman Sachs study found that Black business owners were rejected for bank loans at a rate three times that of white applicants.  

Read full story at Finurah here.

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