Dealing with Race-Based Redirection in Fundraising, and Debunking the Myth of More
ICYMI — This year for Black History Month I’m using my platform to educate other women, and black and brown entrepreneurs about some of the hardest lessons I’ve learned in business. You can read the first lesson here and the second lesson here.
I’m the Founder of Wingwomen, a FemHealth Startup dedicated to providing virtual and in-person Gynecology, Family Planning, and Doula Support. And like most entrepreneurs, as my company grew, it became imperative for me to look for funding. As I stepped into the world of raising capital I experienced a range of responses from potential funders and investors that were anticipated like “No, You’re too early for us. We already invested in a competitor. Or keep us in your updates.”
But what was unexpected, was that sometimes there was an automatic redirection to funding sources for black people from white colleagues in my network — before I could discuss the merit of what I was building. Furthermore, even though I explained how it could be harmful to turn black founders away from perceived “white” funding sources, they were fine doing it, and often defensive of the practice because they viewed it as being helpful.
While there is a school of thought that it is okay to share funding opportunities with founders that are based on their ethnicity, when it is done habitually it has an adverse effect and sends the message that they are not good enough to be considered against their counterparts.
Today’s lesson is about confronting the improper practice of redirecting black founders to black funders without proper merit-based evaluation and dismantling the idea that we can get “more money” or “extra money” from black venture capitalists.
Separate Was Never Equal
In the post-Civil War era until 1968, a series of laws, referred to as the Jim Crow Laws, sanctioned racial segregation. These regulations, named after a Black minstrel show character, were designed to systematically marginalize African Americans, depriving them of essential rights such as voting, employment, education, and various opportunities.
The image below depicts two water fountains, one labeled “white” and the other “colored,” which served as a stark symbol of the pervasive segregation prevalent in the South. These water fountains, emblematic of the broader segregation enforced by Jim Crow laws, highlight how deeply ingrained racial discrimination was in everyday life. Rather than depicting overt physical aggression, the photograph underscores how these discriminatory laws dictated even the most mundane activities, such as drinking water.
While many are familiar with the historical narrative surrounding segregated water fountains, what often goes undiscussed is the profound psychological impact these fountains had. The segregation wasn’t solely about physical separation; rather, it served as a means to reinforce a racial hierarchy and allocate resources predominantly to white individuals.
This was evident in the social dynamics of the time, where proximity between races didn’t undermine segregation, as seen in interracial relationships or blacks working alongside whites in subservient roles. The primary objective was to maintain social division and ensure that privileges and resources flowed predominantly to whites. Whether water fountains were adjacent or separate, the message remained clear: one was designated for whites, the other for blacks, perpetuating the notion of inferiority. This segregation strategy efficiently upheld racial hierarchy without the need for separate facilities, utilizing proximity to underscore social divisions.
In 1948, President Harry Truman took a historic step by ordering the integration of the military. Subsequently, in 1954, the Supreme Court’s landmark ruling in Brown v. Board of Education declared educational segregation unconstitutional, marking the end of the “separate-but-equal” era in schooling.
Roughly a decade later President Lyndon B. Johnson further dismantled Jim Crow with the signing of the Civil Rights Acts in 1964 and 1965, which created and secured equal access to restaurants, transportation, and other public facilities.
Today, although we’re 60 years from the vestiges of Jim Crow; the grasp of segregation continues to permeate into our society. As it relates to funding, the practice of redirecting us to our social or financial class without proper consideration echoes the division Jim Crow Laws intended to create. And this act of “social redlining” continues to leave many black and brown founders at a significant disadvantage.
If We Know its Unconstitutional to Segregate Commodities, Real Estate and Education on the Basis of Race; Why is it Routinely Done in Venture Capital?
This sharp learning curve was difficult to navigate because as a millennial, my life has been shaped by the belief that merit is enough to excel. And coming into an industry, where people could socially send you back to your own was hard to understand.
After all, what is the purpose of getting into Ivy League programs, building and scaling companies against all odds, and transcending generational traumas — just to make it here — and be relegated back to our own based on the color of our skin and not the content, merit or vision of our innovations?
What I Learned So You Don’t Have To
More is a Myth
After fundraising and approaching 50 or so funds, and several handfuls of individual investors throughout 2023, I commonly experienced people referring me to black grants, funding, and programs because they heard there was “extra” money for us, or that there were “more” opportunities for black and brown founders to receive support.
I believe a part of why this happens is due to the misconception that black-led funds prioritize social projects, or that they must invest in black or brown founders. But this isn’t true — they are allowed to use their money as they wish. So do not assume their money has to come to you simply because you are black.
Black Venture Capitalists Are Investing Money From Other People
Despite the optics, fund managers may have LPs they have to answer to. And statistically speaking LPs are not people of color.
Color aside, when the fund is raised, they may not require or ask them to use their money to invest in black or brown founders.
What I learned, is that if they have the opportunity to prioritize deals that fall through the cracks of institutional firms — they will take them. Investors are in the business of making money, and because the most successful VCs understand it is a numbers game. They are likely to prioritize the selection of deals based on data. So yes, they may want to invest in women or underrepresented black and brown founders, but keep in mind that those considerations may not take place until after the data is reviewed.
It may be hard to have uncomfortable conversations with your colleagues about race, but if they are redirecting you to funds that do not suit your greater purpose, and it's impacting your ability to fundraise, it might be worth talking to them. There’s no guarantee they are going to see how it is impacting you, but at the very least if you say something you can share your perspective.
Go for the Gold
Part of the psychological impact of segregation was intended to make black people feel inferior.
During the 1940s, psychologists Kenneth and Mamie Clark embarked on a groundbreaking study, commonly referred to as “the doll tests,” aimed at examining the psychological impact of segregation on African-American children. Employing four dolls, distinguishable only by their color, the Clarks conducted experiments to gauge the racial perceptions of their subjects. These participants, ranging from three to seven years old, were tasked with identifying the race of the dolls and expressing their preferences based on color.
The majority of the children exhibited a preference for the white doll, attributing positive traits to it. From their observations, the Clarks deduced that the pervasive presence of prejudice, discrimination, and segregation instilled feelings of inferiority in African-American children, consequently undermining their self-esteem.
The learning here is that your self-esteem as a founder or entrepreneur may be impacted if you are constantly turned away or redirected. Since there is empirical evidence that shows the impact of segregation, you have to remember that you are worthy of being considered for investment from large firms or institutional funding sources. Don’t be afraid to pursue the big fish.