Black and LatinX female founders received record funding last year, but still got less than 1% of total venture funds

On paper, diverse female founders appear to be killing it. Last year, Black and Latinx women raised $3.1 billion in venture funding — up from $1 billion in 2018, according to the ProjectDiane report. And the number of Black and Latinx women raising at least a million in seed funding more than doubled. 

However, they still only account for 0.64% of all venture investment since 2018. 

Although there’s more venture funding than ever — there were 23 unicorn valuations in January alone — the funding for diverse female founders isn’t increasing at the same rate.

Elizabeth Yin, general partner at the Hustle Fund, previously told Insider how, even if a female founder can “pull together a round and a solid valuation,” their companies are still “not hyped in the same way that I’m talking about, where the valuations jump like 20x.” 

The numbers support Yin’s sentiment: the median seed funding for all startups was a $2.5 million, but only $479,000 for Black and Latinx female founders, according to ProjectDiane. 

Lauren Maillian, CEO of digitalundivided, the organization behind ProjectDiane, attributed this discrepancy to women of color being held to higher standards than their white and male counterparts. 

“One thing women of color always say is ‘I didn’t get the check, because they say I don’t have enough traction,'” she said. “Like what is traction? What is traction when you write checks to non-revenue generating companies all day long?”  

Some founders can point to downloads or subscribers to score big checks, but Maillian said women of color don’t get “the same sorts of investments on similar metrics.” 

It’s particularly difficult for women of color since the VC world is historically very, very white. In fact, only 4% of the VC workforce is Black, and only 3% of the people leading investments are Black, according to the National Venture Capital Association.

And even if women of color do manage to land over a million in seed funding (referred to as the one million club in ProjectDiane), Maillian says they’re held to impossible standards.

“Many of those women messaged me saying like, ‘yeah, I’m in the million dollar club, but I realized I just shot myself in the foot,'” she said. “They are scrutinized for how they spend the money, or how on earth they could have raised it but then not achieved whatever they wanted to.” 

Evidence shows this behavior means VCs are overlooking a massive, mostly untapped, source of successful founders. The fail rate for Black and Latinx women founded startups in ProjectDiane’s database is 27%, significantly lower than the 40% national fail rate, Maillian says.

Digitalundivided is striving to help women of color navigate an industry where there’s so many barriers to their success. It recently launched applications for a year-long fellowship for Black and Latinx woman where they receive a $5,000 investment and career development resources Maillian says are worth $75,000.

The fellowship aims to get more women into the million dollar club, but also prepare them for obstacles they’ll face after securing major investors.

“I want them to be the fiercest, fiercest woman out there,” she said.