The news that funding for Black founders is falling was no shock to the Black community, much of which was raised with the aphorism, “when white America catches a cold, Black America gets pneumonia.”
U.S. startups received VC funding of around $75 billion in Q1 and about $50 billion so far in Q2, despite investors pulling back and valuations decreasing as the markets trend downward. But as funding in the wider private market plummets, Black founders are seeing an even sharper decline: They received $1.2 billion in Q1 and only $324 million thus far in Q2, which was raised by only a handful of companies. If this trend continues, we’ll have taken a step backward from the record-breaking funding that Black founders saw last year.
Yet, regardless of how the market behaves, we still have a problem: Investing in Black founders is deemed too risky by some investors, who retreat to their networks and fund what they find safe and familiar when things get tough.
But Charlie Jarvis, co-founder of art exchange platform Fairchain, says investors shouldn’t conflate playing it safe with investing in less diverse founders. She argues that now is the time to double down on those with different perspectives.
“We’re in a culture of innovation and doing things in ways that nobody has done before,” Jarvis told TechCrunch. “It’s worth believing that someone approaching things from a new perspective — a perspective informed by virtue of their identity — is likely to create some very powerful solutions.”
A silver lining remains, though. Black founders received 1.2% of VC funds this year, meaning the low funding we’re seeing is nearly on par with the cohort’s usual funding levels, proportionally speaking. That means this uncertain economic climate is effectively business as usual for many Black founders, allowing many to further their focus on fighting for economic equality.
TechCrunch reporting indicates there is a growing focus on educating Black entrepreneurs to build sustainable businesses, more demand to scale Black-founded existing startups and an urge to invest in the community.
Kerry Schrader, the co-founder of Mixtroz, says her plan is to follow the mantra, “Showing folks better than one can tell them.” Schrader plans to continue to focus on growing her company and fundraise again in August. She advises other Black founders to continue focusing on growing their businesses, but she feels the community must consider supporting and maintaining itself.
“Our allies and communities need to be part of the solution by investing in our companies or becoming paying clients,” she told TechCrunch. “Clapping from the sidelines only goes so far.”
Angel investor Esosa Johnson said it’s essential to continue teaching Black entrepreneurs how to stay afloat and alleviate the negative economic impact a downturn could have. She pointed to the effects of the pandemic on Black businesses, 40% of which shut down during the lockdowns in 2020 compared to 17% of white companies.
“That means 40% of Black wealth just dissipated, disappeared,” she told TechCrunch.
Johnson last week hosted the annual Black Women Talk Tech conference with Regina Gwynn as a way to provide networking opportunities and educational materials to Black founders seeking to navigate the industry.
“We’re hoping to save and get some of these businesses to thrive in this [climate] where everyone is trying to prepare for what’s next,” she said.
Meanwhile, Ryan Glover, co-founder of financial services company Greenwood, is expanding his company’s reach to help address the wealth gap in the Black community. Greenwood announced the acquisition of Valence, a recruiting platform meant for Black people, this week. This deal follows the purchase of The Gathering Spot, a member-only club for Black professionals, earlier this year.
“Our collective mission revolves around closing the wealth gap in America that has existed in the minority community for generations,” Glover told TechCrunch.
Valence CEO Guy Primus added, “I don’t think there is any one thing that is most worrying; it’s an ecosystem. That’s why we come together as an ecosystem … to solve these problems.”
The fight to hold the industry accountable is also continuing. Aurora James, founder of the Fifteen Percent Pledge, feels it’s crucial for leaders to continue working for the prosperity of all people, and that public pressure shouldn’t be required to make that happen.
“We will continue doing this much-needed work for as long as it takes,” James said. “I look forward to a time in our society when conversations have shifted from Black-owned businesses struggling to receive funding, to Black-owned businesses being positioned to thrive and consistently have a seat at any table.”
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