Black founders are seeing a decrease in funding amid economic downturn


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It’s confirmed — Black entrepreneurs saw a dramatic decrease in funding this year as investors continue to pull back.

So far, new Crunchbase data shows Black startups received $324 million in VC funds in the second quarter, a steep decrease from the $1.2 billion received in Q1 this year and substantially below the $866 million the founder cohort raised in Q2 last year. Overall, Black founders have received more than $1.5 billion in capital so far this year, compared to the over $2 billion received this time last year. Funding at all levels is tracking below 2021.

Sadly, this isn’t surprising; valuations are falling and deal volume is shrinking this year as investors pull back from 2021’s excesses.

It is not a new concern that in times of economic distress, some investors may retreat to their respective networks to fund what is considered safe and familiar to them — and those networks are often not filled with vast amounts of Black founders.

“People tend to default to what they know and what is safe,” RareBreed Ventures founder McKeever Conwell told TechCrunch. He added that the decrease in funding is concerning but not surprising during this economic downturn. “Investing in founders of color, as we’ve seen over decades of venture capital, is not what is deemed to be the safe thing to do.”

The situation compounds when looking at the fact that Black founders were already disproportionately receiving small amounts of funding, meaning the overall funding decrease was likely to have an outsized impact on the community.

Overall, U.S. startups received about $75 billion in VC funds in Q1 and about $50 billion in funding so far in Q2, according to Crunchbase data, though second-quarter data is incomplete. If the trend of falling funding for Black founders continues, it could indicate a step back after last year’s record-breaking progress, which saw Black founders raise more than $4.3 billion in VC funds (even though that equated to just 1.3% of all VC funds given out last year).

Marceau Michel, founder of Black Founders Matter and the 25 by 25 Pledge, also told TechCrunch that he isn’t shocked by such a dramatic decrease.

“It’s not surprising when venture tightens its belt that we are the first to be pinched,” he said. “Choosing to ignore the obvious advantages of equitable investment is like choosing to ignore the transforming power of electricity.”

The silver lining in the matter is the changing climate may feel like business as usual for many diverse founders and investors, as TechCrunch previously reported. These entrepreneurs are used to operating leanly without the promise of substantial venture funding and statistically still manage to outperform their white counterparts. In fact, Black founders received 1.2% of the VC dollars this year, which is nearly on par in proportional terms with what usually goes to Black founders around this time, Crunchbase found.

It’s ironic, then, that in this economic downturn, investors stated they are looking for founders that can operate with a focus on profitability while strapped for cash. The decrease in funding, however, shines a light on precisely the type of founders they were seeking such requirements from.

“Black founders uniquely understand how to stretch the dollar and how to survive shifts and downturns,” Michel said. “It’s a great time for funds to set themselves up to make good on the promises many of them made to the Black community.”

Conwell said this is also a good time for the venture funds already backing Black founders to double down on helping them grow. But he added that the overall problem in the VC landscape remains the silence from many institutional LPs, endowments and pension funds with the power to make a change.

“We need to see LPs continue to fund and back the fund managers who are going to have unique networks and unique perspectives that are going to lead to more funding for diverse founders,” he said. “We need to see more of that. But do I think that’s going to happen? No, I don’t.”

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