Black Women Face Significant Barriers in Obtaining Venture Capital

A survey-based report by RockHealth suggested that women & black women, who founded medtech companies, have extreme difficulty in obtaining financing from VC firms.

Katie Pfaff

October 3, 2022

6 Min Read
Image courtesy of Tetra Images, LLC / Alamy Stock Photo

A common funding strategy in medtech is venture capital backing, however, a survey-based report by RockHealth suggested that women and black women who founded medtech companies had more difficulty obtaining funding by this common route. A few women founders shared their experiences with the barriers to obtaining funding, and how to potentially overcome them.

According to the 2020, Diversity in Digital Health report based on responses from 245 founders (, those who were White or Asian were more likely to attain venture capital funding, compared to 24% of Black Founders. In fact, 41% of Black founders funded their companies with "bootstrapping," or paying for development on their own or through finances from personal or family connections. Less than a quarter of Asian or White founders "bootstrapped" their company. 

According to respondents for the RockHealth report, Black founders were more likely to report "access to capital" and "access to connect with investors" as notable barriers in business development. Women founders also achieved fewer VC backings, according to a report that was based on survey responses. When broken down by gender, almost 62% of men who were founders had closed VC funding while women founders closed 40% of VC deals. This does not square with the actual number of women founders in digital health, according to the report, with 58% of respondents who were male and 42% female. 

Unclear investor expectations
Lorenna Feliz Santos, founder and chief executive officer at DiaM Life Inc., has experienced this uphill climb as she builds her company which focuses on improving outcomes in diabetes through AI, neuropsychology, nextgen engagement, and behavioral science. The process of VC funding needs to be demystified, she explained as conversations around achieving the needed milestones for investment have been vague and jargon-filled. "I spent close to a year meeting with VCs and never did anyone explain the route I need to take. Never did they say you need to get to X. People would say, 'Have you made traction," but that was not defined. A lot of the lingo is lost in translation." She was coming up against the catch-22 of needing funding to show the data investors were looking for to provide funding. 

Further, a 2021 report by Deloitte that pulls experience from 16 medtech investors and entrepreneurs paints a slightly different picture in which ( series A and seed funding has been decreasing over recent years in medtech as a whole. Investors' potential hesitancy might be due to waiting for certain milestones or successes rather than involvement in startup phases and uncertain routes for reimbursement of devices. So, while VC-backed funding had increased across the board, the majority of funding was allotted to "late-stage diagnostic and digital companies."

Inequities in women's health
If VC funding is less common in medtech across the board, it might be even more difficult for companies that focus on women's health. These tend to get less attention by investors, suggested some of the founders, a phenomenon that mirrors healthcare overall and the poorer outcomes that can occur in women in the US. 

"America's healthcare system is one of the most competitive in the world, regarding technology and monumental discoveries, however, according to the CDC our maternal mortality rate is higher than ever for Black mothers, and we have to ask ourselves why is that? Especially a nation that has the most advanced resources in healthcare." said Lauren Elliott, chief executive officer and co-founder of Candlelit Therapy Inc., a person of color digital therapy that helps new and expecting BIPOC moms at risk for post-partum depression and anxiety to access culturally competent support. 

Having black-owned VC funds has broadened access to funding as companies finance development in technologies treating patients of color and/or women. "The process is changing as we see more Black and POC-founded venture capitalists companies, such as Backstage Capital, founded by Arlan Hamilton, Fearless Fund by founding partner Arian Simone, and there are a few more that are disruptors," said Elliott." More Black-owned and culturally- centered VC organizations are a start in the right direction. We are creating companies that are changing the cultural landscape of organizations that are founded on implicit biases, such as healthcare."

Bootstrapping not an option
While the RockHealth report suggested some women founders of color were bootstrapping their companies, or funding them with their own capital or that of friends and family, this is an option that only goes so far, echoed Santos and Elliott.

"Startup funding is the foundation of our business, and it's where we can purchase equipment, hire a great team, and gather data to conduct a trial for our products. The majority of the founders of large companies receive funding from their family and friends who contribute in large amounts," said Elliott "Most Black founders are working-class and cannot invest due to daily livelihood responsibilities. As a Black woman and mom of two, I understand firsthand having to choose between necessities and bootstrapping our business." There is also historically less intergenerational wealth in Black and minority communities due to barriers to property ownership in wealthy neighborhoods (redlining, etc).

Tracy MacNeal, chief executive officer of Materna Medical, a women's pelvic health company, also suggested VC and private equity make up less than a quarter of medtech funding, putting women at a possible disadvantage as their networks for family offices and angel investing are often less flush with cash than men's. 
"[Inequities in funding of women-founded medtech companies] is an issue of standing waves of unconscious bias," said MacNeal. If [your funding strategy is] based on who you know, women historically have less wealth. Women historically are encouraged to be philanthropic and not invest." For founders, this makes their personal and professional networks less able to invest or less savvy in investing, so they may not invest even if wealthy. MacNeal said women-focused investment groups like Astia, Portfolia, Springboard, and Golden Seeds are important in changing this trend. Groups like AdvaMed are also working to increase diversity in medtech. 

 A slow process to find a match 
Regardless of the route, fundraising is a time-intensive effort to make connections, expand networks, and find investors who match the company on many levels. 
"Just last month, I was one of 10 businesses selected internationally for the Cedars Sinai Health-tech Business Accelerator program, and I realized that mentorship is key to being educated on how to pitch, establish relationships, and know my longterm goals for my business," said Elliott. "The program invested $100,000 in my company CandleLit Therapy and connected me with mentors that are experts in the maternal health market."
MacNeal, who was recruited to bring products to market, has found success calling on her network of connections to make introductions. She likened attaining investment to going into a room of strangers and telling them a story they could relate to. "You are looking for your people. It is a bit of a needle in a haystack, but you do not want anyone investing in your company that isn't interested, isn't passionate about it, and worst of all doesn't understand it," said MacNeal. It is imperative that investors are prepared by fully understanding the company, steps involved in going to market, timelines, etc. 

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