Tired of Building Startups? Try Funding Them Instead

The path from underrepresented founder to venture capitalist is rarely linear, but it’s one filled with invaluable lessons, resilience, and the power of rewriting the narrative. For many founders from marginalized backgrounds, breaking into the VC world isn’t just about securing capital—it’s about reshaping who gets to control it.

The Founder’s Struggle is a Strength

Underrepresented founders—women, people of color, LGBTQ+ individuals, and those from non-traditional backgrounds—face systemic barriers when raising capital. Less than 2% of VC funding goes to Black and Latino founders, and female founders receive only about 2% of all venture dollars. These disparities force underrepresented entrepreneurs to be scrappier, more resourceful, and hyper-focused on proving their worth.

But this struggle breeds unique strengths:

• Deep empathy for founders – Having faced funding biases firsthand, former founders can spot overlooked talent and potential.
• Operational expertise – Building a company from scratch means understanding what it takes to scale, pivot, and survive.
• Network-building skills – Underrepresented founders often create their own ecosystems when traditional ones exclude them.

Transitioning to VC: The Pivot

Moving into venture capital isn’t just about writing checks—it’s about leveraging lived experience to identify and support the next generation of innovators. Here’s how many make the shift:

1. Leverage Your Founder Story: Your journey is your biggest asset. Investors want VCs who understand the trenches—your struggles with fundraising, hiring, and scaling make you a better advisor.

2. Build Credibility Through Angel Investing: Before joining a VC firm, many founders start by writing small angel checks. This builds a track record and demonstrates an eye for promising startups.

3. Network Strategically: VC is a relationship-driven industry. Engage with investors, attend LP meetings, and contribute to the ecosystem (e.g., through mentorship or scout programs).

4. Advocate for Change: Many underrepresented VCs enter the industry to fix its broken systems. Whether by launching their own funds (like Arlan Hamilton with Backstage Capital) or pushing for inclusion at established firms, they redefine what a VC looks like.

Why This Shift Matters

The venture capital industry remains overwhelmingly homogeneous—about 80% of investors are white, and only about 4% are Black. When underrepresented founders become VCs, they:

• Spot overlooked opportunities – Diverse founders often solve problems the majority overlook.
• Reduce bias in funding decisions – Personal experience helps combat pattern-matching in deal flow.
• Create a ripple effect – More diverse VCs mean more funding for diverse founders, creating a virtuous cycle.

The journey from underrepresented founder to VC is about turning adversity into advantage. It’s not just about gaining a seat at the table—it’s about redesigning the table itself. For those making the transition, the mission is clear: use your experience, insight, and capital to build a more inclusive future for innovation.

And that’s a story worth investing in.

About the Author: Tess Danielson is a journalist and writer focusing on the intersection of technology and society.