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Women of Color Get 0.2 Percent of VC Dollars. This Startup Founder Plans to Change That

Women-led startups are largely excluded from the world of venture capital financing.

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BY Glenn Leibowitz - 09 Mar 2018

PHOTO CREDIT: Getty Images

When Ashwini Anburajan went on a roadshow a few years ago to raise funds for her ad tech startup, OpenUp, she encountered a level of rejection she had never experienced before.

"I had VCs openly tell me, 'You're great, it seems like you're good at sales, but you should come work for us rather than run your own company," she recalls. "I was a female founder. I was a woman of color. And I had rarely met such resistance--and, quite frankly--discrimination, until I went out to raise venture capital."

Ashwini Anburajan

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While she managed to raise a very small amount of capital from angel funds, she ended up bootstrapping her startup with its initial revenue streams.

Among women of color trying to raise funds for their startups, Anburajan is not alone: Of the $84 billion of VC investment that went into startups in 2017, just 2.7 percent were invested in women-led companies, according to Fortune. And just 0.2 percent of all VC dollars were invested in startups led by women of color.

"In many ways, the venture and startup ecosystem is still a boys' club--one that all too often excludes, disadvantages, and mistreats talented women who want to contribute to it," Melinda Gates, investor and cochair of the Bill & Melinda Gates Foundation, told Fortune recently. "The data tells us that's harmful to society and bad for business."

Last year, Anburajan applied to the accelerator program at 500 Startups. "Ad tech is a male-dominated industry. There are very, very few female founders in it. I said, okay, let's go to 500 Startups. They're considered a growth accelerator and they really teach you marketing and sales to grow your company," she says.

Over drinks at one of 500 Startups' weekly "Tequila Friday" social mixers, Anburajan and her fellow entrepreneurs were chatting about the buzz in Silicon Valley around ICOs--initial coin offerings. While several of her fellow founders had already raised financing from VCs, they decided to launch an ICO as a way to expand their ability to raise funds.

Thirty startups pooled together to establish the 22X Fund, which they named after Batch 22, their cohort at 500 Startups. Like a startup index fund, the 22X Fund enables investors to buy into a pool of equity from all the companies.

"As an investor in the fund, what you are buying, essentially, is similar to a traditional share in a company. But what's different is that it's a tokenized investment so it's executed on the blockchain," explains Anburajan, who has helped spearhead the fund.

22X Fund is expecting to close $35 million over the next few months. One million dollars will be given to each of the 30 companies in the fund in exchange for 10 percent of equity.

Securitize, which owns the fund, will also host the fundraising and handle compliance. Investors can sell the tokens after one year, and they last nine years.

In addition to attracting a more diverse investor profile, the 50 or so founders behind the 30 companies participating in the fund are also a diverse bunch. "50 percent of the founders are international. A little less than 20 percent of the founders are women. This is very different from VC where just two percent of funding went to women in 2017," she says.

"For a female founder like me, being part of a group of companies raising money gives me a better chance at raising capital in a way that the VC market just doesn't allow for."

What about female-led VC companies? "I've met with tons of female-led VC companies. Maybe they don't have the same selection biases, but they're operating on the same investment model as male-led VCs. I don't think the answer is more female VCs or partners. We need a new investment thesis."

"I think we're seeing a "Time's Up/#MeToo" movement for fundraising. Women are helping women. People of color are banding together," says Tereza Nemessanyi, Entrepreneur-In-Residence at Microsoft in New York, where she leads the company's work with early-stage, venture-grade startups.

"Ashwini is intrepid when it comes to building her own company, but she never stops showing up to help other women raise money. That's something women do."

(Note: 22X Fund is not a client of mine, nor do I have any other business dealings with the company.)

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