Weekend Read: Why I Invest in Women- and Minority-led Startups
Yun-Fang Juan, co-founder and CEO of Fundastic: It’s a well-known fact that women- and minority-led startups receive a disproportionately low percentage of angel and venture funding. There are many reasons for it. Some argue that it’s due to pattern matching: Investors tend to invest in people who are like them, or in people who are like the successful entrepreneurs they have previously funded. Regardless of the reasons, we know this gender and race bias does exist, and I believe it represents great investment opportunities. In essence, women- and minority-led startups are more undervalued than comparable startups led by white males who come from privileged backgrounds.
One might suspect there is a systematic disadvantage for women- and minority-led companies that keeps them undervalued. As a woman, a minority and a first-generation immigrant myself, I believe the perceived disadvantage is actually an advantage. If a female/minority founder can overcome the obstacles to get her company funded, she will be more prepared for the daunting challenges down the road. These entrepreneurs have to endure more rejections and setbacks compared to their more privileged counterparts. The fact that they persevered through the early obstacles to build a viable product with meaningful traction makes them stronger players in the startup game.
Although data on this subject is hard to come by, there are many anecdotal examples to back up this hypothesis. I have angel invested in over 30 early stage tech startups in the past two-and-a-half years. Most of them are founded by the typical white or Asian male from an elite college. Some of these companies are doing quite well and have gone ahead to get their Series A/B, while a couple of them got acqui-hired or shutdown. But there are two companies that surprised me the most with their resourcefulness and persistence, and I was able to invest in both companies with a modest valuation. One company has a black CEO while the other has a female founder.
Soldsie was founded by Chris Bennett and Arrel Gray. Chris is the business guy and the CEO. They pivoted a few times until they found a product market fit in social commerce after 18 months of bootstrapping. By the time they raised their $4 million Series A led by First Round Capital, they already processed over $25 million of e-commerce transactions. Yet raising money was very difficult for them. A couple of similar companies with lesser performances raised their Series A way earlier. I participated in …