Report: New Concerns Arise As Funding Gap For Diverse Women And Minorities, Including Black Founders, Broadens

All-female teams with minority members were the only demographic to average under $500K in fundraising.

Regarding raising capital, Black women small business owners continue to be among entrepreneurs shunned in their quest to do so.

Racially diverse, all-female startup founding teams with minorities spent the longest time fundraising in 2023 at an average of 25 weeks, a 67% increase from 2022.

Simultaneously, the group collected an average of $460,000 in 2023, the lowest amount of funding of all demographics. The bottom line: female and minority founders allotted the most time to fundraising to raise the smallest amount of capital. And even as all demographics raised less in 2023. data showed that underrepresented founders endured the most misfortune.

In contrast, racially diverse, mixed-gender teams raised an average of $810K for 18 weeks, while mixed-gender teams without minority members raised an average of $800K for 20 weeks.

The fresh statistics are from this report. The analysis examined growing disparities and disadvantages that female-led and people-of-color start-ups endure in obtaining much-needed financing.

The data revealed that female teams raised 43% less than all-male teams in 2023. All-female teams with minority members were the only demographic to average less than $500K. They gathered the most per meeting, raising an average of $21,900.

The findings are intense and potentially consequential on several fronts. The report indicated the Black Lives Matter movement and activism in 2020 to fund women and Black-led firms encouraged venture capital (VC) firms to make progress in closing the funding gap. Yet, partly due to VC financing tightening, progress regressed as underrepresented founders faced more fundraising obstacles.

Observers expressed concern if the latest funding downturn for female and minority founders will keep falling for those businesses as anti-DEI pressures continue to grow. They have come from conservative activists against private and public organizations as they have in recent months.

Simultaneously, venture funding for Black-founded startups 2023 fell below $1 billion to $705 million, the first time since 2016, according to a report from tech research firm Crunchbase.

Furthermore, the meltdown comes roughly four years after the murder of George Floyd and promises by corporate America to invest billions of dollars into the Black community. That included vows to help Black small businesses gain financing to grow. However, many of the pledges have not yet been delivered upon. And that reportedly has occurred as DEI critics have since legally attacked such investments.

Justin Izzo, senior data and trends analyst at Dropbox DocSend, offered this perspective in comments in a news release. “In 2021, underrepresented founders experienced a relative increase in funding and positive momentum in bridging the funding gap.”

He added, “But with less money overall, this trend was short-lived. The pendulum swung even further back as VCs cautiously invested in decks that easily resonated. Investors are missing opportunities for outsized returns from underrepresented founders and less familiar ideas.”

Dropbox DocSend reported that if a team had minority team members, the business model slide was among the most scrutinized by investors. However, diverse teams received 29% less time on their business model sections than all-white teams.

Victoria Yampolsky, president and founder of The Startup Station, commented on the analysis in a news release. The Startup Station describes itself as a CFO advisory and finance education platform for startups and small businesses.

“Fundraising is rarely a quick process, especially for underrepresented founders,” she stated. “Despite increasing challenges, all-female teams continue to show unparalleled determination and resourcefulness. It’s more than just fundraising, though: utilize your existing network while you build a new one, apply to an accelerator, enter a pitch contest and attend startup conferences.”

She added, “Above all, believe in yourself, your ability to raise money and your mission. Having an unwavering will to persevere and open-mindedness to try all available resources can make the difference between success and failure.”