Black and female founders in digital health are disproportionately more likely to bootstrap their companies, according to a new report by Rock Health. The survey of 678 digital health founders and leaders highlighted where venture capital funding is lacking.
The findings aren’t necessarily new — inequities in venture capital have been well documented. But the survey highlighted significant discrepancies in digital health, a sector that has seen a significant investment boom in recent years.
“We know Black and Brown founders are underfunded. This played itself out in our data,” said Dr. Ivor Horn, an angel investor and former chief medical officer of Accolade, who partnered with Rock Health on the study. “It’s not that Black founders aren’t starting companies in the health tech space. They aren’t getting the investment that other founders are getting,”
According to the survey, more than half of white founders reported that they had raised venture funding, compared to 43% of Hispanic founders, 53% of Asian founders, 40% of Middle Eastern founders and 24% of Black founders. A disproportionate number of Black founders reported bootstrapping their company, at 41%, nearly twice as much as the other respondents.
Female founders were also more likely to bootstrap their company, with 38% bootstrapping compared to just 14% of men. Just 40% of female digital health founders reported raising capital, compared to 62% of men.
Black, female founders were the overwhelmingly the most likely to bootstrap their companies, at 57%.
“What you do, because you believe in what you’re doing? You bootstrap your company, you get awards. Getting to the next level becomes a challenge,” Horn said.
This discrepancy in funding also has a greater cost:
“We know there are significant health disparities in this country. We know the health system is challenged,” she said. “We know people who are Black and have lived experience about what is not working in our healthcare system. They’re not getting the funding to grow and scale those companies.”
The survey also highlighted geographic discrepancies in how funding is distributed. Western states, including California, brought in the most funding from venture capitalists, at $5 billion, following by the Northeast bringing in $3 billion.
Meanwhile, the South and Midwest saw less digital health funding, at $830 million and $518 million, respectively. These regions had a larger number of Black and Hispanic founders who responded to the survey.
Horn hopes that more investment funding would shift to these regions. She also sees an opportunity for investors to listen to founders who might have a different lived experience.
“So much of this is about community and network and access,” she said. “I would encourage in comfort with not being the expert. For investors, being comfortable working with founders who can educate you about their community, being willing to listen and learn to understand why they’re doing what they’re doing to make that investment.”
That work extends beyond providing funding. It’s also critical for investors to open their networks, connecting startups to potential customers and provide business support, especially in the early stages.
“Part of the reason I became an angel investor is because I wanted to understand the other side of the table. I’m not writing a huge check but I can offer a ton of support and coaching and connecting,” Horn said.
Despite these challenges, several digital health startups are bubbling up that provide services for underrepresented communities. Startups like Her Hue connect Black women to culturally competent healthcare providers, or Queerly Health, which lets patients search for LGBTQ competent providers for in-person or telehealth visits.
“Funding those solutions is going to be an important next step to overcome disparities and meet the needs of their communities,” Horn added.
Photo credit: bayhayalet, Getty Images