Investing in Black Founders, and How Far We Need to Go

Organization types - StatisticsEquity-deserving groups - Black CommunitiesOrganization types - EntrepreneurshipEquity-deserving groups - People of ColourFinancing types - Venture CapitalMain cat - Sector Insights
Written By Hanh Le

2 mins read · July 13, 2021
Marlize van Romburgh & Gené Teare, CrunchBase News

Statistics · Entrepreneurship · Venture Capital · Black Communities


This article speaks about existing funding received by U.S. Black Entrepreneurs in 2021, the barriers young entrepreneurs face to getting funding to begin their entrepreneurial journey, and positive signs of investors paying more attention to black-led startups.

4% of US venture capital investors are Black.

Key Findings

  • Earlier in 2021, Charlie Moore, the founder and CEO of Rocket Lawyer, raised $223M in growth capital for his firm, marking one of the largest funding rounds ever for a startup founded by a Black entrepreneur.

  • Led by funding to early-stage startups, the 2021 half-year total has already surpassed the $1B invested in Black founders in all of 2020 and the $1.4B invested the year before that.

  • A more than fourfold increase: About $442M was invested in Black-founded startup founders in the first half of 2020; Crunchbase data shows that increased to $589M in the second half. That momentum continued into 2021, with at least $1.8B invested in the first half of 2021.

  • Around March 2021, Black-led Base10 Partners raised a $250M Advancement Initiative fund to invest in high-growth-stage companies. The fund is set up to help historically Black colleges and universities (HBCUs) — which typically do not have large endowments — and organizations focused on supporting diverse talent.

  • According to BLCK VC, black representation in the VC ranks increased slightly in the past year, from an estimated 3 percent of investors to 4 percent in 2021. This organization aims to help double the number of Black venture investors by 2024.

Moore brings some information about the background of the problem. Startup entrepreneurship is difficult for everyone, irrespective of race, but how do we at least level the playing field to have the same opportunity? For example, currently, the median white household is 7.8x wealthier than a typical Black household — $188,200 vs. $24,100 — and Black Americans hold just 4 percent of the nation's wealth. The comparison becomes more delineated when it comes to who receives venture funding and that decision power matters because venture capital is the lifeblood of the startup ecosystem, which increasingly serves as a gateway to wealth and prosperity in the U.S.

Takeaways

Recently, companies proclaimed "Black Lives Matter" from Silicon Valley to Wall Street; corporate organizations acknowledged they could no longer stay silent and promised to take an active role in confronting systemic racism. So, the greater the diversity in the VC environment, the greater would be our chances to create equitable access to flow to capital. Furthermore, many people Crunchbase spoke with for the article said one key to greater racial parity in startup investing is more diversity among VCs: “The more Black investors writing checks, the more investment in Black entrepreneurs.”

Read the full article here.

References

Romburgh, M. V., & Teare, G. (2021, July 13). Funding to Black startup founders quadrupled in past year, but remains elusive. Crunchbase News.

Hanh Le
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Female Founders Got 2 percent of All Venture Capital Dollars across the US in 2021—the Lowest since 2016 (1.8 percent)