Black founders in the U.S. raised 0.48% of all venture dollars allocated last year. That’s around $661 million out of $136 billion, according to the latest Crunchbase data.
That number is the lowest it’s been in recent history. The past two years saw Black founders raising at least 1%. Last year, though, suspicions were confirmed when the market cooling really did appear to have an extreme impact on the Black community. In Q1’23 and Q2’23, Black founders raised 0.74%. In Q3’23, the group raised 0.13%, and in Q4’23 they raised 0.20%.
There’s been a consistent yearly decline in funding since the murder of George Floyd in 2020, which saw a record-breaking amount of capital flow to Black founders as the tech industry promised to better support them.
“As we pull this data quarter after quarter, year after year, it remains clear that any progress made by the venture industry investing in Black-founded startups following George Floyd’s tragic death in 2020 has completely stalled,” Gené Teare, senior editor at Crunchbase News, told TechCrunch+. “The percentage of funding going to Black founders remained well below 1% in 2023, with the lowest totals coming in the latter half of the year.”
Data visualization by Miranda Halpern, created with Flourish
Crunchbase data shows that Black fund managers are also seeing the impact of the bear market, as deal counts overall were low in the industry: Only four Black-founded funds announced they raised capital in 2023, compared to 13 in 2022 and 13 in 2021.
This dip in funding to Black founders may be part of a wider trend of tech’s decreased support for the Black community. Black founders have started to call it “the Great Rollback” as companies continue cutting their DEI (diversity, equity, and inclusion) initiatives and critics of DEI become more mainstream. The Congressional Black Caucus is also worried that the recent spate of tech layoffs is disproportionately affecting the Black community; the group wrote to the Department of Labor to start an investigation into how Big Tech companies are conducting these dismissals.
Data visualization by Miranda Halpern, created with Flourish
Meanwhile, Black founders and fund managers were not surprised by the dips in funding and knew the bear market’s venture pullback would disproportionately affect them.
Monique Woodard, founder of Cake Ventures, was one of the Black-led firms to announce last year, though the firm technically completed fundraising in 2022. Woodard is looking forward to what this year brings despite the increasing anti-DEI sentiments. “My optimism comes from complete and blind belief in myself,” she said.
Woodard never expected an easy fundraise and said, “If you want to be in business and you have a strategy that LPs find differentiated and likely to deliver outsized returns, you’ll raise a fund.” Still, she said venture investors are entering this new year with a sense of “optimistic uncertainty,” especially the funds with a thesis to back diverse founders.
“Optimistic in the performance of their funds and the founders they’ve backed, but uncertain whether that will be enough given the current rollback on DEI-focused investing from some LPs,” she said, adding that the Great Rollback has left a terrible stain on the industry, even if much of the anti-DEI rhetoric is just noise.
There is also optimism on the founder’s side of the business. Devo Harris, the founder of Adventr AI, closed a $3 million bridge round in October and said fundraising wasn’t too bad for him, as he simply went back to existing investors to double down on his latest round. Still, he noticed that capital is harder to come by for Black founders.
Still, he is optimistic. “When I got started, there were virtually no Black-founded companies,” he said. “With the spike in investment a couple of years ago, there are many Black founder-led companies that are succeeding, so there are at least reference points that investors can pattern match to and improve the odds of Black founders getting funded, rollback or not.”