Despite efforts to promote diversity, equity, and inclusion (DEI), black founders of U.S. startups have made little progress in securing venture capital. According to Crunchbase data, in 2023 these individuals accounted for less than 0.48% of all venture dollars distributed, marking a decrease from previous years.
Venture investments have generally become riskier and less appealing due to rising interest rates. This trend has significantly impacted black founders, whose already small slice of the funding pie has continued to shrink, despite an initial boost following the killing of George Floyd in 2020.
Nevertheless, there is some optimism in the entrepreneurial community. A number of innovative individuals have actively built on the momentum that existed pre-2020. Naza Shelley, a lawyer from Washington D.C., is one such example. Frustrated with dating apps that failed to cater to professional black women, she launched her own in 2018. CarpeDM, her matchmaking service, extends a personal touch with a dedicated human matchmaker.
To kickstart CarpeDM, Shelley sold her condo, exhausted her savings, and raised funds from close connections. The startup’s biggest investment came in 2022 from Portland-based Elevate Capital, a venture capital fund that supports underrepresented entrepreneurs. This significant financial boost enabled expansion in technology, marketing, and hiring.
Another entrepreneur, Jason Ray, initiated his wealth management firm in 2019 with an aim to address racial and gender-based wealth inequality in investing advice. Zenith Wealth Partners’ clients are often interested in supporting early-stage companies with the goal of reducing stock-market volatility and potentially increasing overall returns.
However, Ray warns that investing in entrepreneurial ventures does come with risks. Startups are often illiquid investments, making them inaccessible for many years and possibly never turning a profit.
Despite the difficulties, startup entrepreneurs continue to face these challenges, looking for strategic ways to secure critical funding and grow their businesses.
