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Decoding The Three-Peat Plunge In Funding For Black-Led Startups

By Sabrina Lynch

  • Black entrepreneurs secured a mere $661M out of the $136B total venture capital funding in 2023
  • Black-founded startups in the U.S have been unable to surpass the 1.1% mark in the venture market in the last three years

Capital flow for Black founders has been dwindling at the same pace as the financial community’s commitment to diversify VC firms’ business portfolios. The stats are pitiful as eight out of ten venture capital firms lack any non-white representation. What’s worse, Blacks still don’t have a seat at the table due to racial biases. Four years ago, budding Black entrepreneurs were on the receiving end of funding reaching the heights of $850M to $1.2B. Now, startups can expect less than $324M, a major drop in financial backing, not to mention a massive blow to the unrealized revenue new Black businesses could contribute to the economy.

Why This Matters: A lot of promises made regarding diversity, equity and inclusion after the murder of George Floyd in 2020 have been broken. Investors are still lagging far behind what they initially committed to, appearing to restrain themselves from transforming the marketplace into an industry of equality. In 2022, Black-founded companies only received $2.3B of venture capital funding from $215.9B. This in turn translated to these startups managing to raise 0.74% of funding in Q1 of 2023 to a pitiful 0.20% by the end of Q4 which was a hard pill for Black business leaders to swallow.

California clearly had enough of VC firms’ small talk and is leading the way to create a public ‘list of shame’ that will feature venture capital companies’  inequitable investment practices. Beginning March 2025, private firms will need to survey all the companies in their portfolio for specific demographics such as race, ethnicity, and gender identity. Any firms that do not abide with the law will be fined. Research has already shown that when African-American leaders are at the business helm, stocks jump and stronger market footholds are made. The evidence speaks for itself yet the backtracking of funding continues which is baffling and belittling to the skills of Black leaders.

What’s Next: Although there have been a number of political and cultural conflicts that have prevented the momentum of much needed investment, some corporations are still trying to steer the course. Initiatives such as  Google for Start Ups Black Founders Fund or Microsoft Black Partner Growth Initiative give Black founders hope.

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