TLDR:
- Black founders of startup companies in the U.S. raised less than half of 1% of all venture dollars allocated, the lowest amount in two years.
- Startups seeking funding have faced significant headwinds as higher interest rates have made risky investments less attractive.
Black founders of startup companies in the U.S. raised 0.48% — or less than half of 1% — of all venture dollars allocated in 2023, according to Crunchbase. The share of funding has been falling since 2021. Over the past year, startups seeking funding have faced significant headwinds as higher interest rates have made risky investments less attractive. Black founders have been hit hard, with their already-small numbers shrinking after a brief boost in funding following the murder of George Floyd in 2020. Still, some entrepreneurs are rising to the challenge and building on the momentum generated a few years ago.
One example of a successful startup is CarpeDM, a dating service app founded by Naza Shelley in 2018. Shelley, frustrated with existing dating apps that did not cater to professional Black women, decided to build her own. To initially fund her business, she sold her condo, used her savings, and raised money from friends and family. CarpeDM received its largest investment in 2022 from Elevate Capital, a venture capital fund that invests in underrepresented entrepreneurs. This investment allowed CarpeDM to allocate more money to marketing, technology, and hiring matchmakers.
Another entrepreneur, Jason Ray, started his own wealth management firm called Zenith Wealth Partners in 2019 to address racial and gender-based wealth inequality in investment advice. Ray’s firm helps clients interested in early-stage investments to mitigate stock market volatility and potentially increase overall returns. However, investing in startups comes with risks, as most startups never show a positive return. Ray advises investors to thoroughly evaluate the company’s operations, competitive advantage, management team, and terms of investment before making a decision.
Despite the challenges faced by Black founders in the startup funding landscape, Elevate Capital plans to launch a new venture fund to support diverse entrepreneurs in new regions. And according to Ray, the graph of early-stage investing seems to be “up and to the right,” indicating continued investment and support for businesses run by Black people and people of color.
