Why Black Women Are the Real Unicorns of the Start-up World

They’re the fastest-growing entrepreneurial demographic, but venture capitalists won’t invest.

(Photo: Steve Cole Images/Getty Images)

Feb 12, 2016· 1 MIN READ

Alex Reed is an editorial intern at TakePart and a senior at the University of Southern California.

In the tech world, they’re called “unicorns”—private start-ups that are worth $1 billion or more. But according to new analysis of the innovative ideas being backed by venture capitalists, the real unicorns of Silicon Valley are start-ups founded by black women.

That’s the finding of a report by Digital Undivided, a social enterprise focused on increasing investment in projects from underrepresented groups. It analyzed more than 60,000 start-ups and found that less than 1 percent—0.2 percent, to be exact—of the tech start-ups funded by venture capitalists between 2012 and 2014 were created by black women.

Digital Undivided also found that even when start-ups led by black women get funded, they receive an average of $36,000 each, which pales in comparison to the average $1.3 million given to white male-led companies.

The problem is not that black women aren’t starting companies, wrote the report’s authors. The number of black women–led businesses—more than 1.5 million—has increased by 322 percent since 1997, making black women the fasting-growing group of entrepreneurs overall in the United States. Those businesses would be a smart investment for funders, as they bring in more than $44 billion annually. The report’s authors also wrote that “the [tech] industry sees diversity and inclusion primarily as a human resource issue, but not a market opportunity.”

The root of the problem is the lack of diversity in Silicon Valley. While black women make up 13 percent of the U.S. population, the researchers found that they constitute only .04 percent of female tech start-up founders.

The report’s authors also found that 75 percent of start-up founders who raised at least $1 million previously worked for a tech company. In an interview with Wired, Digital Undivided founder Kathryn Finney explained that she’s been to tech conferences at which she’s seen roughly 50 black people among 20,000 attendees. “To me, that was just ridiculous and striking,” she said.

To see more diverse start-up founders, the report recommends that tech companies hire more diverse employees. Digital Undivided also intends to use its findings to design initiatives that will further efforts to boost the number of female entrepreneurs from diverse backgrounds in tech. “I’ve seen firsthand the impact technology can have...how it can immediately change someone’s trajectory,” Finney told Wired.