As of Aug. 31, a total of $87.3 billion in venture capital has gone to founders so far in 2020. However, Black and Latinx founders have received just 2.6 percent of that funding.
According to CNBC, a new report from Crunchbase confirms the Black founders are still struggling to raise money for their innovative ideas. Released on Oct. 7, the reports gathered data from over 970 Black and Latinx-founded companies that have raised VC funding since 2015. The report also highlights data from the nonprofit organization BLCK VC that shows 81 percent of all VC firms don’t have a single Black investor.
“I think it’s pretty shocking,” Crunchbase data evangelist Gene Teare said. “Hopefully for the industry, this is a wake-up call.”
Teare cites racial bias and discrimination within the venture capital space for the rejection founders experience early in the fundraising process.
“That early funding is all about you as a founder, your network, and your credibility,” she said.
However, with limited access to networks with capital, Black and Latinx founders fall behind.
In a recent tweet, venture capitalist and co-founder of Intersectionality Primer, Del Johnson shared tips on how a founder can utilize social media to widen their network, thus reaching more investors.
Should a founder have a Twitter account?
A 2017 study out of Wharton found, "startup firms active on social media have higher chances of getting funded, receive larger amounts of funding, and have a larger number of investors."
— Del Johnson (@DelJohnsonVC) October 22, 2020
He tweeted: “A 2017 study out of Wharton found, ‘startup firms active on social media have higher chances of getting funded, receive larger amounts of funding, and have a larger number of investors.'”
Still, to close the funding gap, investment strategies at VC firms must prioritize investments in Black and Latinx startups.