Venture capital funding for black startups slows dramatically as venture investors decline
Investment funding for Black-founded startups in the United States reached $324 million in the second quarter of this year — a sharp drop from previous quarters when investment in those companies began to show hopeful signs of progress.
Although funding for black startup founders in the US has always been disproportionately meager — in single-digit ratios — last year set a record in terms of dollars invested in those companies, Crunchbase data shows. Quarterly funding in the previous five quarters has been much higher, at between $850 million and $1.2 billion, according to Crunchbase Diversity Spotlight data.
While investment dollars in the second quarter could turn around by the end of the quarter in a few weeks, the funding provided to black startup founders in the United States is well below the quarterly average since the first quarter of 2021.
The funding drop this year comes amid a general dip in investment dollars this year, a worrying sign that as venture investors become more cautious, unrepresented entrepreneurs may be among those feeling the worst of the downturn.
The percentage of funding from the United States
Crunchbase data shows that startups with at least one Black founder have received 1.9% of deals and 1.2% of total project dollars invested in the US this year so far.
That’s in line with the tiny portion of funding that has typically gone to startups with black founders: Dollars invested have fluctuated between 0.8% and 1.3% since 2017 annually as a share of U.S. funding, according to Crunchbase data. Transaction numbers since 2017 have ranged slightly higher, between 1.8% and 2.6%.
New unicorns in 2022
Two companies with a black founder joined The Crunchbase Unicorn Board in 2022.
One is Virginia-based kidney care company Somatus, which raised $325 million from a Series E led by Wellington Management at a $2.5 billion valuation. The company collaborates with primary care groups and health plans, and serves 150,000 members with its products.
The other is New York-based Esusu Financial, which raised $130 million in Series B led by SoftBank Vision Fund that valued the company at $1 billion. The company helps tenants build credit by obtaining rental payment data. Reaches over 2.5 million units across the United States
In 2021, a total of six companies with a black founder joined the Unicorn Board.
2021 was the peak of funding for Black founders, which reflects the surge in project funding for startups in the US in general that occurred last year.
More than $4.3 billion was invested in 2021 in companies founded by Black in the United States, with just over $1.9 billion, or 44% of it in seed or early stage funding.
While that’s a high mark in terms of total dollars invested, the startups Black founded still received just 1.3% of all venture capital funding for US startups last year.
2022 until now
So far in 2022, $100 million has been invested in American startups founded by Black, $591 million in early stage, and about $876 million in later stage for 100 startups.
100 companies and the number is increasing
Crunchbase data shows that so far in 2022, 100 US companies with a black founder have raised project funding, the vast majority in the beginning and early stages. Halfway, that tracks well below 2021, but it’s not too far behind in previous years’ funding.
Black startups were already struggling to get past single percentages of funding last year, and that was a peak year for venture capital funding. In an uncertain adventurous environment in 2022, as investors focus on the survival of their portfolio companies, that is unlikely to improve.
Crunchbase Pro queries referenced in this article
Financing amounts and accounts were collected for the last year up to June 15, 2022.
The data in this report comes directly from Crunchbase, and is based on reported data provided by Diversity Spotlight Partners, project partners, community network and news sources. The data in this report focuses on the United States market for underrepresented minorities, which are companies founded by Black/African Americans.
Crunchbase’s data set is constantly expanding, but there are gaps. The company may not have founders listed, or the Diversity Spotlight data in its Crunchbase profile may not be updated. We think we’re missing companies, especially in the early stages of financing.
If you notice data loss, please reach out to firstname.lastname@example.org or check your company email to update your company’s Diversity Spotlight tags directly on the site.
Crunchbase, like all private market transaction databases, has a documented pattern of delays in reporting. The data for 2022 will increase over time compared to previous years. As data is added to Crunchbase over time, some of the numbers in this report may change.
Illustration: Dom Guzman
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