Underfunding of Black businesses and entrepreneurs remains a pervasive challenge in America. Various reports have documented how the venture capital (VC) market has traditionally remain unfavorable to Blacks and other minority groups.
A new report by a Los Angeles-based diversity recruiting platform company Hallo has revealed the extent to which the VC market is tilted against Blacks, reaffirming other publications that said Black businesses remain underfunded.
The report noted that about 1,537 startups closed VC deals of at least $1 million in the fourth quarter of 2020, but only 40 of them were Black-led. The report analyzed 1,537 young companies across the U.S. that raised funding between $1 million and $50 million at the end of last year. The companies combined raised $12,368,156,928 with $260,844,766 being invested in Black founder-led startups.
“For those VC’s who simply posted their “we stand in solidarity” message across social media back in June, yet haven’t taken any meaningful action to back Black founders, you should be ashamed of yourselves,” Hallo said in a press release.
“The Black founder community doesn’t need VCs to just say they stand in solidarity. What we need is for you to stop talking, start listening, and start investing and supporting Black founders. That’s the only thing that will truly move the needle in creating equal funding opportunities.”
Many venture capital firms acknowledged funding challenges Black startups face following nationwide protests against racial injustice last year. Black people are 13% of the American population but receive less than 1% of VC funding. The protests led to several organizations announcing initiatives to tackle the problem.
“In my honest opinion, the largest bottleneck for entrepreneurs of color are in the earliest days of starting your company,” Hallo’s co-founder and CEO Vernon Howard told AfroTech. “Once it’s time to go raise a traditional seed round the lack of friend and family capital access might put even the best-laid plans and product roadmaps behind the curve in the eyes of seed investors aiming to back initial products and amazing teams.”
Hello had previously released the figures Black-led firms secured through VC funding in the first, second and third quarter of 2020. Howard said he was inspired to start publishing insights in the company’s quarterly reports after Black founders personally reached out to him about the difficulties of raising venture capital while their White counterparts seem to raise millions easily.
The Black Founders Funding series is intended to lobby on behalf of Black businesses in the startup investment community and benchmark progress by spotlighting how much Black founders are left behind in the venture capital realm. “Our objective here is to keep a pulse on progress being made so we can ensure that all the awareness and momentum that was built last year doesn’t slowly fade away,” Howard said.
Hallo is a diversity recruiting platform that helps connect college students across the country with leading companies like Apple and Google. Hallo has raised $1.9m in funding from Canaan Partners, Tribe Capital, Kleiner Perkins, and many other leading VCs.