July 10, 2024

Racially Diverse, All-Female Founding Teams Struggle The Most When Fundraising

Female entrepreneurs of color remain among the most disadvantaged in raising capital, despite growing efforts to support diversity in entrepreneurship, according to The Funding Divide report.

Persistent Challenges in Fundraising

The report, published by DocSend and Dropbox, found that racially diverse, all-female startup founding teams spent the longest time raising capital. In 2023, they spent an average of 25 weeks fundraising in 2023, a 67% increase from 2022. 

Despite this extended effort, they secured an average of only $460,000, the lowest amount among all demographic groups. 

In contrast, racially diverse, mixed-gender teams raised an average of $810,000 over 18 weeks, while mixed-gender teams without minority members raised $800,000 in 20 weeks.

Although all demographics experienced a decline in funding in 2023, minority and female founders were hit the hardest. 

The report reveals that all-female teams raised 43% less than all-male teams, with minority all-female teams being the only group to average under $500,000.

The Impact of Economic and Social Factors

The analysis points to several contributing factors to the growing funding gap. The tightening of venture funding and the backlash against Diversity, Equity, and Inclusion (DEI) initiatives have compounded the difficulties for minority founders. 

The momentum gained in 2020, driven by movements like Black Lives Matter, has diminished, resulting in increased fundraising obstacles for underrepresented entrepreneurs.

“As VCs have been holding back on their spending, many have been falling back into old habits of tapping into the founder networks they already know,” said David Uponi, Forum Ventures.

“This leads to missed opportunities both for investors and historically underrepresented founders. In fact, Black founders have recently told me that fundraising conditions are worse now than they were before the pandemic.”

Feature Image Credit: Christina @ wocintechchat

Sara Keenan

Tech Reporter at POCIT. Following her master's degree in journalism, Sara cultivated a deep passion for writing and driving positive change for Black and Brown individuals across all areas of life. This passion expanded to include the experiences of Black and Brown people in tech thanks to her internship experience as an editorial assistant at a tech startup.