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Venture capital is alarmingly down for Black owned startups

As investors retreat to safe and familiar options, Black founded startups are seeing dramatic troughs in venture capital funding for 2022. This isn’t surprising, but is definitely concerning.

Talk of venture capital (VC) can quickly get convoluted, but we’ll get to the crux of what is happening and what it actually means.

According to new data from Crunchbase, a popular VC analytics firm, Black founded startups are seeing a huge shortfall in investment in the second quarter of 2022 – that’s April 1st to June 30th.

This is a steep trough from prior quarters where numbers had started to show ‘hopeful signs of progress,’ as the report described it. Significantly below steady averages since Q1 of last year, funding has plummeted from $1.2bn to just $324m throughout Spring.

Given there’s been a significant decline in VC generally – which we’ll get into in a second – this isn’t particularly surprising, but it is concerning nonetheless.

As things stand, our chances of making marginalised communities feel more represented in the world of business have just taken a huge hit, and frankly, it’s gutting.

Funding to Black owned companies has always been disproportionately small, but this Spring, startups with at least one Black founder received a paltry 1.2% of all venture dollars doled out in the US.

Only 35 such businesses received any funding at all, in fact, compared to the 116 beneficiaries of Q1 in 2021. But why exactly?

As we alluded, there has been a sizable dip in both the volume and size of venture investments globally this year. There are myriad reasons, both technical and confusing, but it largely boils down to falling valuations and investors pulling back from the excess spending of 2021.

Everyone in tech is feeling the strain, but as stockholders become more cautious those already operating on a minority share will obviously feel the worst impacts.

So-called ‘safe’ traditional networks for investment aren’t typically brimming with Black company founders either – which pretty much explains the whole vicious cycle society needs to break.

‘People tend to default to what they know and what is safe,’ RareBreed Ventures chief McKeever Conwell recently told TechCrunch. He then clarified: ‘Investing in founders of colour, as we’ve seen over decades of VC is not what is deemed to be the safe thing to do.’

Unfortunately, then, it appears the cash-rich five quarters starting in 2021 may merely have been a flash in a pan, though we want to believe this isn’t the case.

Black owned businesses aren’t the only ones being ignored in recent times either. Companies founded by women (and particularly those of colour) have scarcely been acknowledged by investors, receiving just 2.8% and 0.64% respectively of VC funding in 2021.

We constantly hear grandiose pledges to strive for a more equitable world, but the necessary attitude changes to physically make this happen clearly aren’t materialising.

Actions speak louder than words.

 

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