Women of Color are the New Unicorn in Silicon Valley

When Aileen Lee of Cowboy Ventures coined the phrase “unicorn” in 2013, the term was used to describe what was a rarity at the time, privately held companies valued at $1 billion or higher. There were less than 1%.

Over the years, these unicorns have become far less rare as it has become easier for companies to continue to raise larger and larger amounts of venture capital prior to an IPO. According to CB Insights, there are more than 400 unicorns today.

Today, the true rarity among venture backed startups are not privately held companies – they are female CEOs. Female CEOs receive a measly 2.6% of all venture capital, with women of color receiving less than 1%. As billion dollar valuations become increasingly common, and the venture markets bounce back after a global pandemic, women of color are the real unicorns.

Recent Q3 2020 reports on venture capital came in earlier this month, and funding for female founders fell to 2017 levels (keep in mind it was growing at a snail’s pace to begin with). All things considered, this is bad news for investors, because the data demonstrates that betting on female founders is one of the best decisions you can make. 

Regina Clewlow

Why your next investment should be in a female CEO

Study after study demonstrates that among both publicly traded and private companies, companies that have women CEOs, CFOs, and more diversity on their executive committees outperform their peers.

A BCG study of over 350 startups found that startups founded by women “ultimately deliver higher revenue—more than twice as much per dollar invested—than those founded by men, making women-owned companies better investments for financial backers.” Ethnically diverse companies not only send a strong signal about values to potential customers and employees, they also are 35% more likely to provide higher financial returns than the national median according to McKinsey Research. 

So why is it that more female founders aren’t backed by early stage investors? The simple answer: bias. A recent Harvard Business Review article summarized multiple studies that confirm that there are various stages of the financing process that are biased against women – from initial responses from angel investors (still predominantly men) to making the pitch.

Systemic obstacles to achievement are not new to women, and especially not minority women. History should be proof to investors that women have the survival instincts that you want in your next investment. What most investors should also know is that , the women and minority founders who have spent their entire careers in heavily male-dominated fields like engineering are resilient as hell.  I can attest to this from my own personal experience and those of my minority and women colleagues.

We’ve seen and heard it all – from “you only got into this PhD program at MIT because you’re a woman” even with a degree  from a top 10 computer science program to hearing from backchannel conversations in your early seed stage that investors didn’t believe you could build technology. If that female founder has bothered to stick around in an industry that can be hostile and biased against her, she’s going to survive and thrive. Know that she’s working 10x as hard because that’s what she’s been doing her whole career.

Female CEOs, and particularly women of color, are the new unicorn in Silicon Valley. Investors should seek them out, invest in them, and hopefully someday, they won’t be so absurdly rare that we can find another mythical creature in Silicon Valley to bestow the term upon.

Regina Clewlow is the CEO of Populus, a platform empowering cities to manage the future of mobility.  Follow me on Twitter, LinkedIn, or my website.

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