Crunchbase Venture Capital Report Low Funding for Black Startups
Black-based startups have seen record amounts of investment lately, with quarterly funding commitments approaching or even exceeding $1 billion. But according to new data from Crunchbase, venture capital funding fell significantly in the second quarter of 2022, to just $324 million.
Only 100 startups with the Black founder raised $100 million in seed rounds, $591 million in early stage rounds, and about $876 million in later stages.
Startups with at least one Black founder have earned 1.9% of deals and 1.2% of total project dollars invested in the US this year so far.
This comes on the heels of a relatively strong streak of black businessmen. Beginning in the first quarter of 2021, venture capital funds have invested at least $866 million in emerging black companies. These companies have seen a peak of $1.2 billion in investment in three separate quarters since then, the most recent being the first quarter of 2022.
But it all came crashing down this quarter, with investments only reaching 27% of the level seen at the start of the year. The total number of deals has also fallen, from a peak of 119 in the first quarter of 2021 to just 35 this quarter. Total investment is lower than at any time since fall 2020.
Black startups aren’t the only ones getting overlooked. Venture capital funding for companies founded by women, especially entrepreneurs of color, has also been minimal in recent years, despite massive inflows of venture capital money. In 2021, global venture capital investments totaled $643 billion, an increase of 92% over the previous year. Women entrepreneurs have seen only a small portion of this funding. Less than 3% of venture capital funding went to women entrepreneurs in 2019. For black women, the numbers are even worse; They received just 0.64% of all venture capital funding, according to Project Diane.
It’s unclear why venture capital investment has fallen so sharply this quarter, or if the decline will continue. Either way, it will be hard to withstand a hard fall from the highs of the first quarter of 2021 and the first quarter of 2022. It might leave black startups wondering if those five cash-rich quarters starting in 2021 were just a coincidence.