It’s been over two years since people filled the streets to protest the murder of George Floyd, since the COVID-19 pandemic illuminated our nation’s long-standing racial health disparities and since business and healthcare leaders pledged to make change.
In those two years, important progress has been made to diversify venture capital firms, increase support for diverse entrepreneurs and fund solutions that address the needs of underrepresented communities. Funding to Black-led startups reached new heights in 2021. Black entrepreneurs brought in $4.4 billion last year—more than triple 2020’s year-end total of $1.3 billion, according to Crunchbase.
We’re thrilled to see the progress toward equitable funding since 2020. But we believe equitable funding for Black-led health tech startups, or those focused on solving health problems that disproportionately affect communities of color, should be prioritized even more. That’s because equitable healthcare funding is the true foundation for health equity. It puts people of all economic and racial backgrounds on an equal playing field when it comes to getting and staying well.
And these first gains are just that—glimpses of progress. The $4.4 billion raised by Black-led startups in 2021 accounted for just 1.3% of the $329 billion raised by startups overall, despite the fact African Americans represent 13% of the U.S. population. We have a long way to go until we reach parity.
As partners in a venture capital firm dedicated to accelerating inclusive innovation, we believe now is the time to double down on supporting health startups led by diverse founders who have innovative ideas to close gaps in care.
Why health tech
Our combined six decades in the healthcare sector have led us to focus our investment portfolio in three areas: biotechnology, digital health and virtual care. These areas demand our attention because they have a tremendous potential to produce both social and financial returns and to balance short- and long-term gains.
Many ethnic and racial minority groups face barriers to care that white Americans don’t struggle with for various reasons. Virtual care companies, particularly those that are Black-led, can help break down those barriers for people who don’t have time to see a doctor during normal hours or those who fear discrimination if they go to a medical facility. They can connect people to the culturally competent care they deserve. That’s why we’ve invested in 4D Healthware, a Black-led virtual healthcare service provider working with Federally Qualified Health Centers to reach medically underserved patients. 4D Healthware has engaged 95% of patients and reduced emergency room visits by 25%—indicators of improved health management.
We also champion investing in digital health because of the impact digital solutions can make on traditionally underrepresented populations. For instance, Black women are more likely to be diagnosed with advanced-stage breast cancer and more likely to die of the disease than white women. CancerIQ, a digital health company in our portfolio, is built to prevent cancer or detect it early by ensuring all women are properly risk-assessed and screened for the disease.
Lastly, because issues that disproportionately impact people of color have often been overlooked in medical research, biotechnology solutions in this area have enormous growth potential. For example, our portfolio company Temprian Therapeutics develops immunotherapy-based treatments of skin disorders like vitiligo, a genetic autoimmune disease that causes skin to lose pigment. This condition affects people of all races, but its prominence on darker skin tones means it takes a disproportionate toll on people of color.
Making these investments not only addresses immediate unmet needs, but it also helps lay the groundwork for future investments. It expands investment networks, forges equitable channels for upward mobility and builds a healthier future for all.
How can we accelerate inclusive innovation in healthcare? Generations of underinvestment mean diverse startups have differing needs. Here’s what we recommend:
Invest earlier and invest more. The typical Black-led startup is doing a great deal with little capital. Imagine the possibilities if they were properly funded! Black founders often have limited access to network-based, pre-seed and seed stage funding (i.e., self-funding, bootstrapping or funding from friends and family), which means they may not have the resources necessary to execute on their ideal plan. They need institutional money earlier in the process to bridge that gap. The earlier VCs invest, the more likely they are to be on track and stay on track.
Provide mentorship and support. We believe in hands-on investment, rolling up our sleeves and understanding our portfolio companies’ day-to-day operations. Frequent check-ins help build transparency and trust for investors, and they deepen the relationships and network connections founders need to grow.
Build a community. Successful startups can’t exist in a vacuum. Beyond mentorship from the venture capital firm partners, founders need a network of entrepreneurs, research partners and corporate sponsors to guide product development as well.
Takeaway
The last few years have demonstrated change is possible. They’ve also shown us the interconnected, collective nature of healthcare—our own health depends on the actions and support of our neighbors. We can’t overcome generations of resource deficits in two years, especially not without industrywide support. And we can’t risk losing this hard-won progress in the economic downtown—something we are already beginning to see. That’s why we all need to work together to prioritize inclusive investments in healthcare. Only then can we build a truly equitable infrastructure for innovation and health.
Paul Burton is the general partner for biotechnology at 2Flo Ventures. Sharon Ray is the general partner for diversity, equity and inclusion at 2Flo Ventures.