As 2022 begins, one thing is certain: there billions of dollars worth of potential ripe for investment, including women leaders. Astia alone considered $3.024 billion in 2021, representing 1,103 enterprises, an increase of 119 percent over the previous year, putting any pipeline concerns to rest. However, the bleak picture of venture financing directed at minority founders, particularly Black female founders, remains unchanged.
In 2020, only 2.3 percent of women-led firms will receive venture capital funding, compared to 0.64 percent for Black and Latinx women. Women of color systematically excluded from the wealth, job creation, and innovation impact that entrepreneurship brings, and systemic biases perpetuated because of these inequities in venture funding. We decided to change those three years ago. We realized that Black women-led businesses abound in our pipeline, and that the only failure we could find was a failure to invest.
Finding hidden gems is what venture capital is all about. Underinvested, outperforming startups with the potential to transform the world sought out by best-in-class venture. We discovered a whole class of them right in our midst in our efforts to find those hidden jewels – and on the premise that we had done so years before. While we were unhappy to hear that we would have invested in many companies that we did not because of race, we were ecstatic at the prospect of correcting something over which we had complete control and agency – our own investment decision.
This prompted us to delve into our own data in order to find concrete actions that could take to address the intersection of gender and race in our investment activity. Three years later, we have put solutions in place to address the key findings from the Astia Edge investment pilot, and the outcomes speak for themselves. As a result of this self-examination and course correction, the Astia Fund portfolio now includes 50 percent Black female CEOs, and 17 percent of the Astia Angels’ funds deployed following the adjustment was invested in companies led by Black female CEOs.
The road to get here was not without its share of sobering moments of contemplation. In terms of racial equity, the findings highlighted in our new report provide eye-opening insight into some of the key parts missing from today’s venture capital paradigm.
The softer data was just as depressing. Throughout the pilot, Astia discovered that companies run by Black entrepreneurs disproportionately came to Astia with less capital invested in the seed and “friends and family” rounds, while having accomplished considerably more with their limited resources. Much of the financing disparity can attributed to systemic pressures produced by the wealth inequality in the United States. To make matters worse, investors frequently judged these entrepreneurs based on “who else had invested” — a query steeped in prejudice against those without access to cash and networks – rather than their development, tenacity, and promise.
The fact is that we, the investment community, must accept responsibility for the racial financing inequality and take aggressive steps to rethink the paradigm and the current quo. According to statistics, 17 percent of Black women are starting or running a new business, compared to only 10% of white women and 15% of white males. This is not a problem with the pipeline. Black female entrepreneurs abound; all we have to do now is discover them, honestly assess them, and invest in them. We have felt the pain of this knowledge directly, but we now understand the potential of interrupting the pattern. We are urging every venture capital firm to follow suit. It is a new year, and it is time for a new venture capital firm — one that benefits everyone, not just a select few.
