By Keyanna Harper
- In Q4 2022, Black startups faced disparities in funding, raising only $264 million out of the total $33.6 billion
- More than 80% of VC firms that lack diversity in venture capital have no non-white representation
Black startup founders raising capital has become a significant concern in venture capital. In Q4 2022, Black startup founders in the U.S. raised around $264 million out of the total $33.6 billion in venture capital allocated, which is less than 1%. Even though Black entrepreneurs are the fastest-growing group of founders, they face significant barriers when raising money.
Why This Matters: The main reason for this disparity when it comes to Black founders not getting funding is the lack of diversity within the venture capital industry. More than 80% of VC firms have no non-white representation, and 40% of those in their ranks are alums of Harvard or Stanford. This means that many Black entrepreneurs cannot access the same networks and resources that other counterparts have.
Minority founders are most prominent in the early stages of raising capital. According to a recent study, Black entrepreneurs receive less than 0.5% of all venture capital invested in the U.S. Without access to sufficient money; Black entrepreneurs cannot build businesses that can compete in the marketplace.
What’s Next: Black founders raising capital in the venture capital industry have a lot of potential for further examination on highlighting successful Black startup founders. Their experiences raising capital can provide inspiration and practical advice for other Black entrepreneurs. Examining alternative forms of funding, such as crowdfunding and angel investing, can provide insights into how these forms of financing can be a viable alternative to traditional venture capital.
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