Yelitsa Jean-Charles created Healthy Roots Dolls to teach young Black girls to love and care for their curls, and spent five years building relationships to get her business off the ground. It worked: she closed her first round of funding at the end of 2020: a $1 million seed round from Backstage Capital, Broadway Angels, Lightship Capital, and some individual investors. But she says not all of her conversations with investors have gone well.
“I would meet with an investor and they would say, ‘This isn’t a fit for us, but have you talked to insert-random-Black-venture-capitalist?’” says Jean-Charles. “Mind you, that person doesn’t even invest in physical products.” Her story is part of a larger pattern of women and minority founders being routinely dismissed by mainstream venture capital funds. From 2015 to 2020, only 2.4% of venture capital funding went to companies with Black or Latinx founders, according to Crunchbase Diversity Spotlight 2020: Funding to Black and Latinx Founders. The 2021 VC Human Capital Survey found that only 4% of venture capital firm employees are Black and 7% are Latinx, and the percentage of minority firm partners is even lower.
This lack of diversity in venture capital firms and the founders they fund directly affects the types of business that are being built, with consequences for the American economy. According to the Center for Global Policy Solutions, 1.1 million minority-owned businesses, nine million jobs, and $300 billion in income could be generated by fixing discriminatory lending practices.