Funding for black-founded startups still struggling to reach new levels of growth
A recent announcement by venture capital firm Fearless Fund that they would be closing a grant contest for Black women business owners as part of a settlement agreement with a conservative group which filed a lawsuit alleging that the program was discriminatory certainly hasn’t helped the stagnant nature of investment into Black-founded business. Still, it has brought the issue back to the forefront of the public attention.
Based on fissures in the first half of 2024, the numbers aren’t looking much better for Black founders hoping to raise capital this year, either.
According to Crunchbase data, Black-founded startups in the United States received approximately $228 million in funding, just 0.3% of the almost $79 billion invested into United States startups in the same period. Based on 2023 numbers, that’s almost a 60% drop in investment.
The Sharp Decline Continues
In the 2023 financial year, investment into Black-founded startups in the United States crashed, totaling around $700 million. It was the first time since 2016 that the figure hadn’t hit $1 billion. 2021 and 2022 were much better, with $4.5 and $2.5 billion respectively.
While 2021 and 2022 may have been record-setting years, it’s also significant that in both these years, the figures represented over 1% of the total investment made into U.S. startups.
A Bleak Outlook for 2024
Deal flow is another area that’s currently seeing some historical lows. In the second quarter, Black-founded startups only achieved 28 funding deals, making it the lowest total quarter since 2019.
In total, there were 66 total deals done by Black founders in the first half of the year, which is a 53% drop in deals from the first half of 2023. No single deal achieved more than $25 million in the first six months of the year. To add some perspective to those figures, 22 startups in the U.S. each raised more than $25 million in the last few weeks alone.
Some of the more significant deals done in 2024 by Black founders included:
- FlutterFlow, a visual application development platform based in California, raised $25.5 million Series A, which was led by Google Ventures.
- FinQuery, a platform that provides transparency into financial contracts based in Atlanta, raised $23 million Series A, which was led by Founders Fund.
As bad as last year was, this year is projected to be even worse for Black founders, potentially setting a new record low for the last decade. To put that into perspective, last year failed to hit the $1 billion mark, and this year is set to only achieve half that.
Renewed Efforts Needed to Reverse the Trend
The steep decline in funding and deal flow for Black-founded startups highlights the persistent challenges in achieving equitable access to venture capital. While 2021 and 2022 brought record-breaking investments, the significant drop in funding since then signals a troubling trend, with projections for 2024 indicating an even starker gap. The closure of initiatives like Fearless Fund’s grant program for Black women entrepreneurs illustrates the broader issues that hinder progress.
To change the landscape, more industry-wide support and intentional funding strategies are needed to ensure that Black founders can grow their businesses, innovate, and contribute to the economy. Without meaningful action, the potential for diverse talent and groundbreaking ideas in Black-founded startups may continue to go unrealized.
At Ruby Leaf Media, we’re dedicated to helping founders and business investors navigate the unique journey of tech startups. Led by Dr. Marquicia Pierce, whose background in both life sciences and business brings a rare blend of scientific and strategic expertise, our team supports you in making critical, informed decisions to drive growth and innovation. Discover how our deep understanding of the tech founder’s path and investor priorities can benefit your goals—visit our website or book a call today.