While the $1 billion unicorn valuation is still the milestone of choice for many startups, for Black women a notable benchmark comes a lot earlier in a startup’s life cycle. In 2018, only 34 Black female founders had ever raised $1 million in venture capital for their company.
This year, that stat has nearly tripled, with 93 Black women now reporting they have secured $1 million in investor backing for their businesses, according to ProjectDiane, a biennial report on the state of Black and Latinx women founders by the organization digitalundivided. Ninety Latinx women have raised the same amount.
“These stats are the ones that are going to spark conversations and lead to real, true systemic change,” says Lauren Maillian, the CEO of digitalundivided.
ProjectDiane sources this information from a database of about 650 Black and Latinx female founders. Its survey finds that Black and Latinx women combined received just 0.64% of total venture capital investment between 2018 and 2019, for a total of $3.1 billion; 0.27% went to Black women and 0.37% went to Latinas. Those sums can be put in context next to the paltry 2.7% of venture capital that went to female-only founding teams across the board in 2019.
Their continued lack of access to institutional venture capital is influencing how Black and Latinx women run their businesses. Many businesses owned by Black women haven’t taken on venture funding at all; only 57% of those companies in the ProjectDiane database report having raised capital. The rest are self-funded or operating based on revenue. (A larger share of Latinx women have received funding, at 69%.)
That measured approach to running a startup—rather than the high growth, VC-backed model—may have helped some of these companies led by women of color to avoid the pitfalls that have plagued their peers. Of the 334 startups that were in this organization’s database in 2018, 73% are still in business—meaning these startups have a two-year fail rate of 27%. That number is far lower than the fail rate for all startups, which digitalundivided cites at 40%.
Anecdotally, too, companies led by women of color have avoided the cultural and leadership problems that have plagued others in recent years, from the high-profile failure at a company like WeWork to the issues that have recently led to executive departures at several female-founded companies led by white women.
“To make something out of nothing is something women of color know how to do,” says Maillian. “We’re scrappy. We treat money we do receive, whether revenue or investment, by making every dollar stretch.”
She adds: “Black women look at their businesses as a source of wealth creation, not just a job. Other founders look at building and failing and building and failing as a job. As women of color, we don’t get that privilege. We look at having the title of founder and CEO as a ticket to wealth creation.”
The organization’s report unearthed a few more insights. Latinx women are more likely than Black women to have a cofounder, versus going solo, says Maillian.
And Howard University, the Washington, D.C., historically Black school, produces more Black women startup founders than any other undergraduate institution.
Earlier this year, digitalundivided studied the effects of the COVID-19 pandemic on Black female founders, finding that 82% reported a loss of revenue because of the crisis.
