VC funding to black-capital startups slows dramatically as venture capital investors pull out

In the second quarter of this year, venture capital funding to black-founded start-ups in the United States was $ 324 million, a steep drop from previous quarters when investments in those companies had just begun to show promising signs. of progress.

While funding to black startup founders in the United States has always been disproportionately small, with single-digit percentages, last year it set a record in terms of dollars invested in those companies, data from Crunchbase shows. According to Crunchbase’s Diversity Spotlight data, quarterly funding in the previous five quarters was much higher, ranging from $ 850 million to $ 1.2 billion.

While second-quarter investment dollars could change by the end of the quarter in just a few weeks, funding to black startup founders in the US is significantly below the quarterly average since the first quarter of 2021 for now.

The drop in funding this year comes amid a general withdrawal in venture capital dollars invested this year, a worrying sign that as venture investors become more cautious, underrepresented entrepreneurs may be among those to hear. the most acute retraction.

Percentage of US funding

Startups with at least one black founder have received 1.9% of the business tally and 1.2% of the venture capital dollars invested in the United States so far this year, according to data from Crunchbase.

This is in line with the small sliver of funding that typically went to startups with black founders: dollars invested has fluctuated between 0.8% and 1.3% from 2017 per year in proportion to US funding. according to data from Crunchbase. The bid count since 2017 is 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 such is Virginia-based kidney care company Somatus, which raised its $ 325 million Series E led by Wellington Management at a $ 2.5 billion valuation. The company works 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 a $ 130 million B series led by the SoftBank Vision Fund which valued the company at $ 1 billion. The company helps renters create credit by capturing rental payment information. It reaches more than 2.5 million units in the United States

In 2021, a total of six companies with a black founder joined the Unicorn Board.

Peak 2021

The peak year for funding for black founders was 2021, reflecting the dramatic increase in venture funding for US-based startups that occurred last year.

More than $ 4.3 billion was invested in black-based companies in the United States in 2021, of which just over $ 1.9 billion, or 44%, of upfront or upfront funding.

While this was a highlight in terms of total dollars invested, black-founded startups still received just 1.3% of all venture capital and growth funding to US startups last year.

2022 to date

So far in 2022, $ 100 million has been invested in US startups founded by blacks at seed, $ 591 million in the early stage, and about $ 876 million later in 100 startups.

100 companies and beyond

So far, in 2022, 100 U.S. companies with a black founder have raised venture funding, the vast majority in the early and early stages, Crunchbase data shows. In the middle of the year, this is below 2021, but it is not too far from funding in previous years.

Black fund startups were already struggling to break through single-digit funding rates last year, and that was a peak year for VC funding. In an uncertain venture capital environment in 2022, where investors are focused on the survival of their portfolio companies, things are unlikely to improve.

Query Crunchbase Pro referenced in this article

Methodology

Funding amounts and counts for the most recent year were collected until June 15, 2022.

The data contained in this report comes directly from Crunchbase and is based on reported data provided by our Diversity Spotlight partners, venture partners, our community network and news sources. The data in this report focuses on the US market for underrepresented minorities, i.e. companies of black / African American descent.

Crunchbase’s dataset is constantly expanding, but there are gaps. A company may not have founders listed or the Diversity Spotlight data may be out of date on its Crunchbase profile. We believe we miss companies, especially in the early stages of financing.

If you notice missing data, please contact [email protected] or check with your company email to update your company’s Diversity Spotlight tags directly on site.

Crunchbase, like all private market transaction databases, has a documented delay reporting model. Data for 2022 will increase over time from previous years. As data is added to Crunchbase over time, some of the numbers in this report may change.

Illustration: Dom Guzman

Stay up to date with recent funding rounds, acquisitions, and more with Crunchbase Daily.