Of the 1,537 startups that closed venture capital deals of at least $1 million in the fourth quarter of 2020, only 40 of them have Black founders at the helm, a new report finds.
These findings were brought to light by Los Angeles-based diversity recruiting platform company Hallo in its second quarterly Black Founders Funding report. The new 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 findings only account for these mega-deals closed between Oct. 1, 2020, and Dec. 31, 2020.
“In my honest opinion, the largest bottle neck for entrepreneurs of color are in the earliest days of starting your company. 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,” Hallo’s co-founder and CEO Vernon Howard told AfroTech. “I wanted to focus on the earliest rounds and in looking at the data pre-seed and seed funding were the most challenging rounds, since its most based on your network.”
Globally, startups reportedly brought in $300 billion total in venture capital last quarter, with $12 billion falling in that mega-deal range. Of that $12 billion, merely $260 million of that funding went to Black-owned companies.
Here are some further findings from Hallo’s report:
- Only 28 of the 40 Black founders are based in the U.S.
- Only six out of the 40 Black founders are women.
Howard 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. These reports are a part of the company’s Black Founders Funding series which intends to apply pressure on the startup investment community and benchmark progress by spotlighting how much Black founders are left behind in the venture capital realm.
“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,” said Howard 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.”
Launched in 2017, Hallo is a data-driven online event platform that connects university students to job opportunities at top companies. The company has raised $1.9 million in total funding with investments from Canaan Partners, Tribe Capital, Kleiner Perkins and others.
Hallo is comprised of former engineering heads at Capital One, LinkedIn and VEVO.
“I was a hacker at Capital One directly after graduating college at Virginia Commonwealth and ended my career on the derivatives trading floor there before launching Hallo,” Howard told AfroTech.
When we asked Howard which VC’s are getting it right when it comes to inclusive investing, he simply said, “no comment.” For this reason, he will continue to publish these quarterly reports, in which he compiles data from Crunchbase, and has plans to potentially launch a video series focused on them.
Check out the third quarter and fourth quarter Black Founders Funding reports from 2020 as Howard gears up to analyze venture capital from the first quarter of this year.