TLDR:
- VC funding for Black founders in the Bay Area has dropped by 88% since 2021.
- Nationwide, Black-founded startups received less than 0.5% of the total venture funding in 2023.
Article Summary
Funding to San Francisco Bay Area startups with Black founders has seen a significant decline, dropping by 78% in 2023 from $895 million to $198 million. This represents an 88% decrease since 2021, outstripping the national decline of 71% in funding to Black-founded startups. Black-founded startups received less than 0.5% of the $140.4 billion in total venture funding directed to startups in 2023, despite making up around 13% of the population. This decline has been attributed to a reversal of diversity initiatives post-George Floyd’s killing in 2020.
Trevor Parham of the Oakland Black Business Fund noted that the decrease in funding aligns with other inequities in the business landscape, such as disparities in accessing lines of credit and higher failure rates for Black-owned businesses. The dramatic decrease in funding has impacted organizations like the Fearless Fund, facing legal challenges that have resulted in significant losses and operational constraints.
Black founders, particularly in later-stage growth rounds, have faced challenges in raising funding, with larger funds focusing on existing portfolios rather than new investments. Efforts to diversify the VC industry have had limited success, with only 5% of the workforce being Black employees. This funding gap has led to initiatives like Black Operator Ventures, aimed at supporting Black founders and highlighting the economic opportunities in investing in an underserved market.
The overall trend signals a misalignment in venture capital funding, with only one Black founder able to raise a round exceeding $100 million in 2023 compared to the multiple large funding rounds in February 2024. This disparity underscores the ongoing challenges faced by Black founders in accessing crucial investment opportunities in the evolving startup landscape.
