Black funding updates and...
legal notices have already been sent
💖Motivation Meows💖
Hello, and welcome to yet another edition of The Black Cat.
To read what you missed this week in Good Black News, click here. Otherwise, a quick update on the funding going to Black founders and new action taken by a famous legal watchdog.
Feel free to send around, email me your reflections, and follow me on Instagram at dominicmadori.
This month I’m reading: His Excellency Eugène Rougon by Zola
This weekend, I can’t stop listening to: Flamenco by Beyoncé
💢From the Chatterbox💢
Funding to Black founders continues to tumble, according to new data I received from Crunchbase.
The data shows that Black founders raised 0.44% of capital raised in Q1 — or around $151.9 million out of the about $34.5 billion allocated to U.S. startups. The number fell even more the following quarter, Q2'2023, with Black founders picking up $100 million out of the $43.6 billion raised — that’s 0.23%. This means the H1’2024 total percentage of capital raised for Black founders stands at 0.32%, which is a decrease from the 0.73% in H1’2023, and the 1.30% raised in H1’2022, according to Crunchbase data.
“We are eight to nine quarters into a venture funding downturn, but Crunchbase data has shown a persistent decline in funding to Black-founded companies that outpaces the overall decline in startup funding," Gené Teare, Crunchbase News' senior data editor, told me. "Indeed, despite the fact that Q2 of 2024 was amongst the highest for total funding since Q1 2023, the percentage of that funding that went to Black-founders remained stubbornly low at just 0.32%.”
This news surprises no one. After Black Lives Matter, as everyone knows by now, there was a historic allocation of capital to Black founders, with the group raising more than $1 billion in 2021. I was chatting to one investor who said this is all just bad timing for Black founders: during the historic time of giving, the market crashed and investors retreated to what they considered to be their safe networks, leaving the exciting want of trying something new — in this case backing founders outside their traditional networks — behind.
Then, the “Great Retreat” started to happen, which saw more people, corporations, and companies pul black on their promises to foster more diverse workplaces for various reasons. Layoffs happened. Departments shuttered.
Diversity is now a political issue, an endless debate on X. All the while, funding to Black founders has dipped. Last year, Crunchbase found that Black founders raised 0.48% of all capital allocated — around $661 million out of $136 billion. That number was the lowest in recent history, as even 2022 and 2021 saw them raise at least 1% of venture capital.
Last year, even Black-founded funds were seeing a retreat — only four announced they raised capital in 2023, compared to 13 in both 2022 and 2021. So far, at least two Black-founded funds have announced raising this year — Beta Boom Fund II and Harlem Capital. I obviously chat with Black founders all the time and by now the data updates are numbing. There isn't much to do about it aside from more of the same — heads down building companies, while staying vocal about the disparities. The future isn’t clear here — especially as diversity remains a political hot spot that has divided America. Perhaps time is the answer — and bad luck the reason — for the continued dip in funding. But even then, there seems to be a catch.
“While the AI funding boom has been beneficial for female founders, the same cannot be said for Black founders,” Teare said. “There are no indicators in the data that things will improve anytime soon.”
In other news, I’ve received word (and evidence) that the legal watchdog Southern Poverty Law Center has sent legal notices to attorney generals in three states — Florida, Georgia, and Louisana — asking them to investigate if venture firms in the state are partaking in “race-based decision making.” The legal notices, dated August 5th, say that each state mentioned says it supports “race-neutral and meritocratic systems” that is supposed to foster equality for all rather than put one race above another. Yet, at the same time, the SPLC used public records to find some key investment firms in the state that have seemingly only supported mostly white or entirely white-led businesses.
“Given this position, we expect your office will conduct investigations into — and, if warranted, initiate action against — entities that are found to have privileged majority white-owned businesses over businesses owned by people of other races. Such application of the law would be the natural extension of your office’s race-neutral thinking and efforts. Specifically, this letter suggests that your office turn its focus on financial institutions, and particularly venture capital funds, operating within…” the letter read, going on to list the respective state the letter was sent to.
It then highlighted each law that could have been broken in each state, from discriminating on the basis of race in " provisions of financial assistance” in Louisana to “discriminate in the extending of credit or the making of loans solely on the basis of . . . race . . .” in the state of Georgia. “However, failure to investigate and act against entities that may have privileged business dealings with entities owned by white people over those owned and operated by people of color, for example, would be counter to the public positions your office has taken in favor of “race-neutral and meritocratic,” the letter continued, before a sign off from the organization’s deputy legal director.
Here are the letters for each respective state:
To my knowledge, SPLC picked Louisana, Florida, and Georgia specifically because those are the three states in the south with the most venture traction as of right now. The organization had been following the lawsuits being filed against organizations like Fearless Fund and Hello Alice from people like Edward Blum, who are, in some ways, pushing the notion of meritocracy and alleging that efforts targeted just toward funding women and people of color discriminate against white folks. SPLC thought to reverse-uno that idea, pointing out firms in different states that have almost no people of color in their portfolios and arguing that those firms too, are partaking in a form of discrimination and, since many Red States are pushing for meritocracy it is worth a look to see if the lack of diversity at those firms is really due to colorblindness.
I understand SPLC might send notices to more states — like Texas — but it’s too early to call right now. The org is trying to push back against the spew of lawsuits that have popped up recently against initiatives seeking to rectify what some have considered past discriminatory actions that have made it harder for women and specifically Black people to move ahead in America. Blum in particular has had much success in ending race-conscious decision-making, most notably helping to end affirmative action in education. The SPLC, on the other hand, believes it’s fine for organizations to take into account that America is not exactly what many would call a colorblind nation. (On Tuesday, I reached out to the respective attorney generals who received notices asking to confirm they saw the letters and if they plan to respond. I am still awaiting comment).
I found this to be so interesting!! Mostly because it shows that venture capital is entering the mainstream and the work of equality activists is starting to work — people are paying attention. And not just any people, we’re talking lawmakers now. Lawmakers and policy advocates. They see the dwindling numbers, they see the political blowback, they see the lack of transparency. People are starting to pay attention, and slowly things are moving — whether that’s California's SB 54 law to bring more transparency to the venture landscape or Massachusetts looking at extending workplace laws to venture. Agencies, businesses, and corporations are being sued for allegedly discriminating against men and non-people of color. Most famously, Edward Blum from the American Alliance for Equal Rights took Fearless Fund to court, positioning the giving of grants and investment money as a legal issue that is fair game to challenge in courts. Fearless Fund shot back, arguing the lack of funding for people of color is a civil rights issue. Having the SPLC send legal notices calling out venture capital firms for purported discrimination while asking for an investigation is huge — it’s another baby step toward what I always said was going to be the next frontier in the fight for venture equality: the court system.
💫Kitty Talk💫
Here are some interesting articles I’ve read since we last met: