Cornell Study Reveals Who Drove The 2020 Funding Surge For Black Founders — And Why It Didn’t Last
The temporary surge in funding for Black startup founders after George Floyd’s murder was driven largely by investors who had never previously backed a Black entrepreneur, and most showed only surface-level support, new research from Cornell University shows. Funding returned to prior levels within two years.
Cornell researchers analyzed PitchBook data on venture funding from 2020 to 2023, using algorithms and manual review to classify the race of 150,000 founders and 30,000 investors.
Surge in funding in the wake of Black Lives Matter
The researchers found that at the height of the Black Lives Matter movement, investors were 36% more likely to fund Black-founded startups, with their share of venture capital rising by 43%.
The main growth in funding was primarily among venture capitalists who had never previously invested in a single Black entrepreneur. They were also less likely to invest in more than one Black-founded startup and less likely to take a board seat.
Black entrepreneurs with stronger business track records were less likely to take investments from those “newcomer” investors in that period after Floyd’s death, perhaps anticipating this “token” response.
“The strongest Black entrepreneurs paired up with investors who had more of a track record” of investing in founders of color, study coauthor Matt Marx, a Cornell professor who focuses on entrepreneurship and innovation, told Fast Company.
What does this mean for Black founders now?
In 2024, startups with a Black founder or co-founder raised just $730 million, only 0.4% of all venture funding.
Marx believes venture capital funds adopting a more open application process, like accelerators, could reduce the funding gap. Although the number of investments in founders of color has dwindled, the overall number of Black founders is slowly increasing, despite Black entrepreneurs representing just 3.5% of all founders seeking VC funding over the past 20 years. In the past five years, that number has grown to 4.5%.
“But maybe [that growth] gives someone the thought that, Hey, I can play this game too. I’m going to take an entrepreneurship course or apply to an accelerator. That’s my hope,” Marx says.
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