VCs shouldn’t confuse risk management with not funding various founders – TechCrunch
The news that dwindling black founder funding came as no shock to the black community, much of which was heaved with the aphorism, “when white America catches a cold, black America catches pneumonia” .
US startups have received venture capital funding of approximately $75 billion in the first trimester and around $50 billion so far in the second quarter, despite investors pulling back and valuations falling as markets trend lower. But as funding in the broader private market plummets, black founders are seeing an even steeper decline: They received $1.2 billion in the first quarter and only $324 million so far in the second quarter, which was only raised by a handful of companies. If this trend continues, we will have taken a step back from the record funding that black founders saw last year.
Yet no matter how the market behaves, we still have a problem: Investing in black founders is deemed too risky by some investors, who fall back on their networks and fund what they find safe and familiar when the going gets tough. .
But Charlie Jarvis, co-founder of the art exchange platform Fair chain, says investors shouldn’t confuse playing it safe with investing in less diverse founders. He argues that now is the time to double down on those with different perspectives.
“I don’t think there’s one thing that’s most worrying; it is an ecosystem. Guy Primus, CEO, Valencia
“We’re in a culture of innovation and doing things in a way no one has done before,” Jarvis told TechCrunch. “It’s worth believing that someone who approaches things from a new angle – a point of view informed by the virtue of their identity – is likely to create very powerful solutions.”
A silver lining remains, however. Black founders received 1.2% of venture capital funds this year, which means that the low funding we see is almost on par with the cohort’s usual funding levels, proportionally speaking. This means that this uncertain economic climate is actually business as usual for many black founders, allowing many to focus more on the fight for economic equality.
TechCrunch reports indicate that there is a growing focus on educating Black entrepreneurs to build sustainable businesses, greater demand to scale existing Black-founded startups, and an urge to invest in the community.