But the fundraising market came back pretty quickly in 2020 — for some. We could tell by how investors interacted with our pitch deck or asked us questions that they already had preconceived ideas about us and our business. And though we are thrilled to have closed a $1.5 million pre-seed round in the middle of a pandemic, the challenges we faced in the past continued. The spotlight only turned back on minority founders after the Black Lives Matter movement took off last summer, and we began to pursue fundraising again in late 2020.
We were in our second year of running Handsome and had traction similar to, if not better than, other male-centric startups that were getting funded, yet we still ran into friction when fundraising. The hard part was that we didn’t have any concrete evidence as to why, or the extent to which, fundraising was harder for minority and female teams outside of our apparent challenges and personal experiences. Men can have a vision or an idea on the back of a cocktail napkin, while women must have fully established businesses and revenue streams.
The evidence is in the analytics.
DocSend, a tool we and thousands of other startups use to send out pitch decks to investors, analyzed how investors interact with pitch decks. A recent DocSend study confirmed our hunch, finding that investors scrutinize the decks of businesses founded by women and minorities differently.
For instance, their data showed investors spent 20% longer on the business model section of decks from all-female teams at the pre-seed stage than all-male teams. While more time spent on a particular deck area may indicate more interest, it can be a sign of greater scrutiny and skepticism.
We could tell by how investors interacted with our pitch deck or asked us questions that they already had preconceived ideas about our business.
When you look at the makeup of the average VC you are pitching to, it is likely a middle-aged white man. When throwing Handsome — something that’s reimagining the education and community of the beauty industry — you can imagine that most VCs don’t understand the value and opportunity at hand. Although beauty is a $190 billion global industry ($60 billion alone in the U.S.), investors who don’t follow this industry might have difficulty understanding how big it is, how it works, and how our business fits into this thriving market. Investors might completely discredit our company because of the “beauty” label.
All Thesetors can lead to more time spent analyzing the business model — anand its viabilityiculated in our pitch deck. In reality, VCs are busy, and if they’re spending more time on the fundamentals of your business, they don’t understand it. They are more likely looking for ways your business won’t work. And, frankly, we are not business school graduates or Stanford alumni, so investors who want to de-risk their portfolios will spend more time looking at our deck to gauge if we know how to build a business.
More than goodwill is needed for lasting change.
Despite all this, we believe investors don’t know they are acting on these biases. They don’t realize they may have written you off most of the time, which is part of the problem. Investors may think they’re widening the funnel simply by taking a meeting or providing mentorship over coffee when, subconsciously, they’ve already counted you out. Awareness of a subconscious bias is the first step toward making positive change.
Even though the barriers are being lowered, minority founders just starting still have difficulty getting their foot in the door. Most underrepresented founders don’t have an established network, making it difficult to get an initial introduction. That’s why these founders aren’t getting meetings. So even with more investor goodwill, founders can still not access the capital they need to grow their businesses.
It takes time and effort to enact meaningful changes. Genuinely committed people will work on these issues over the coming years and decades. It’s only on a longer time scale that we’re going to be able to tell whether investors promising change have delivered. Changing the demographics of the founders you fund requires a year-in, year-out consistency, repeatedlyear-outain. Only then will we shen the future of great ideas is not hindered by the demographics of the people building businesses out of those ideas?
