Although the nonprofit technology sector is more diverse than the rest of Silicon Valley, social impact-minded startups struggle to secure early-stage funding, a report from Fast Forward, an accelerator funded by Google, Omidyar Network, and BlackRock, finds.
Based on data from nearly three hundred and fifty organizations in the Fast Forward Tech Nonprofit Directory, a registry of startups that are "building original software or hardware but leveraging a nonprofit business model so they can focus 100 percent on social impact," the report, The State of Diversity and Funding in the Tech Nonprofit Sector (7 pages, PDF), found that 47 percent of tech nonprofits were founded by women, while 30 percent were founded by racial/ethnic minorities, compared with just 17 percent and 13 percent of for-profit tech startups. The survey also found that 6 percent of tech nonprofit founders self-identify as LGBTQ, while 84 percent have a co-founder who is a woman or a person of color.
Conducted in partnership with AT&T and Nielsen, the analysis found that many tech nonprofits get stuck in the seed funding stage, including the 39 percent of tech nonprofits whose founders are white men. More than half (54 percent) of the organizations in the analysis had annual budgets under $500,000, while only 34 percent had budgets of more than $1 million — often a requirement for receiving grants from foundations. Once a tech nonprofit crossed the $500,000 threshold, however, those founded by women were nearly as likely to reach the $1 million (35 percent) threshold as were those founded by white men (39 percent).
At the same time, the report found that of the forty-five tech nonprofits in the study whose founders are men of color, only 22 percent crossed the $1 million threshold, while 62 percent had budgets below $500,000, compared with 33 percent and 60 percent of organizations founded by women of color. The analysis also found that in two issue areas — health care and public service/civic engagement — tech nonprofits founded by women and people of color surpass the fundraising success of those founded by white men, while they lag in the area of human rights.
"[I]f we want these diverse founders to succeed in building and scaling tech products for 100 percent social impact, now is the time for investors to step in as the tech nonprofit 'seed' funders," the report concludes. "Both new tech philanthropists and foundations alike have a huge opportunity to make bets on emerging tech nonprofits that have the potential to be the next Khan Academy or Wikipedia."