Why Aren't Venture Capitalists Invested In Black Women?

A Thought Piece By Katherine Heredia

As of 2019, Black women are among the least likely to receive funding from venture capitalists.  0006% of venture capital went towards black females entrepreneurs between 2009 and 2017.

As of 2019, Black women are among the least likely to receive funding from venture capitalists. 0006% of venture capital went towards black females entrepreneurs between 2009 and 2017.

If you haven’t noticed the upward trend of Black women entrepreneurs in America, where have you been? The number of businesses owned by black women from 2007 to 2018 has increased by a whopping 164%. The hidden truth behind all this data, however, is that Black women’s entrepreneurship has always been prevalent. Black women have been businesswomen throughout history. Women like Madam CJ Walker, Janice Bryant Howroyd, Elaine Welteroth, Oprah Winfrey, Kimora Lee Simmons, Rihanna or even your local hair braider, are all running businesses each day.

Arlan Hamilton  [Photo:  João Canziani ]

Arlan Hamilton [Photo: João Canziani]

One of my favorite examples to bring up is Rosa Johnson. She was a highly successful insurance agent for North Carolina Mutual, the field was being dominated by white men. She was one of many women in a community of successful black businesses nicknamed “Black Wall Street.” In the late 1800s to early 1900s, “Black Wall Street” was a community in Durham, North Carolina that was an economic powerhouse for Africa Americans. It allowed Africa Americans to increase their wealth and allow them to pursue a variety of careers. Some whites saw this as a threat because they would no longer be able to secure their jobs. Occasionally, racist whites would go as far as to attack these black businesses. On March 2, 1902, a group of whites burned down one of the North Carolina Mutual offices. Even through all this tragedy and blatant racism, Rosa was able to persevere. Rosa was one of the first women to sell over $2 million of policies in one year. She was also a regular attendee of the President’s Club, an annual conference for the top agents in her industry. She was able to be successful during a time that was not only tribulating for black people but also a time when women were discriminated against and denied rights.

The Marvelous Women of North Carolina Mutual   [photo: Pauli Murray Project]

The Marvelous Women of North Carolina Mutual [photo: Pauli Murray Project]

Another great entrepreneur is Arlan Hamilton. The founder of Backstage Capital, a black queer woman, who saw that VC firms weren’t investing in underrepresented business founders, especially black women. She saw this as an opportunity to invest in the futures of underrepresented business owners. She founded a firm of her own, while homeless, with no college degree, no connections, and no money. She has since found success with her company becoming the only black and openly queer woman to found a VC firm. Her firm has a $36 million fund that is reserved to invest in black women entrepreneurs seeking for help building their businesses. 

It is very apparent that Black women BEEN owning businesses and are good at it too! So good they actually own 59% of all Black businesses. Meaning not only do black women own more businesses than their male peers, but they are also the only racial or ethnic group to achieve this. However, Black women are - and have always been - systematically ignored by traditional business systems. Founder and CEO of Uncharted Power, Jessica O. Matthews, who also happens to be a venture capitalist speaks from experience when she says “Whenever you are a black face in a white space, your presence represents all black people. You don’t have the ability to be flawed. Any mistake you make, that will be the one data point to explain an entire people”. There is an unnecessary pressure placed onto black female founders, which makes it that much harder for black women to gain financial support from VCs.

Whenever you are a black face in a white space, your presence represents all black people. You don’t have the ability to be flawed. Any mistake you make, that will be the one data point to explain an entire people
Jessica O. Matthews  [Photo:  Bryan Derballa ]

Jessica O. Matthews [Photo: Bryan Derballa]

As of 2019, Black women are among the least likely to receive funding from venture capitalists. 0006% of venture capital went towards black females entrepreneurs between 2009 and 2017. Just to give a little perspective, 98% of venture capital goes towards men and 2.2 % goes to women. There is a clear vast imbalance when it comes to VC funding. It sure isn’t because black women aren’t starting enough businesses, so why is it hard for them to find an entry point into the start-up world? 

Let’s give them the benefit of the doubt, shall we? According to a Morgan Stanley survey conducted in 2018, “found that nearly 60% of investors believe women and minority-own businesses receive ‘about the right amount of capital’ and 20% believe they receive more capital than they deserve (Woah, was that a diss?). Black women have consistently been underappreciated. VC Investors don’t want to take a chance on them, even though throughout history we’ve seen how black women’s businesses thrive when they are actually supported. 

Perhaps these white male investors are oblivious to the fact that black women businesses aren’t receiving a fair and sufficient amount of funding. 81% of VC firms don’t have a single black investor and only 7% of VCs are women of color (black women make up just 1% of that). This goes to show how important it is to diversify your team. It is important to have people of color (especially women) in the room to call bull and keep firms accountable and aware of their decisions.

The real question is do these firms care enough to take the extra step to diversify their team? Or are they content with a system currently in favor of white men? Well, some black women have decided they are not going to wait around for them to make up their minds. Especially with black women founding their own VC firms, like Arlen Hamilton.

The stories of Arlan Hamilton, Rosa Johnson, and of Black Wall Street are important and inspirational ones. This is because they saw spaces where they were not welcomed and instead of begging for a seat at the table, they created spaces for themselves to thrive independently. This allowed them to open doors for other black women entrepreneurs to pursue their passions and prosper.