Startups have fallen on lean times since venture capital funding peaked over two years ago.
For women and minorities — who represent only a small fraction of those either pitching ideas or writing checks — it has been especially challenging to line up funding for startups and new ideas.
Venture Capital investor Bryanna Samuels recently joined Yahoo Finance's podcast Stocks in Translation to break down issues facing the industry, as well as a landmark court decision that may have slammed the door on certain minority-focused funding.
In 2023, all-female founding teams raised 1.8% of venture capital allocated during the year. Black founders raised less than 0.5% of venture capital doled out in 2023.
"Only about 2% of investment professionals are people of color," Samuels said. And that number dwindles when it comes to those who write the checks. "At the partner level, that drops down to 1% of women of color."
The lack of diversity means that pattern recognition and inherent biases continue to play a significant role in investment decisions, in Samuels's view. And this accounts for much of the symmetry in low minority representation on both sides of the table.
"We tend to spot patterns and trends and then repeat them," creating a cycle that perpetuates underrepresentation, Samuels said.
Though today's environment is challenging, it also offers more opportunities for diverse founders, including Samuels herself, who founded fashion startup Good Rapport New York in 2022.
"I want to hold [my investment] into perpetuity," she said, bucking the traditional VC route that looks for the exits after five to seven years.
"I truly want to build a strong foundation. And I'm all about slow growth, and thoughtful growth, which means that there can't be a timeline put onto that."
Still, a recent court case involving the Fearless Foundation — which provides grants to Black women-owned businesses — shows the structural challenges that remain for Black founders.
In June, the 11th US Circuit Court of Appeals ruled against Fearless in a case brought by the American Alliance for Equal Rights (AAER), which alleged these grants violate the Civil Rights Act of 1866, posing a potential setback for diversity-focused funding initiatives. The Court issued a preliminary injunction blocking new grants. The program remains on hiatus, though another appeal could be made.
As this case makes its way through the courts, Samuels stressed the importance of raising awareness and taking action.
"The Fearless Foundation has a petition going on right now. I highly encourage everyone to sign it and start this conversation within their networks," she said.
On Yahoo Finance's podcast Stocks in Translation, Yahoo Finance editor Jared Blikre cuts through the market mayhem, noisy numbers, and hyperbole to bring you essential conversations and insights from across the investing landscape, providing you with the critical context needed to make the right decisions for your portfolio. Find more episodes on our video hub. Watch on your preferred streaming service, or listen and subscribe on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
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