As we recap the past year, we are seeing an undeniable surge in the creation of new businesses led by Black and Latinx women. This reflects the broader trend that pandemic-fueled entrepreneurship—and possibly even survivalist entrepreneurship—is on the rise. The workforce trend of survivalist entrepreneurship has been known to define businesses that are created quickly, not by choice but in response to a lack of employment, and amid extreme conditions, like this pandemic. They are often counted out as unsustainable businesses that will struggle to make profits in the long term.
Don’t underestimate the potential of these new brands and businesses, because many of them are created by a new C-suite of Black and Latinx female entrepreneurs who are delivering value, influence, and driving the next economic recovery.
The pandemic throttled the American economy and created what is widely known as a shecession, an economic and career fallout disproportionately impacting women. Last year, millions of women left the workforce in the United States, almost half of them were Black or Latinx, evidence that both the health and careers of women of color were disparately impacted. As both employees and entrepreneurs, Black and Latinx women are overrepresented in the industries hardest hit by the COVID-19 pandemic, including hospitality, leisure, and healthcare. The pandemic continues to exacerbate existing inequalities and derail decades of progress for women in the workplace.
Black and Latinx female entrepreneurs redefining C-suites
I lead digitalundivided, a nonprofit that leverages data, programming, and advocacy to catalyze economic growth for Black and Latinx women entrepreneurs. The organization’s ProjectDiane 2021 Research Update added hundreds of new companies with Black and Latinx women founders to its database, indicating a steady uptick in the number of businesses founded and funded by women of color during the pandemic.
Nearly half of the founders in our database are headquartered in New York and California. This is important to note because these regions, specifically New York City and Los Angeles, were among the cities hardest hit by COVID. Our research indicates that during the pandemic many women of color started businesses, while some increased their focus on their side hustles for income. These aren’t businesses that are thrown together to make income quickly for the short-term only, they are highly competitive and viable businesses.
There’s a record number of Black and Latinx businesses in the startup ecosystem today, and they are thriving and beating the odds to stay in operation. Their existence and success could inspire an even greater wave of entrepreneurship amongst women of color this year. Our conversations with Black and Latinx women founders highlight that they are starting businesses for numerous reasons, such as needing more job security during the pandemic, rejecting wage labor and differing pay standards, seeking more flexibility, and having the potential to achieve greater wealth-building opportunities. The pandemic also forced many founders to reimagine and pivot their existing businesses.
Farah Allen is an alum of digitalundivided’s START program and the founder and CEO of The Labz. The company originally worked with creatives as a collaboration platform but pivoted during the pandemic. It’s now an online platform for creating experiential, interactive events.
The Labz inked a million-dollar partnership during the pandemic to scale its operations. “The COVID-19 pandemic upended nearly every aspect of society, and many founders, myself included, saw opportunities to insert our big ideas into new, emerging markets that are now open to hearing what we have to say,” said Allen. “We are experiencing a unique moment and a shift in business to level the playing field and open up the once closed venture capital doors to POC concepts,” she said. “Innovation today is the key to unlocking post-crisis growth tomorrow, and with my new funding round of $3 million, I am glad to be part of this growth.”
The funding gap grows during the pandemic
Despite having more Black and Latinx founders than ever before, we are seeing little to no change in the investment metrics for women of color. Black and Latinx women founders now receive less than half of 1% of venture capital funding. These founders are actually losing ground given that total venture capital investment spiked to an all-time record high last year. Women of color are still forced to innovate, by doing more with less.
This lack of venture capital funding funneling to Black and Latinx women-led businesses is only part of the problem, as minority-owned businesses were largely shut out of early PPP loan forgiveness programs and restricted access to small business loans. Funding is an essential need for these startups and businesses to grow and survive.
We are seeing some incremental gains. The number of Black and Latinx women who have raised over $1 million in venture funding continues to increase. Twenty-seven more founders met this goal since September 2020. Much of the credit for the overall increase in funding to Black and Latinx women-founded businesses can be attributed to major funding rounds led by a few unicorn companies, such as Savage X Fenty, BlockFi, and Cityblock Health. We need to accelerate these wins exponentially if we are going to reach funding parity.
We need to have more companies led by Black and Latinx women reach that unicorn status to close this funding gap faster. We need to eliminate discrimination, bias, and lack of access in the funding process. We also need more transparency from the venture capitalists as to why we aren’t getting the checks, or getting checks but not the same size as our non-minority counterparts.
The recovery starts with entrepreneurship and professional parity
Although recent data show that the U.S. economy is slowly recovering and businesses are reopening, Black and Latinx women are not sharing the job market recovery, and that’s also evident by the funding gap in the VC funding landscape. At a time when corporate funding commitments and pledges to BIPOC businesses and organizations reached the billions, we aren’t seeing all of that funding. It’s time to write those checks and enforce structures of accountability with the private sector and VC leaders. Entrepreneurs and small businesses are pivotal to this recovery, but for them to thrive they need funding.
I have long argued that professional parity is needed to help close this funding gap. Professional parity is reached when we are able to win, succeed, and even fail by equal standards, and have our work judged equally regardless of background, race, or social and financial status. It is a notion that gets to the core of what’s holding investors back from investing in founders of color.
Women of color don’t get to fail, and if we do, it marks us in ways non-minority male founders don’t have to worry about. They have the ability to fail, learn, and try again; while women of color are often troubled by the fear of failing, and it impacts their ability to take on risks. Similarly, investors also see the data and know that there are so few Black and Latinx women entrepreneurs getting funded that they view their businesses as riskier. It’s time to ask why the funding system second-guesses if women of color can lead. That’s all we do in every aspect of our lives, we lead—and we do more with less.
This systemic bias is not fair, but it’s the reality we live in. On the road to economic recovery, it’s imperative to do the hard work to remove bias from the founder and funder ecosystem. This is the only way to create and empower this new C-suite and to ensure that they are capitalized and resourced.
Lauren Maillian is the CEO of digitalundivided.