Black Women Startup Founders Are Raising More Venture Dollars, Study Finds
But the group is still receiving an almost negligible part of the venture funding pie. And states like Pennsylvania are far behind on nurturing and retaining black women entrepreneurs.
In 2016, a groundbreaking analysis from the demographic study ProjectDiane revealed a bleak statistic about black women founders: a measly 0.2 percent of all VC funding that year had gone to startups launched by black women. And at the time, only 11 black women had ever raised more than $1 million in venture capital funding. Now two years later, the ProjectDiane 2018 report released on Wednesday shows that the number of black women with big rounds has more than tripled, though states like Pennsylvania have a lot of room to grow when it comes to producing and funding black women founders. Researchers collected information from more than 8,000 U.S startups and companies to produce the report. Here are some key findings:
Most Black Women Founders Are in California and New York
The report found that close to 50 percent of all black women-led startups are located in these two coastal states that are hotbeds for startups and venture capital. A closer look at the report’s map shows that only seven black women founders are based in Pennsylvania, one in New Jersey and one in Delaware.
The Overall Number of Black Women Founders Remains Low
In 2018, there are two times more black women-led startups since 2016, but “the percentage of black women-led startups is far less than the percentage of black women in the U.S.,” according to the report. Specifically, in 2017, there were 6,791 funded startups led by at least one woman founder. Less than four percent were led by black women.
Black Women Raised a Significant Amount of Funding in 2017
Black women-led startups have raised $289 million in venture/angel funding since 2009, with more than $200 million raised in 2017. Overall, the figure represents .0006 percent of the $424.7 billion in total tech venture funding raised since 2009.
More Black Women Have Raised More Than $1 Million
In 2015, 12 black women had raised more than one million dollars in venture funding. In 2017, 34 black women are in the one million dollar club. “$1MM was chosen as a goal because the median seed round raised by companies is approximately $600,000, so $1MM raised would indicate the startup has been able to raise additional funding post their seed round,” the report notes.
Most Black Women-Led Startups Do Not Raise Any Money
Those who raised less than $1 million raised $42,000 on average, a 15 percent increase since 2016, while the average seed round for all startups according to Crunchbase is $1.14 million.
Penn Has Produced a High Number of Black Women Founders
More than 95 percent of founders in the report have a bachelor’s degree and 50 percent have a Master’s degree or PhD. Penn was represented in the list of universities with the highest number of black women founders but sits at the bottom of the list. At the undergraduate level, the schools producing the highest number of black women founders are Howard University (7), Stanford University (6), Harvard University (6), University of California, Berkeley (5) and the Massachusetts Institute of Technology (5). At the graduate level, the schools graduating the highest number of black women founders are Howard University (10), Stanford University (9), Northwestern University (5), University of Pennsylvania (4) and Massachusetts Institute of Technology (4).
STEM Backgrounds Seem Unconnected to Startup Success for Black Women
For black women, STEM degrees apparently don’t matter for startup success. Black women with non-STEM related undergraduate or graduate degrees were able to raise, on average, 2.5 times as much as those with STEM degrees, the report found. The report also analyzed whether having prior work experience at a major tech company meant black women founders were more successful. The analysis found that only 18 percent of the black women who’ve raised over one million reported working for a tech company. And less than half of the black women in the study had worked for a tech company.
To view the complete study, click here.