Startups run by women of color need money from investors, not empty platitudes

• What women of color don’t need is another white person saying “Yes, Black Lives Matter” or “our company rejects racism.” What we need is more investors willing to ask: what can I do to change the system?
• Dedicating 15% of a venture fund is a platitude, a pat on the head, particularly when you consider that 46% of the country are people of color.
• This current environment also stifles economic growth and chokes off the true innovation we need.
• Stephanie Lee is a former staffer to former First Lady Michelle Obama and former product developer at the global brand, MAC Cosmetics.
• This is an opinion column. The thoughts expressed are those of the author.
• Visit Business Insider’s homepage for more stories.

Too many women of color are being asked to prove first that our ideas are worthy of investment, while white founders get the benefit of the doubt over and over again. 

What we don’t need is another white person saying “Yes, Black Lives Matter” or “our company rejects racism.” What we do need is more investors willing to ask: what can I do to change the way things are actually run? 

Though the access to investments are especially limited for women of color, female founders in general face challenges that men don’t. A new report on fundraising for women-led startups bears this out. The survey highlights the bias women founders experience, which ironically starts with their pitch decks. 

The study exposes that women-led teams raised 30% less after engaging with investors 23% more than all-male teams. All-male teams also received $18,000 more in investments per meeting. Worse, there were zero — that’s right, zero — all female teams at the series A level — or the first venture capital funding for a startup outside of soliciting funding from friends and family — of investment in the study. All of this points to a dissonance between the makeup of the investment world and the consumers they want to serve. 

Despite these biases, women were the leading force driving the 2008 recession recovery. A 2017 American Express survey found a 164% increase in the rate of Black woman-owned business creation from 2007. The Kauffman Foundation also found that between 2014 and 2019, the number of women-owned businesses grew by 21%, while the number of women of color firms doubled that rate at 43%. Fast Company recently found women-owned businesses boosted job creation at almost seven times the rate of all businesses, and fueled several years of economic expansion.

That same study found that venture capital investment in all-female founding teams hit $3.3 billion, but that only represents 2.8% of capital invested across the entire US startup ecosystem. It also found that fewer than 10% of decision-makers at American venture capital firms are women. 

Those stats smack you in the face when you are a BIWOC (Black, indigenous, or woman of color) trying to raise capital for a brand that is being built with the very intention of serving your peers.

Venture funds dedicating small amounts, many around 15%, to these types of startups is a platitude, a pat on the head, particularly when you consider that 46% of the country’s population are people of color. These are extractive partnerships that give us tiny shares of ownership and only serve to harm Black, indigenous, and people of color. 

The need to adapt

As a woman of color and the CEO of soon-to-be launched emotional wellness brand, I know the funding process intimately. Even with the privilege of family members willing to invest, a supportive partner, white allies, and the ability to take two years for research, the process has been defeating.

The rejections cut especially deep for us and for our mission to expand mental health education for Gen-Z women and women of color — a demographic struggling under the weight of school shootings, deportations and suicide rates — while making the critical connection between beauty and emotional health sciences.

Time and again, I’ve been told to “prove it” despite the years of effortful collaboration with emotional health experts, and a stellar, industry-proven all-women team. This month will mark the first time in almost a year that I pitched a VC investor who is a woman of color and the only outside investment we have received since we started came from people of color. 

This current environment also stifles economic growth and chokes off the true innovation we need to adapt to BIPOC market spending power. Nielsen Diverse Intelligence Series reported in 2018 that if Black Americans alone were a country, they would be the 15th largest economy in the world, with Black women controlling the lion’s share of it.

The University of Georgia estimated that combined buying power of Black Americans, Asian Americans and Native Americans is estimated to be $2.4 trillion, while the nation’s Hispanic community command $1.5 trillion in spending power — larger than the GDP of Australia. 

Again, looking at numbers from the Global Wellness Institute, women are not only the largest group of wellness consumers to the tune of $4.2 trillion annually, they almost make up the majority of its CEOs. It shows that an industry run and dominated by women can succeed. 

At the heart of this is the reality that most investors are white men over the age of 40, and those men don’t have a true sense of the products women of color need. They only understand the market through the lens of the white male economics — they set the rules for the systems and have the power to work with us to change them. 

It starts with a fundamental shift in how investment decisions are made. It takes courage to look at yourself and your portfolio and ask, am I part of the problem?

It takes courage to flip the old school way of investing upside down in the name of equality and to know that you may be doing so alone. It takes checking unconscious biases when we are being critical of women of color businesses, or when we find ourselves asking for more data, more research to “prove it.” It takes the extra step of reaching out to women of color in your network to vet ideas and businesses founded by women of color to seek validation from people you trust. 

It’s not about setting aside two chairs at the table for us. It’s about fundamentally changing what that table looks like. 

Stephanie Lee is a former staffer to former First Lady Michelle Obama and a former product developer at the global brand, MAC Cosmetics. She is CEO of SELFMADE, a new personal care brand and community committed to the journey of self discovery for all womxn launching later in the fall of 2020.