The underrepresentation of minorities and women throughout the science, technology, engineering, and math (STEM) industries is well-documented. Numerous initiatives have been created across the country to address the issue through K-12 educational curricula, afterschool and community-based programs, and adult programs designed to retrain workers for new careers in STEM industries. However, despite the effort, these programs have garnered little success.
Among a number of significant challenges facing minorities and women in STEM industries, a major one is entrepreneurs getting venture capital funding for business ideas that can lead to increased exposure, additional support and relationships, and increased employment opportunities for young people in the industry.
A recent blog posting from Fast Company titled, “One of the Biggest Challenges of Getting Funding for Minority-Owned Business” says while lack of access to capital is a big challenge, so is the lack of access to networks and advisors. Simply put, not only are minority- and women-owned ventures not getting the capital needed to advance ideas, they are also missing out on all of the advice and business networks that would accompany financing from leading venture capitalists across the nation.
Project Diane, an initiative of Digital Undivided, has the mission of fostering economic growth by finding and developing high-potential women of color entrepreneurs. The project has compiled research from CB Insights, reporting that from 2012-2014, startups led by African-American women comprised less than 0.2 percent of all the venture deals in that time period. Project Diane’s founder Kathryn Finney believes the issue is not one of availability, but rather one of access. Finney wrote in an online post, “The larger investment community cites the lack of investment in black and Latino-led startups on a pipeline that is more of an intermittent ‘drip’ when it comes to diverse founders, versus the massive ‘drop’ of the ‘young-white-guy-from-[insert big name school]’- founders.” Finney asserts that minority and Latino founders are out there, but they don’t have access to the traditional networks.
Natasia Malaihollo and her Wyzerr cofounder represent only a few minority-owned companies that have successfully raised venture capital for a startup. Their firm, Wyzerr, was one of only 12 firms owned by a minority woman that has raised over $100,000 in outside investments, according to early research data from Project Diane—referencing a proprietary research study about the state of Black women in tech entrepreneurship in the United States.
Malaihollo credits her success in getting funding to a venture capital fund that had a woman of color as a partner and chief operating officer. “The reason a lot of us [women and minorities] don’t get funded is because a lot of investors don’t look like us,” Malaihollo said.
Other findings of Project Diane’s ongoing research show that black women make up just 88 (4 percent) of the estimated 2,200 women-led tech startups. The study also found that the average amount of funding for a black female founder is just $36,000. For comparison, the average failed startup raises $1.3 million—and the study notes that those are generally founded by white men. Only 11 of the 88 founders had raised $1 million or more in funding. Of those, nine of them had previously worked for a tech company. That's problematic, said Finney, because it shows a correlation between big tech company experience and startup success.
Despite efforts by large tech companies to increase workforce diversity, which could in turn lead to a greater number of minorities and women potentially available to develop startup firms, the rate of success has been minimal. For instance social media site Twitter's overall workforce is just 2 percent black and 4 percent Hispanic. Apple is 8 percent black and 11 percent Hispanic; and its board rejected a proposal earlier this year to diversify its board, calling it “unduly burdensome and not necessary.”
Therefore groups like Project Diane are looking for more local and non-profit programs like Cleveland Ohio’s JumpStart, Inc. that are focused on helping startups to get financing and succeed. Programs such as Jumpstart may be willing to invest in smaller startups not requiring the quick returns demanded by many venture capital firms. “Part of our focus is to accelerate opportunity for women and minority entrepreneurs in Ohio,” said JumpStart CEO Ray Leach. For more information about STEM careers, startups, and small business funding, visit www.TheInstituteNC.org to learn more.