A new report has revealed that the tech industry’s diversity problem particularly affects black female entrepreneurs in the industry.
The report, The Real Unicorns of Tech, was produced by digitalundivided’s #ProjectDiane. It found that black women own over 1.5 million businesses – a 322 per cent increase in the last 20 years. There’s even a significant amount of black women starting businesses in the technical industry, however a large percentage of those are consultancies or non-technical support services for the industry and the majority of them have no employees. Additionally, although they are the fastest growing group of entrepreneurs, black women represent just four per cent of the total number women-led tech start-ups in the US, a mere 88 businesses.
“Black women founders have the drive and skill to lead successful start-ups that can have a profound impact on their communities,” authors Kathryn Finney and Marlo Rencher say. “However, they continue to be severely undercapitalised with little to no structures to acquire the funding and social capital necessary to scale a successful start-up.”
Of these 88 businesses, 56 per cent raised outside funding for their business, with the average amount raised by black female founders standing at just $36,000, compared to the average of $1.3 million that the averaged failed start-up raises.
More than half of black female founders reported receiving less than $100,000, which the report suggests means that they are tapping into resources outside of the traditional venture/angel network, such as retirement accounts and personal savings to fund their businesses.
#ProjectDiane found that just 11 of the founders that they surveyed had raised more than $1 million in outside investment and nine of those founders had previously worked for a tech company – suggesting that holding such a position was beneficial to black female entrepreneurs. But also, the report’s authors suggest that the lack of diversity within tech companies is feeding the lack of diversity within start-up founders.
As with other groups of entrepreneurs, incubator and accelerator programmes help black female founders to develop their companies. Those in accelerators were 40 per cent more likely to receive funding than those who had not been part of such a programme. However, black women are struggling to gain places on the top programmes. #ProjectDiane identified just five black female founders who were alumnae of one of the top three accelerator programmes.
So what's the solution? #ProjectDiane has a few suggestions: redefine entrepreneurship, support accelerators and programmes that produce black women founders, and give promising black founders direct access to capital. Only time will tell whether or not these suggestions will work, but this report makes it clear that something needs to be done to support black female entrepreneurs.
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