Venture capitalists and investors clamber over each other to dump money into tech startups. An entire buzzword-infused culture has formed around the industry as everyone tries to get in on the ground floor of the next Apple, Uber or Facebook. By no means does this almost entirely male, largely white community hold a monopoly on good ideas, but every year white men are showered in billions of dollars by excitable investors. Meanwhile, their non-white, non-male counterparts still struggle to get any attention from investors, and unless the government can step in, this inequality threatens to stifle some of the most innovative participants in the tech scene today.
There is a stark double standard within startup culture. For almost every white male tech entrepreneur, failure is acceptable, even encouraged. Though many startup bank sheets are filled with hacks rather than true growth, investors continue to dump money into them.
Even startups that failed within 20 months each received an average of $1.3 million in funding, as long as the owners were white men. Minority business owners do not see the same excitement. Among startups founded by black women, only 55 percent received funding at all, and those who received funding only received an average of $36,000. According to a Harvard study, investors — an even less diverse group than tech entrepreneurs — are far more likely to favor pitches from men than from women. While venture capital firms with women in leadership roles are more likely to give women entrepreneurs a fair chance, women still only make up six percent of the venture capital partners.
While the tech boom has resulted in an oversaturation of foolhardy ideas that do not actually make any money, female small business owners are helping to drive growth throughout the country. Among privately held firms, only women-owned companies expanded their employment in 2015. While these firms are growing, they are still only a minority share of business in the U.S. They still have a lot of room to grow. Within New York City, the number of women-owned small businesses grew by 36 percent from 2007 to 2012. In areas such as the South Bronx, Black and Latino women are driving economic growth and starting businesses where others are unwilling. Programs such as WE NYC and NYC Small Business Services’ (NYC SBS) initiatives are helping to fill the investment gap for underserved business owners, but they pale in comparison to the money and resources behind venture capitalist firms. The Federal Minority Business Development Agency, dedicated to helping women and minority business owners, only had a budget of about $28 million last year — a paltry sum compared to more than $58 billion in venture capital invested over the same period
Until the private investors catch up, the government needs to increase funding for programs like the MBDA and WE NYC. Both for the sake of equity and economic growth, we need to invest more in women and minority business owners. If the private venture capitalists are too busy drooling over the next useless app to see the growth potential of minority-led startups, government is going to have to take the lead.
Opinions expressed on the editorial pages are not necessarily those of WSN, and our publication of opinions is not an endorsement of them.
Email Shiva Darshan at [email protected]