The drop in VC funding to Black start-ups is a big deal as those firms need the capital to launch businesses and expand.
New data show that venture funding for Black-founded startups remains dreary.
The drop in VC funding to Black start-ups is significant as those firms need the capital to launch businesses, expand, and gain working capital to help them survive. Further, Black-owned women’s small businesses continue to struggle to land VC funding even though they’re among the fastest-growing segments in their space.
Still, observers have and continue to question where such investments have been made.
“Funding was less than $1 billion a year,” he said. “That means we have about a $17 billion problem. People understand money, so they should understand that. Now we need a $17 billion solution.”
In addition, it has been reported that Black startups often can offer investors bullish returns and provide them performance they are looking for.
“People just haven’t realized the financial rewards of investing in startups with diverse leadership,” Judge told Crunchbase. “Minority-led companies consistently outperform.”
“We think the data accurately reflects current macroeconomic conditions and is reflective of the general decline in funding for minority businesses,” William Michael Cunningham, an adjunct professor at Georgetown University and owner of Creative Investment Research, said regarding Crunchbase’s data.
Using a brief he attempted to file in a federal case involving the Edward Blum-led American Alliance for Equal Rights versus Fearless Fund Management, LLC, Cunningham highlighted the detrimental effects of anti-Black racial discrimination on market efficiency.
Using a proprietary analysis tied to the Fearless Fund case only, Cunningham calculated a total macroeconomic decline of $7.15 billion in Black and other minority businesses over the next year due to legal costs, declining donations, and negative investment perceptions.
He estimated that the anti-Black American Alliance for Equal Rights stands to make $32 million. For example, he noted the University of North Carolina agreed to a $4.8 million settlement last month with the same anti-affirmative action group.
“It is my belief that these anti-affirmative action lawsuits are being filed primarily to make money for groups like the incorrectly named American Alliance for Equal Rights.”
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Source: Black Enterprise
