The latest Crunchbase data shows that Latin American-founded companies in the United States raised $250 million out of the $39.85 billion allocated in venture funds in the U.S. this Q3 — or about 0.63%.1 The Q3 sum is a sharp decrease from the $2.3 billion the cohort raised in Q3 last year and a dramatic decline from the $1.3 billion raise in Q2 this year.
In total, 1.5% of all venture dollars so far in 2022 have been allocated to Latin American-founded companies, a drop from 2.5% last year, according to the Crunchbase analysis.
The numbers are not surprising. Minorities and women overall are seeing dramatic dips in venture funding this year. TechCrunch previously reported that Black founders raised $187 million this Q3, which meant, given historical data trends, the amount allocated to Latin American-founded companies wouldn’t be too far from that sum.
Meanwhile, PitchBook found that female-founded companies have raised 1.9% of all venture funds so far this year, which is, again, a drop from the 2.4% the group raised last year. TechCrunch noted before that investors tend to pull back toward their old networks to fund the founders who are familiar to them amid economic downturns — and those people tend to be white men.
The somewhat encouraging news is that funding for early-stage Latin American-founded companies is on pace to exceed 2021’s total; much of the decline that we see in the above numbers came from a decrease in late-stage financing. The reality remains that women and minorities are not faring well right now when it comes to raising VC, and promises of change have dissipated. Last year, Latin American-founded U.S. companies raised $8.5 billion. Through the end of Q3 2022, that number stands at $2.7 billion, meaning it won’t even come close to passing last year’s record-breaking sum.
“It’s disappointing but not surprising that funding for Latino founders is down this much,” Miranda Perez, the program coordinator of the HBCU Founders Initiative, told TechCrunch, adding that investors need to take much more responsibility when it comes to “deploying opportunities for the advancement of marginalized communities.”
Adrian Mendoza, the founder of Mendoza Ventures, told TechCrunch he anticipated a drop in funding for Latin American founders, citing how investors often avoid diverse and women founders during economic downturns because they are seen as “risky to the status quo funds.”
“Now is the time for LPs to step up and invest in Latino-owned funds that can deploy to those Latino founders that are building amazing businesses,” Mendoza continued, adding that the influx will help change the face of venture capital and the overall tech ecosystem.
Javi Park, the CEO and co-founder of Reamp.xyz, noted that out of the 26 fundraising calls he’s had so far, he’s only met with one investment associate who identifies as Latin American.
“By nature, we tend to be more helpful to those who look like us,” Park told TechCrunch. “This is why we need more Latinx folks in these roles.”
Mendoza agreed. “Now is the time to start our own communities to step up and fund these Latino founders and funds,” he said. “If we want to control where the capital flows, it has to come from Latino LPs to Latino funds, to Latino founders. This is how we control the capital stack and make a real difference.”
It’s been well reported that investors are leaving money on the table by excluding minority founders from both managerial opportunities and funding prospects. As the numbers remain inconsistent, there is no solid way to predict when venture capitalists will care about those outside their comfortable pattern match. What is known, though, is that the industry is running everyone around in circles regarding the conversation around equitable funding.
Perez put it perfectly: For the publicist typing away another press release on racial unity on behalf of whatever firm, or for the investors at the end of their keyboard getting ready-set to type a Twitter thread in solidarity with the marginalized, she said, “Talk less. Do more.”
- Editor’s note: Crunchbase provided TechCrunch with Latin American funding data for the U.S. market in Q3. However, because Crunchbase News reporting aggregates overall U.S. results with Canadian numbers, we had to go afield to get the correct denominator for our calculation. We turned to Q3 U.S. venture capital aggregates from PitchBook and CB Insights for that figure. To reach it, we used the midpoint of PitchBook and CB Insights Q3 data, contrasted with the Crunchbase Latin American figure for U.S. venture results in the third quarter. In our view, this is the fairest and clearest way to parse available data.