Karen Cahn, the founder and CEO of IFundWomen, a four-year-old crowdfunding site for women entrepreneurs, has long known that her customers were predominantly women of color. But those women weren't having the same success raising money on her platform as White women. Through the end of 2019, women of color were the majority of the site's members, but raised only 28 percent of the money. Enough was enough.
In January 2020, IFundWomen's co-founder Olivia Owens spearheaded the launch IFundWomen of Color, an online platform specifically for diverse entrepreneurs, with its own mentoring and programming. For the first year, that support is free. About 2,000 women signed up for the program in 2020, and by the end of the year, women of color were generating fully 70 percent of the money raised on IFundWomen. It's not as if White women were raising less: Overall funding volume on the platform grew 185 percent in 2020. That means that since IFundWomen launched, 51 percent of the money raised has gone to women of color.
That's real progress, and it's no blip. In the last year, a handful of startups have started to see signs of progress in their efforts to level the playing field in entrepreneurship, and to start to chip away at the results of decades of systemic racism, and economic and social injustice.
The work of IFundWomen and others shows that there is money to be made in supporting entrepreneurs of color. "Black and brown entrepreneurs have capital," says Melissa Bradley, a longtime social impact entrepreneur and adjunct faculty at Georgetown University's McDonough School of Business. "If you prove your value, they will come to you."
Bradley knows this firsthand. As the co-founder of Ureeka, an online platform to help founders of color grow their companies, she's built a platform to provide coaching, content, and community, all customized for founders of color. And she charges for it--Ureeka's basic package costs $199 a year. It measures its success largely by the revenue growth of its member companies. By that metric, it's doing well: The first group of about 1,000 founders to go through the program were mostly Latinx, and 80 percent of them saw a 50 percent jump in revenue. "We know it's not just investment," says Bradley. "They need coaching, they need support."
You can't just build it and hope for a more equal mix, however. "People ask us, 'Why build IFundWomen of Color when the majority of your original customers were women of color anyway?'" says Cahn. "The answer is that just having them on IFundWomen wasn't enough. We tried that for two years. It didn't work." Owens says that about 60 percent of the applicants to IFundWomen of Color cited the need to build their personal and professional networks as a top challenge, compared to about a third of White women. "We did a ton of programming on network building," says Owens, who set up a mentor-matching program in partnership with Unilever, so that founders could get support from Unilever executives.
Shannon Maldonado, the owner of Philadelphia boutique Yowie, already had a strong network when she started thinking about fundraising. Customers rallied to support Yowie throughout the spring. When Maldonado was looking to hire an employee to help her develop a co-working, creative, and hospitality space in addition to her retail store, she knew venture capital wasn't the right fit.
"We're not looking to duplicate this across the country," she says. When she first saw the playbook IFundWomen developed to help entrepreneurs raise money, she says, "I was like, oh, I love this. This feels achievable." Owens talked Maldonado through an Instagram Live interview, and Cahn sent her an encouraging note mid-campaign. On July 31, Maldonado's campaign ended, having raised $77,651 from 746 funders, just above her $75,000 goal.
Crowdfunding in general tends to be more diverse than other forms of funding, and many founders come to it specifically because their existing networks can't support them financially. "If you're not from a wealthy or upper middle-class family, your friends and family will not have the money to back you," says Ken Nguyen, co-founder and CEO of Republic, a crowdfunding site that says about half of its companies have a diverse founder. "Part of what we do is present compelling stories to our community, and have that community act as the friends and family round."
If more entrepreneurs of color are able to get funding, these platforms stand to prosper. IFundWomen's membership ballooned 800 percent in 2020. The number of companies that reached their full funding goals was 31 percent, and women of color did even better: 45 percent reached their full funding goals. (IFundWomen allows entrepreneurs to keep any money they raise even if the full funding goal isn't reached). Like other crowdfunding sites, IFundWomen gets a share of the money its founders raise--in its case, 5 percent.
IFundWomen has also found that large corporations are looking for ways to support these same founders. "When enterprises like Visa and AMEX and Unilever or Adidas or Diageo come to us, they're coming to us with marketing dollars saying you've got all these smart savvy women who happen to be business owners, but are also making 80 percent of the purchasing decisions in their household," says Cahn, who adds that these companies are interested specifically in reaching women of color. IFundWomen has facilitated millions of dollars of grants from its corporate partners to entrepreneurs raising money on its platform.
Ureeka's Bradley understood the value of this market from the start. Unlike traditional accelerators, Ureeka is venture-backed, having closed an $8.6-million round early in 2020. Bradley says she and her co-founders decided to raise venture capital in part because of the signal it sends. "It really emphasizes this was not started out of charity," she says. "This is recognizing a huge market opportunity."