By Naimeesha Murthy
Independent entrepreneurship is increasing at a steady pace, and the participation of women in the space is no exception. For these startup founders, securing funding for their new business venture is crucial and can spell success or failure in the early stages of their new project. Women have had their fair share of obstacles when it comes to increasing the funding they receive. In fact, in a survey (download required) of 250 female founders, only 28% raising funds in 2020 were able to successfully reach their goal.
However, there is an often-overlooked aspect in all this: women of color. While the marginal success of women in securing funds for their business is something worth noting, it is important to pay attention to subpopulations that are disproportionately affected — especially in light of the Covid-19 pandemic and its economic impacts on the global population.
Right before the pandemic hit, Black women outpaced other minority groups in terms of participation in independent entrepreneurship. Despite this laudable statistic, however, the number of Black women who were able to raise over $1 million in funding in 2020 remained small. In fact, only 90 Black women were able to meet that target in 2020. While it is commendable considering that the number was only 34 at the start of 2018, the fact remains that Black women are quite underserved and underrepresented when it comes to venture capital funding. From 2009 to 2019, $276.7 billion was collectively secured for startup funding by all companies, yet the share participation of Black women in this amount was only 0.27%.
Another factor to consider is that according to research from Equal Ventures, 70% of venture capitalists are white, while just 3% are Black. Of these venture capitalists, only 14% are women. Thus, when you compound being a woman with being Black, a person is twice removed from the kind of funding they might otherwise find. This applies especially in the startup industry, where it is important for entrepreneurs to establish trust from investors and where investors tend to favor those coming from similar backgrounds.
Knowing all that, it is not hard to see that in the circles of venture capital funding, women — and particularly, women of color — have more setbacks ahead of them. This prevents them from securing the funds that they would have otherwise received had the circumstances of their birth been a little different. Thus, this article will look at fundraising methods and determine which of them can be utilized by women of color and other similarly situated minority groups.
Traditional And Equity Crowdfunding
It is no secret that the startup landscape and VC funding circles are predominantly white; however, crowdfunding platforms like Kickstarter and GoFundMe allow women of color to directly engage with people who are already interested in their projects and ventures. They also don’t have to worry about getting crucial investors on board; the large audience size in crowdfunding allows entrepreneurs to cast a large net. Thus, the risk of having limited to no funding because of gender or racial prejudice is minimized.
The key difference between traditional and equity crowdfunding is that it makes funders more directly involved with the company by giving them equity shares proportionate to the amount they invest in. There are plenty of equity crowdfunding platforms available, such as Fundable, SeedInvest, WeFunder and LocalStake. Potential investors may view equity crowdfunding as a more attractive investment method since they receive a direct interest in the company, as opposed to the more gratuitous rewards or benefits from traditional crowdfunding.
Venture Capital Funding And Angel Investments
Recognizing the increasing participation of women of color in the startup industry and the disproportionate funding that exists today, the number of investment companies catering to women and minority groups has also increased. Companies like Pipeline Angels host pitch summits that allow for collective investments. These occasions let angel investors and entrepreneurs meet up to network. They also recognize that entrepreneurs of color, especially women, do not always have a strong business network.
There are also other venture capitalists and investors that have prioritized women entrepreneurs and women-led businesses, such as Golden Seeds, SheStronger Capital, Female Founders Fund and Pelican Ventures. They recognize that there is plenty of potential in the underrepresented and underserved groups of entrepreneurs, especially women entrepreneurs. Therefore, they prioritize providing these groups the funding and the assistance that their businesses need.
Business Grants
IFundWomen, like its name suggests, assists women entrepreneurs. Their website has a list of grants that women can apply for, and they 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 allow women entrepreneurs to find funding, mentorship and other business resources to help their ventures grow.
Grant programs like Girlboss Foundation is also a great resource targeted specifically for women. The government too offers grant programs at Grants.gov.
Accelerators And Incubators
Unlike the other resources in this list, accelerators and incubators are not funding programs per se. Instead, they offer startups more intangible benefits, such as mentoring, networking, office space and opportunities for capital. However, these benefits can potentially be more advantageous to new minority-owned businesses. Especially in light of the fact that the cards are stacked against minorities when it comes to putting up a new business.
New Founder School has a subscription program that helps entrepreneurs get resources and support to build and grow their startups, while Morgan Stanley has a Multicultural Innovation Lab, which is an accelerator launched in 2017 that has helped companies collectively raise over $50 million.
While the funding opportunities to this date are still limited, the list continues to grow every day. The good news is that this funding gap is steadily becoming more recognized. It’s not just the underserved entrepreneurs themselves making this recognition, but investors and successful business people who also happen to be part of minority groups.
See Original Article at Forbes
