Black Entrepreneurs Seek Elusive VC Funding

By Jade Hochberger**

In their article for Thomson Reuters, published in February of this year, co-authors April Joyner and Arriana McLymore explore the barriers facing African American entrepreneurs seeking venture capital funding. Despite renewed attention toward a need for diversity, funding remains elusive for most Black entrepreneurs.

In the past six years, the share of U.S. venture capital going to Black-founded companies has not budged above 5%, even though about 10% of U.S. companies are Black-owned, according to U.S. Census data. The authors identify two reasons for the lack of funding for Black-owned businesses: very little funding from established venture capital firms and even fewer Black investors allocating their funds.

While venture capital firms only finance a tiny sliver of U.S. businesses, their backing can be integral to the success of a new company. This is evident in the history of companies like Facebook and Amazon, whose financial backing allowed for growth and, ultimately allowed for stakeholders and employees from these companies to go on and back other successful ventures.

But Black entrepreneurs have largely been unable to generate this cycle of wealth. The financial opportunities are not the same for Black entrepreneurs as their white counterparts, whether just starting out or seeking a large financial investment.

Only 16 firms out of hundreds of venture capital firms participated in 10 or more early-stage funding rounds for Black-founded or Black-led companies between 2015 and 2020, the data shows. Among the 10 most frequent backers of Black founders in that period, three were founded by African Americans: Backstage Capital, Precursor Ventures and MaC Venture Capital. Another firm in the top 10, Kapor Capital, focuses on companies that close “access gaps,” especially in Black and Latino communities.

So what hope is there for the Black entrepreneurial community as we continue to see small businesses and new companies emerging? Clearly, if you cannot beat them, you must join them. Lorine Pendleton is a graduate of Brown University and the founder of her own venture capital firm. Her mission is to ensure equal access to financial, social, and human capital. Investing in women-led and Black-owned businesses, Lorine and others like her are making waves by actively diversifying the investment world.

While change is slow and often overlooked, investors and entrepreneurs alike must all take an active role in addressing the lack of diversity in the world of venture capital financing.

**Jade Hochberger graduated from Trinity College in Hartford, CT in 2017, with a BA in Cultural Anthropology. With a background in anthropological fieldwork, User Research, and UX Design, she is a recent addition to the Mei & Mark team.