My interest in venture capital (VC) began long before I ever imagined building an actual venture capital fund. In college, I opened a women’s clothing store and quickly learned that having a great idea was only part of what it took to build a business. I needed capital to grow, and finding that money wasn’t easy. That experience stayed with me.
Years later, when I began looking more closely at who gets funded in America—and who doesn’t—I realized that the entrepreneurial challenges I had encountered were part of a much larger story. So I started digging into the numbers.
When I first started researching the racial disparities in venture capital, what I learned shocked me. Women of color make up nearly 20% of the U.S. population, yet our best estimates indicate that only 0.39% of venture capital funding is invested in women-of-color-owned businesses. These numbers weren’t just disappointing; they infuriated me. And though Black women comprise approximately 7% of the U.S. population and start more companies than any other demographic, our research reveals that they obtain less than 0.35% of VC funding across all sectors. While we comprise over 50% of the U.S. population, women of all races combined obtain less than 2% of all VC funding. The rest is awarded to male founders.
The more I dug, the more infuriating the story became.
I learned that the vast majority of dollars venture capitalists invest come from sources like public employees’ retirement funds—their pension funds. Public employees are very diverse. In the federal workforce alone, 44% of workers are women; 18% are Black; 10% are Latino; 7% are Asian American; 2% are Native American; less than 2% are Alaska Natives; and Native Hawaiian and Pacific Islanders make up less than 1%.
Hold up!
That means, in general, white men are investing the money of women and Black and brown people, yet they direct just a pittance of those funds back to Black people, brown people, or women of any race. In other words, the money flows from the pension funds of diverse people to Private Equity (PE) and VC industries comprised almost entirely of white men. Not surprisingly then, most VC money is invested in white-owned start-up businesses. Very rarely does that money get invested into people serving the communities where the money was made.
The injustice made me sick. So not only were Black people not paid for their labor beginning in 1619, when enslavement began, and continuing until the 1860s, they were also underpaid and economically exploited for another hundred years after Jim Crow laws began to be imposed upon Black people. Yet even today their savings fund the descendants of many wealthy white landowners.
More than 150 years after Emancipation, Black people are still underwriting the accumulation of white wealth. My head spun with this reality, though another part of me wasn’t the least bit surprised to discover yet another dimension of racial economic injustice and inequity. Right then and there, I knew I had to help ensure that retirement fund investments reflect the diversity of the people contributing to them. The challenge was huge, yet I felt undaunted. If I wanted to see change, I had to be a part of making it happen.
As a Black woman, I was not only uniquely aware of the issue at hand; I was also uniquely aware of the upside possibilities that came with shifting these assets to Black and brown women more than almost any white man working in the VC space. Having grown up in and moved professionally within racially diverse contexts, I knew that the spaces wealthy white people inhabit are overwhelmingly monochrome. Their narrow lens not only leaves them with a colossal blind spot and it also makes our national and global economy incredibly vulnerable to various cognitive biases and distortions, denial, groupthink, unexamined assumptions, and the homogeneity that results when diverse perspectives are lacking—not to mention the reality that we miss out on billions of people’s God-given gifts, talents, and skill sets.
We can see the cost of inaction and the opportunity of change. Now, we need to roll up our sleeves.
Adapted with permission from Fearless Freedom: A Manifesto for Unlocking Wealth and Equality for All by Arian Simone.
