Black founders raised $212 million out of $29 billion this Q2, picking up just 0.71% of the capital allocated to U.S. founders this quarter, according to Crunchbase. In Q2 2022, Black founders raised $602 million out of $62 billion, or 0.97%, of the capital allocated.
In total, Black founders raised around $565 million out of $75 billion in H1 2023, which is 0.75% of all capital raised in the U.S. so far this year. That, too, is a drop from the $1.8 billion out of $144 billion, or 1.25%, that they raised in H1 2022. Overall, funding to Black founders has gone down from previous years, but the overall amount of funding allocated has gone down, too.
This isn’t surprising. Black founders have never raised more than 2% of capital in any given quarter, and the funding to them has been on a steady decline since the first quarter of 2022. Black founders picked up at least a billion in every quarter of 2021, momentum pushed forward by the Black Lives Matter movement in 2020. But quietly, attention has moved elsewhere, and the consistent decline in funding proves the waning investor interest.
There seem to be two different worlds within the venture ecosystem. There is the old guard, the ones who have billions of assets under management, who operate in their bubble and rarely leave. Founders must go to them. Then there is the new guard, the emerging fund managers, many of whom are diverse, who are here to shake up the playbook. The problem is that they don’t have billions of AUM (assets under management), so even though their intentions are good, their checkbooks are dry.
What’s left is this gap between the old and the new, filled with what? Usually it’s resentment, aloofness and indifference. Hiring doesn’t seem to be working at these legacy firms. Maybe minting more really rich women and Black people? Andreessen Horowitz had that third close of its cultural fund last year with all Black LPs, including Pharrell Williams and The Weeknd, though there is no word on what has happened since.
I’ve been covering this space for years, and there doesn’t seem to be a way around the roadblocks to funding. Even funding for women, which is just as abysmal, seems to be lifted when the founding team includes a mix of women and men. Unfortunately, that is simply not true for mixed-race teams that include a Black founder.
Data visualization by Miranda Halpern, created with Flourish
By now, most know that investors retreat to their old indirectly red-lined networks when economic uncertainty hits. Maybe there really is a pipeline problem.
Some other excuses I’ve heard:
- Black women are the fastest-growing group of entrepreneurs in the nation; perhaps they are not launching venture-backable businesses.
- Classism may be more to blame, that Black people are not getting into the right rooms with the right people who can cut the right checks.
- Or, it may be that their ideas are just bad; that their communities are indeed too risky to bet safe returns on; or that any other funding avenue would be better.
- It’s also possible that not enough of them are even pitching investors, and 1% is pretty high for the number of Black founders actually looking to raise.
- And anyway, Crunchbase data counts only those who identify as Black; it’s possible there are millions of Black businesses that don’t report their race, and these stats are all a false alarm.
And you know what? It could be a mix of everything. But what is undeniable is that something is wrong, regardless of how it transpires. Some people are trying, though, and there have been social and cultural progress, mostly from the emergence of more diverse investors, even if the economics fall short. There are more resources to help Black founders, and communities, like The Gathering Spot, also offer support. The data feels stagnant, but the movement on the ground shows progress: There are more Black leaders in this space. More Black faces in rooms speaking change, and not just in the U.S. The U.K. and France have also seen the emergence of more Black founders and fund managers who are on a quest for change.
After all, it was a global effort to disenfranchise the diaspora, and it will take a global effort to emancipate them. This will happen regardless of the current lack of funding or support. Things will change, though we might not know yet how. The journey is indeed long and, right now, cold. But in the end, the destination will be reached, and upon turning around, it may be the old guard that will have been left behind.