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VC Funding To Black-Founded Startups Slows Dramatically As Venture Investors Pull Back

Illustration of a Black founder (male)

Venture funding to Black-founded startups in the U.S. was $324 million in the second quarter of this year—a steep drop from prior quarters when investment to those companies had just started to show hopeful signs of progress.

Although funding to Black startup founders in the U.S. has always been disproportionately tiny—at single-digit percentages—last year set a record in terms of dollars invested in those companies, Crunchbase data shows. Quarterly funding in the five quarters before this was much higher, ranging between $850 million and $1.2 billion, according to Crunchbase’s Diversity Spotlight data.

While Q2’s investment dollars could shift by the close of the quarter in a few weeks, for now that funding to Black startup founders in the U.S. is significantly below the quarterly average since the first quarter of 2021.

This year’s funding decline comes amid a general pullback in venture dollars invested this year, a troubling sign that as venture investors become more cautious, underrepresented entrepreneurs may be among those to feel the retraction most acutely.

Percent of U.S. funding

Startups with at least one Black founder have received 1.9% of deal counts and 1.2% of overall venture dollars invested in the U.S. so far this year, Crunchbase data shows.

That’s in line with the tiny sliver of funding that has typically gone to startups with Black founders: Dollars invested have fluctuated between 0.8% and 1.3% since 2017 per year as a proportion of U.S. funding, according to Crunchbase data. Deal counts since 2017 have ranged slightly higher, between 1.8% and 2.6%.

New unicorns in 2022

Two companies with a Black founder have joined The Crunchbase Unicorn Board in 2022.

One of them is Virginia-based kidney-care company Somatus, which raised its $325 million Series E led by Wellington Management at a valuation of $2.5 billion. The company partners 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 Series B led by the SoftBank Vision Fund that valued the company at $1 billion. The company helps renters build credit by capturing rental payment data. It reaches more than 2.5 million units across the U.S.

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

2021 peak

The peak year for funding to Black founders was 2021, which mirrors the dramatic rise in venture funding to U.S.-based startups overall that occurred last year.

More than $4.3 billion was invested in 2021 to Black-founded companies in the U.S., with just over $1.9 billion, or 44%, of that at seed or early-stage funding.

While that represented a highwater mark in terms of overall dollars invested, Black-founded startups still received just 1.3% of all venture and growth equity financing to U.S. startups last year.

2022 to date

So far in 2022, $100 million has been invested in Black-founded U.S. startups at seed, $591 million at early-stage, and around $876 million at later stage to 100 startups.

100 companies and counting

So far in 2022, 100 U.S. companies with a Black founder have raised venture funding, the vast majority at the seed and early stages, Crunchbase data shows. At the halfway year mark, this tracks below 2021, but isn’t too far off from funding in prior years.

Black-founded startups were already struggling to get past single-digit percentages for funding last year, and that was a peak year for VC funding. In an uncertain venture environment in 2022, where investors are focused on their portfolio companies’ survival, that is not likely to improve.

Crunchbase Pro queries referenced in this article


Funding amounts and counts for the most recent year were collected through 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 is focused on the U.S. market for underrepresented minorities, namely Black/African American-founded companies.

Crunchbase’s dataset is constantly expanding, but there are gaps. A company may not have founders listed, or the Diversity Spotlight data may not be updated on its Crunchbase profile. We do believe we are missing companies, especially at the early stages of funding.

If you notice missing data please reach out to spotlight@crunchbase.com or verify with your company email to update your company’s Diversity Spotlight tags directly onsite.

Crunchbase, like all databases of private-market transactions, has a documented pattern of reporting delays. The data for 2022 will increase over time relative to previous years. As data is added to Crunchbase over time, some of the numbers in this report may shift.

Illustration: Dom Guzman


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