By 2012, when she founded her startup Attentive.ly, Cheryl Contee had about as impressive as resume as you can muster. She had gone to one of the most elite private schools in Washington, D.C., and from there to Yale, where she studied ethics, politics, and economics. She then embarked upon a career in communications, social media, and brand management. She’d helped launch a prominent blog, Jack and Jill Politics, as well as a consultancy, Fission Strategy.
So getting funding for Attentive.ly—a tool to help nonprofits send more precisely targeted emails to interested parties, based on their social media activity—should have been a breeze, right? Contee started pounding the pavement, reaching into her network and out to established firms. But she kept running into a wall of "nos."
"I don’t want to name names, but suffice it to say, it was really challenging." It didn’t seem to matter that she had already built a multimillion-dollar business. When she went to these venture capitalists, they told her something cryptic: "They said, ‘Wow, this is really compelling, interesting software, and a great idea. I just don’t know that you’re the person who can really pull this off...’"
"How would you read that?" she asks.
Now may be the time to mention that Cheryl Contee is a black woman. And if you’re one of the people who doubt there's discrimination in the lofty and enlightened world of venture capital funding, consider some data, recently compiled in a report called DigitalUndivided: in recent years, vanishingly few startups led by black women have received venture funding (you can read more analysis of the report here).
Of course, there are few startups led by black women at all, which has something to do with it. DigitalUndivided did the legwork, counting about 88 such startups. (They used a definition of startup that was fairly stringent, excluding firms like consultancies; a broader definition might have counted as many as about 375 businesses.) Of these 88, only 24 had received VC funding at all, according to sources like CrunchBase and AngeList. That’s 0.2% of the 10,000 deals in that period. And of those 24, less than half, 11, could be confirmed to have received over a million dollars in venture funding.
One way to parse this data: Even if you’re one of the black women so extraordinarily talented and driven as to overcome all the hurdles our society throws at you in your quest to form a startup, once you do, your odds of securing significant funding for that startup appear to be about one in eight.
Kathryn Finney of DigitalUndivided is an epidemiologist by training; she collected the data. Since releasing it, she’d hoped the publicity would lead other black women founders to step forward and say they weren’t counted among the sources she’d relied on. None have.
Kellee James is one of the 11 black women who raised over a million for her startup. Her startup, Mercaris, is a "market data service and online trading platform for organic, non-GMO, and certified agricultural commodities." (Think along the lines of Bloomberg data for high-brow corn.)
If it’s an unusual business idea, it should come as no surprise James followed an unusual funding path. She had already been working in the world of agriculture when she thought she saw a market opening. But she was faced with a few problems simultaneously: She needed money to quit her job; she needed to prove a market need to herself; she needed to prove a market need to others; and she needed to network among potential investors.
She hatched a plan that satisfied all those needs simultaneously. She went around to people she knew who might be interested and asked for a few grand from each to finance a year in which she would write a white paper. After drumming up $60,000, she traveled to a dozen states, conducting interviews with 300 people along the organic agriculture supply chain. Then she published an 80-page white paper on the organic food sector, while also proving the viability of her business to the 300 people she’d just interviewed—many of whom she would soon be hitting up for money.
She also had a connection to Pierre Omidyar, the eBay-founding billionaire, who she’d met as a White House Fellow in 2009. He’d told her to stay in touch. When Omidyar wrote a check, it built a lot of confidence for subsequent investors, including Freada Kapor Klein and Joanne Wilson. (These names, along with Comcast Ventures' William Crowder, come up again and again in the small world of VC investment in black female founders. Kapor Klein, who is married to venture capitalist Mitchell Kapor, and Wilson, who is married to venture capitalist Fred Wilson, are white; Crowder is black.)
Ultimately, James has drummed up $3.4 million for Mercaris to date.
After her discouraging experience at a number of firms, Cheryl Contee of Attentive.ly didn’t lose faith. Eventually she was introduced to someone who introduced her to someone who introduced her to Josh Mailman, one of the cofounders of Social Venture Network. (Mailman is white; her chain of introductions involved two women of color.) The two sat down on a park bench for two hours, just talking. Eventually, Mailman wrote a check. Attentively has raised $2 million to date.
Contee simply thinks that the mostly white, male world of venture capital is overlooking opportunities to make real money. "So you’re a white guy, you work at a venture fund, and to date you’ve mostly invested in other white guys who look like you. That just doesn’t make any sense. It doesn’t seem like good business acumen," she says. What's the phrase, after all? Diversify your portfolio.
"I would encourage anyone at a venture fund to really look outside the box, because that’s often where the best ideas come from—the ideas that make the most money, the ideas that create the most change," she continues. What’s something a white VC can do right now to expand his (probably his, alas) worldview? Reach out to an organization like YesWeCode, Black Girls Code, or the White House’s TechHire program, says Contee.
"If diversity is an aspiration, VCs and angels need to stop talking about it and be about it," she says, adding that if you specialize in seed funding, you have an outsize role to play in this space, since later rounds become easier after a startup shows growth.
James offers similar advice. She acknowledges that bias is a universal human trait, be it racial bias or more benign forms of bias that any human brain is saddled with. But she says that VCs need to be very honest with themselves about why they keep funding the same kinds of people. Better to admit racial bias, however painful and embarrassing, and start fighting it, rather than continue being part of the problem. "You have to be proactive if you’re going to overcome it," says James.
She also says that the mandate to make tech more diverse is a struggle that must be shouldered across the board—including at Mercaris, which she admits has so far had trouble hiring candidates of color. Not because they’re not out there; she knows they are. But existing networks make it harder and more time-consuming to get diverse candidates in the door.
Still, she says she’s committed to diversifying her staff, and she admits that it means making that a priority in terms of time and resources. "Everyone should be working on inclusion and diversity; no one can sit back and say, ‘We’re just fine.’"
She’ll need to hire a good recruiter, and that will cost money. It’s the sort of decision you often have to justify with investors. Fortunately, her startup has been invested in by some of the rare VCs who see the value in diversity.
*Editor's note 2/16: The last paragraphs of this article were revised to more accurately reflect the views of Kellee James.