New data on VC bias
Art by Britt Stromberg.
How race and sex impact venture funding.
Are women more likely to create companies that benefit society?
That was one of the questions that led me to start tracking female founder fundraising.
For all of 2019, I documented the weekly updates in a Google sheet. I used Crunchbase to search new funding rounds by gender and type of round (seed, Series A, B, C) and exits. To verify a female founder, I would click through to each company website, all 1,293 of them, and cross check against LinkedIn if founder profiles were not listed.
Reading those About Us pages every week made me hopeful. I remember thinking on multiple occasions, “Damn, these women are THE solution.” There are many qualified women who are founding companies that, with money and guidance, could make the world a better place.
Now there’s proof from Plan Beyond’s Bias in Venture Capital Funding Report.
Early in 2020, Laura Troyani, the founder of PlanBeyond, approached me about running data analysis on the Underwire Funding Update. Laura’s initial hypothesis was that there’s a “yellow brick road” to VC fundraising paved by race, gender and class. You need to be white, male and a graduate of an elite educational institution in order to tap the venture-capital trough.
Laura and her team validated the thesis and revealed a couple of surprises based on race:
Companies with women only founders are more than twice as likely than men only teams to develop companies that improve society
Organizations with at least one Black founder are 60% more likely than organizations with at least one white founder to work to benefit society
Let's look at the data behind these two revelations.
The PlanBeyond team found a wealth of female-led, for-profit organizations building solutions across industries, including food and consumer packaged goods, education, manufacturing, healthcare and technology.
The report highlights a few of the types of companies working to improve society as a whole, and also points out that this work is not done equally by all founders. In fact, women and Black-led companies are more likely to build these types of companies.
Despite their value to society, the report also shows how organizations with women Black founders are receiving disproportionately less funding throughout their life stages.
I give full credit to the PlanBeyond team for digging deeper on race. They used LinkedIn and Google Image searches to identify and label founders based on easily-visible traits. That was smart because it mimics how founders are likely perceived when interacting with investors. While not a perfect measurement, this approach went deeper than I was able to do on my own and helped to surface the report's most valuable insights around race.
Other findings from the report:
Venture-backed founders mostly look the same—white and male
Want to raise the big bucks? It helps to be a man, it hurts to be Black
Venture capitalists prefer white men
Big duh. We know these unfortunate truths about the VC ecosystem and white-male bias.
The timing of this report coincides with our collective attention on racial inequality in the U.S., as it should be. We’re fortunate to be able to share this data in support of our Black colleagues. For a just and equal society, we need their full participation in founding and scaling companies.
Please read and share PlanBeyond's report. Post it to LinkedIn and tag @PlanBeyond so Laura gets the spotlight this deserves. It's important. The health of our society depends on it.
Related to the above, I’d like to call out presumptive Democratic Presidential candidate Joe Biden’s Build Back Better economic plan. His platform aims to reinvigorate America's economy with significant investments in R&D, infrastructure and education.
As part of his R&D Challenge for All of America, he calls out the gender and racial inequality of the VC system and pledges to direct federal investment toward 50 diverse communities across the country that could become new centers of job-creating innovation and production. He also pledges to guarantee that funding is equitably allocated so that women and communities of color receive their fair share of investment dollars.
If elected, Biden's administration could provide the spark to finally tip more money into Black- and Brown-led businesses.
Here’s an excellent analysis of Biden’s economic plans from Seattle Times business columnist, Jon Talton — “Biden economic agenda presents voters with a clear choice. “
As PlanBeyond’s report attests, our current system isn't working and will not make society a better place for our children. Voting for an administration that has a plan to give Black and Brown business owners this necessary support is one part of the solution.
Please vote.