How One New York Founder Thrives Amid Venture Capital’s Diversity Crisis

Startups have been in a slump since venture capital funding peaked two years ago.

For women and minorities — who make up only a tiny fraction of those pitching ideas or writing checks — raising funds for startups and new ideas has proven particularly challenging.

Venture capitalist Bryanna Samuels recently appeared on Yahoo Finance’s Stocks in Translation podcast to discuss the issues facing the industry, as well as a landmark court decision that could close the door on certain types of minority-focused financing.

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 distributed in 2023.

“Only about 2% of investment professionals are people of color,” Samuels said. And that number shrinks when it comes to check writers. “At the partner level, it drops to 1% women of color.”

The lack of diversity means that pattern recognition and innate biases still play a significant role in investment decisions, Samuels says. And that explains much of the symmetry in the low representation of minorities on both sides of the table.

“We tend to see patterns and trends and then repeat them,” creating a cycle that perpetuates underrepresentation, Samuels said.

While 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 keep (my investment) forever,” she said, arguing against the traditional VC method of exiting an investment after five to seven years.

“I really want to build a solid foundation. And I’m a big believer in slow growth and deliberate growth, which means you can’t put a timeline on it.”

But a recent lawsuit involving the Fearless Foundation — which provides grants to businesses run by Black women — shows that Black business founders still face structural challenges.

In June, the 11th U.S. Circuit Court of Appeals ruled against Fearless in a case brought by the American Alliance for Equal Rights (AAER), which alleged that the grants violated the Civil Rights Act of 1866, potentially preventing diversity-focused funding initiatives. The court issued a preliminary injunction blocking the new grants. The program remains on hold, although a further appeal is possible.

As the case went through court, Samuels stressed the importance of raising awareness and taking action.

The story continues

“The Fearless Foundation is currently running a petition. I strongly encourage everyone to sign it and start this conversation in their networks,” she said.

On the Yahoo Finance podcast Actions in translationYahoo Finance Editor Jared Blikre cuts through the market chaos, noisy numbers, and exaggeration to bring you essential conversations and insights from across the investment landscape, giving you the critical context you need to make the right decisions for your portfolio. Find more episodes on our video center. Look after yourself preferred streaming serviceor listen and subscribe at Apple Podcasts, Spotifyor wherever you find your favorite podcasts.

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