October 23, 2023

Black Founders Face Funding Decline With Just 0.13% Of VC This Q3

Black founders

Black founders raised only 0.13% of all capital allocated to US startups in Q3 of this year, Crunchbase has reported.

A decline in funding

Only 0.13% of venture dollars allocated between July and September went to Black founders.

This equates to about $39.7 million of the total $29.9 billion allocated, a massive year-over-year drop for Black founders.

In Q3 2022, Black founders raised $1 billion out of around $81.7 billion in venture dollars, approximately 1.2%.

TechCrunch also reported a massive quarter-over-quarter drop as in Q2 of 2023, Black founders raised $212 million out of $29 billion, and in Q1, they raised $352 million out of $45 billion.

“Unfortunately, the venture industry is moving in the wrong direction here,” Gené Teare, the senior data editor at Crunchbase, told TechCrunch.

“It may be tempting to blame a larger market correction, but the data tells a different story.”

Read: Is The Tech Industry Using The Economy As An Excuse To Ditch BLM Promises?

Several tech figures took to X, formerly Twitter, to share their concerns about the low numbers.

“So much for all the post-George Floyd diversity commitments,” said John Henry, co-founder of Harlem Capital.

“Back to business-as-usual in VC. Frustrating, but feels like little we can do other than survive and become successful.”

“These stats are depressing, and it’s why we need funds to not think of diversity as a moment,” said Henri Pierre-Jacques about the most recent figures.

What’s next for Black founders?

Teare said she wondered if there is now an abundance of caution in the ecosystem, preventing investors from taking chances on first-time founders who are more likely to be diverse.

“We’ll be watching to see if the new California law sparks any changes, but it’ll be quite some time before it’s implemented and even longer before we get any answers,” she said.

The California Senate Bill 54 was signed into law by Governor Gavin Newson earlier this month, requiring venture capital firms in the state to report the diversity of the founders they bank annually.

It is the first piece of legislation in the US that aims to address racial disparities in the VC landscape.

Black founders have now begun to speak more of simply leaning into their networks rather than seeking capital from the old guard players who have become more evident in not supporting them, revealed TechCrunch.

“I am more connected and in touch with investors that are mission and impact-aligned,” Perez and Tinia Pina, the founder of Re-Nuble, said.

“It’s a very conscious community of investors that try to be aware of and eliminate biases such as this.”

The Decrease In Diversity, Equity and Inclusion

These figures follow a recent pattern in the decline of Diversity, Equity, and Inclusion (DEI) programs, roles, and increased lawsuits against them.

In 2020, following the murder of George Floyd and the Black Lives Matter protests, Big Tech companies, in particular, pledged to fight racism as they ramped up their DEI roles.

However, Bloomberg reported that listings for DEI jobs have now dropped by 19%.

DDI’s Diversity, Equity, and Inclusion report also found that many companies have regressed in their DEI programs since 2020.

Companies without DEI programs increased from 15% to 20, and leaders’ endorsement of their company’s DEI efforts decreased by 18%.

Lawsuits against DEI initiatives have also risen with the Supreme Court’s ruling against affirmative action and, most recently, Fearless Fund’s case by Edward Blum-led group American Alliance for Equal Rights.

“These stats are depressing, and it’s why we need funds to not think of diversity as a moment,” said Henri Pierre-Jacques about the most recent figures.

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Sara Keenan

Tech Reporter at POCIT. Following her master's degree in journalism, Sara cultivated a deep passion for writing and driving positive change for Black and Brown individuals across all areas of life. This passion expanded to include the experiences of Black and Brown people in tech thanks to her internship experience as an editorial assistant at a tech startup.