As we start a new decade with hope on the horizon regarding a vaccine that can quell the pandemic we have all been living through, I am struck by some key elements we need to get right this next ten years. Two recent articles point to the woeful lack of funding for women and founders of color in the tech space. The Business Insider article spoke of the hundreds of Initial Public Offerings (IPO) that happen annually, but women have led only twenty since the Stock Market was founded in 1817. The article says that only three percent of all venture capital dollars go to female founders; how can we create a robust pipeline, so these numbers reach parity? I believe that is the work ahead of us with purpose this next decade.
2020 has given many of us time to focus on what matters, or it became even more apparent for some. It was also a year that saw a renewed focus on racial injustice, which also has a long history in affording or limiting economic opportunity for communities of color. Not surprisingly, this also shows up in the venture capital space. Rock Health issued its annual report on Diversity in Digital Health with some sobering findings for founders of color based on 678 survey respondents’ responses to a 33-item questionnaire.
The graphic below shows respondents’ breakdown, 46% of founders are white compared to 63% of leaders. The respondents hold a variety of positions ranging from C-suite executives to managers, directors, and VPs. The report reflects on the fact that the diversity of the leadership pipeline for digital health will determine the future health of the business.
The report also shows that White and Asian founders enjoyed larger deal sizes as they seek funding for their products; this also varied by location in the USA. The West Coast of the USA reports a total of $5 billion in deals, with the average deal size being $35.8 million. The Northeast saw deals totaling $3 billion, with the average deal being $29.5 million. Other geographies saw smaller deals occur.
One of the most interesting data points in the report shows the funding methods leveraged by founders. Respondents reflected that Asian men are most likely to be funded by venture capital. Still, African American women are least likely to be funded this way 41% of Black founders were more likely to bootstrap their company versus 25% for other founders. Overall the report suggests that 40% of women are venture-backed as compared to 62% of men. Access to capital to such a key aspect for long-term success of their companies.
This report offers an important baseline to build from. There is a clear need to develop opportunities for funders, especially African American and female founders to gain access to capital so they can get their companies on the right track from inception. Given the diversity of the USA, ensuring founders reflect that same diversity in digital health companies and the solutions they build is vital. Making the market will be imperative as we move through this decade.
Thanks for reading – Trina
(Opinions are my own)
References
https://www.businessinsider.com/female-entrepreneurs-face-obstacles-taking-companies-public-2020-12
