VC Funding To Early-Stage Latinx-Founded Startups In The US Has Stalled

Crunchbase data shows that while funding to Latinx founders has increased in dollar terms—from $1.7 billion in 2017 to $6.8 billion in 2021—that growth only slightly outpaced the overall increase in U.S. venture capital investments, leaving Latinx startup funding stuck stubbornly at around 2 percent of the overall startup investment pie.

Meanwhile, the data shows early-stage funding, arguably the most critical phase, has stagnated almost completely in recent years, according to a report by Ctunchbase.

These numbers are confusing considering Latinx-founded businesses made up about half of the net new small business growth between 2007 and 2017, data from management consulting firm Bain & Co. shows.

Such companies are also a good investment, according to the Stanford Latino Entrepreneurship Initiative, which notes Latinx-founded companies often have high credit scores and fast-growing annual revenue compared to companies with white, non-Latinx founders.

When it comes to early-stage startups – The dollar amount received in angel, pre-seed and seed rounds for venture-backed Latinx-owned startups in the U.S. has barely moved since 2018,

This when $185 million went to Latinx-owned companies raising those earliest rounds, Crunchbase data shows. But in 2021, $205 million went to Latinx startups raising angel, pre-seed and seed rounds, a mere $20 million increase from three years earlier.

Other early-stage funding has grown slightly from about $800 million in 2018 to $1.3 billion in 2021. That means almost all of the growth in funding that Latinx founders have seen in recent years went primarily to later-stage startups, according to Tech Crunch.

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Abbianca Makoni

Abbianca Makoni is a content executive and writer at POCIT! She has years of experience reporting on critical issues affecting diverse communities around the globe.

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