VCs shouldn’t confuse risk management with failing to fund several founders – e-RUPI Guide

The news that funding for black founders falls did not come as a shock to the black community, much of which was raised with the aphorism: “when white America catches a cold, black America gets pneumonia.”

US startups received VC funding of about $75 billion in Q1 and about $50 billion so far in the second quarter, despite investors retreating and valuations falling as markets tend downward. But as funding plummets in the broader private market, the black founders are seeing an even sharper drop: they received $1.2 billion in the first quarter and only $324 million to date in Q2, which was raised by only a handful of companies. If this trend continues, we will have taken a step back from the record-breaking funding that black founders saw last year.

But no matter how the market behaves, we still have a problem: investing in black founders is considered too risky by some investors, who retreat into their networks and fund what they find safe and trusted when the going gets tough.

But Charlie Jarvis, co-founder of art exchange platform fair, says investors should not 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 is anything most disturbing; it’s an ecosystem.” Guy Primus, CEO, Valence

“We’re in a culture of innovation and doing things in ways that no one has done before,” Jarvis told e-RUPI Guide. “It’s worth believing that someone who approaches things from a new perspective — one that is informed by their identity — is likely to create some very powerful solutions.”

However, there remains a silver lining. Black founders receive 1.2% of venture capital funds this year, meaning that the low funding we’re seeing is proportionally close to the cohort’s usual funding levels. That means that for many black founders, this precarious economic environment is essentially business as usual, leaving many to focus on fighting for economic equality.

e-RUPI Guide reporting indicates a growing focus on educating Black entrepreneurs to build sustainable businesses, increased demand to scale up Black-established existing startups, and a drive to invest in the community.