Editor’s note: This article is the last of our three-part series on the state of venture investment to Black-founded startups in 2022. Driving these reports are data from Crunchbase’s Diversity Spotlight feature, which helps indicate diversity in startups’ and investment firms’ leadership teams. Part One introduced the funding landscape for Black-founded startups in 2022, and Part Two checked out the largest rounds raised by Black-founded startups. — Special Projects Editor Christine Kilpatrick
Dr. Iman Abuzeid and Rome Portlock are part of a rare club.
The pair founded Incredible Health, a career marketplace that connects nurses with medical organizations to combat an ongoing massive worker shortage in health care. The company raised $80 million in 2022, making it one of the 52 Black-founded health care companies to receive funding that year (according to Crunchbase data).
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Between 2016 and 2022, Black-founded companies made up around 1.7% of all venture-backed deals in the health care space, Crunchbase data shows. In 2022, as health care startups overall raised more than $555 billion, Black-founded startups saw only 1.3% of that money.
“You can acknowledge that the bias exists because the data proves it, but you actually have to compartmentalize it mentally and not dwell on it,” said Abuzeid. “It doesn’t actually help you as an individual CEO.”
It’s a tough reality to ignore when Black people have historically been abused by the health care system, leading to poor health outcomes. The infant mortality rate for Black babies born to rich families is 22% higher than that of white babies born to poor families. Clinical trials meant to test the safety and efficacy of drugs and vaccines overrepresent white people — one study found that in 10 years of cancer drug clinical trials, only 3.1% of participants were Black.
You may wonder why founder diversity in health care is important when vaccines and drugs work inside the body.
“If, every time someone got into a particular car and they were fine, and then a Black person drove that car and had a 1 in 4 chance of crashing every single time, would you be comfortable with people driving that car at all?” said Jumpstart Nova partner Kathryne Cooper, who focuses on Black-founded health care companies. “If it’s not safe for one group, it’s not actually safe for any of us.”
Filling the gaps in health care equity
Most Americans are really unsatisfied with the health care system, which is littered with friction points that range from inconvenient to medically dangerous.
For example, Incredible Health, a 6-year-old startup, is focusing on a problem that has long plagued the health care industry: low nursing staffing rates. Lack of adequate staffing makes it harder for all patients to find timely care. A shortage of staff also means health professionals spend less time with each patient.
But it’s a problem most salient in medical deserts — large swathes of the U.S. where there aren’t enough hospitals, doctors and mental health professionals to take care of the population. It can often lead to medical neglect, especially for chronic issues — Black patients with diabetes, for example, are three times more likely to lose their limbs than others, despite it being one of the most preventable surgeries.
According to Crunchbase data, 21% of the 28 largest funding rounds to Black-founded companies in 2022 went toward health care companies fixing small gaps in the health care system. Somatus, which provides holistic care for patients dealing with kidney disease, raised $325 million in Series E funding last year. Eleanor Health, a mental health startup aimed at substance abuse patients, raised $50 million in Series C funding.
Incredible Health’s 2022 Series B raise was one of the largest in the health care staffing space that year. But it also came with a strategy: Abuzeid targeted technology-focused venture firms in the Bay Area with a history of funding underrepresented founders.
“Frankly, it means that they don’t just talk the talk, they actually walk the walk,” Abuzeid said. “They’ve already proven that there isn’t some weird bias going on, and I don’t have to deal with that aspect at all.”
Closing the gap in health care funding
When funding flooded into the health care space in 2020 in a pandemic-induced frenzy, Black-founded startups saw less than 2% of it, Crunchbase data shows.
According to a report from digital health-focused investment firm Rock Health, 41% of Black health care startup founders said they bootstrapped their company, while less than 25% of white and Asian founders said the same.
Inequity is often baked into the fundraising process — founders with connections in the venture world are more likely to get their foot in the door. Many venture firms look at past fundraising rounds to help determine whether or not they should invest, and some minority founders aren’t always able to scrape together a sizable friends and family round to launch their business.
But some firms like Jumpstart Nova, an offshoot of Nashville, Tennessee-based Jumpstart Health Investors that is specifically dedicated to funding Black-founded health care companies, are rethinking the process. The fund details what kinds of startups it invests in, and all founders have to fill out the same form before being considered for an investment.
“Black founders are chronically underfunded and health care is no exception,” Cooper said. “Health care affects all Americans. And if a certain group is going to be cut out from this funding, I don’t think that’s representative of all health care opportunities.”
Illustration: Dom Guzman
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