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VC Funding Towards Black-Founded Startups Has Dramatically Slowed Down Since Last Year

Just two years ago, VC-funding to Black founders was between $850 million and $1.2 billion. Now it's at less than $324 million. Why?

In 2021, major VC firms were finally making good on the diversity promises they made in 2020 following the social justice uprising that year. According to Crunchbase, quarterly funding last year into 2021 was between $850 million and $1.2 billion. Now it sits at about $324 million.

This could change next quarter as VC firms submit their funding reports, but the significantly lower figures already signal a steep drop from where they were just a year ago.

Inflation could be to blame as VC investments, in general, has decreased across all industries but Black founders, who are already severely underfunded, may be most harmed.

Right now, Black founders have only received 1.2% of overall VC investment in the U.S. in 2022. Last year, capital seemed to flow more freely to underrepresented founders, with more than $4.3 billion invested.

Although private VC firms seem to be holding back, corporations are continuing to show support for Black-led companies. For example, the Google for Startups Black Founders $5M Fund funneled investment dollars and other resources to Black-owned business owners this month.

“For too long, Black startup founders and Black investors have been locked out of the funding necessary to succeed,” wrote Jewel Burks-Solomon, Head of Google for Startups U.S. and Jeremiah Gordon, General Counsel, CapitalG in a blog post for Google.

“In 2020, Black founders raised less than 1% of all venture capital dollars invested in the U.S. This disparity has not only hindered innovation, but also limited opportunities for economic opportunity, wealth generation and upward mobility. That’s why we made a series of commitments in 2020 to improve access to capital for Black founders and funders.”