Blog

Editor’s note: This is the second in a two-part series on the state of venture funding to Black-founded startups in the U.S., based on 2023 data from Crunchbase and its Diversity Spotlight feature. Part 1 can be found here.

As venture funding to Black-founded U.S. startups plummeted last year, many areas that have in the past served as strong pillars for such investment saw serious declines in those numbers.

Overall, funding to Black-founded U.S. startups totaled only $705 million last year — marking the first time since 2016 that the figure failed to even reach $1 billion, Crunchbase data shows. Funding to Black-founded companies dropped 71% — greatly outpacing the overall decline in overall U.S. startup funding, which fell 37% last year, according to Crunchbase data.

However, certain geographic areas including Atlanta, Boston and the San Francisco Bay Area saw an even more severe decrease in funding to Black startup founders. That’s significant because those areas are not just some of the largest venture areas, but also historically some of the strongest for funding to minority founders.

Those geographic declines helped lead to the overall cratering Black-founded startup funding saw last year.

San Francisco Bay Area

When talking about venture numbers, it is hard to start anywhere but the biggest U.S. market of all: the San Francisco Bay Area.

Funding to Black-founded startups there plunged 78% in 2023, Crunchbase data shows. Only the Atlanta region saw a larger decrease — dropping 79% — but since the Bay Area is a bigger market in terms of dollars, the drop was more significant.

Black-founded startups in the Bay Area raised $198 million in 2023 — the lowest total since 2017, though that was still enough to make it the top region for such funding. Still, that number represents an immense drop from the $895 million raised in 2022 and a shocking crash from the $1.7 billion raised by Black-founded startups in the region in 2021.

What’s more is the share of the venture market Black founders are getting is shrinking. Last year, Bay Area startups overall raised a total of $57.3 billion. The $198 million raised by Black-founded startups mean such companies saw only 0.3% of all funding in the region.

In both 2022 and 2021, funding to Black-founded startups in the region made up 1.3% of the market.

The region did, however, get two of the three biggest fundings to Black-founded startups last year: Investment management platform Juniper Square raised a $133 million venture round led by Owl Rock Capital, and Clerkie, developer of an AI financial planning tool for underserved Americans, raised a $33 million Series A led by Left Lane Capital. Still, even the two larger deals could not save the area from realizing its massive dip.

Atlanta

The only metro region with a larger decline in funding to Black-founded startups than the San Francisco Bay Area last year was Atlanta. That’s especially significant given that the Atlanta area is viewed as a growing venture market that has long strongly supported minority-led companies.

However, last year the Atlanta metro area saw the smallest amount of funding go to its Black-founded startups since 2017. Only $23 million in venture spending went to such startups in the area — a staggering 79% decline from the $107 million invested in 2022 and even a wider gap from the $467 million raised in 2021.

The share of the venture market that Black founders in Atlanta received also diminished, though not as drastically as it did in the Bay Area.

In 2023, Atlanta startups overall raised a total of $1.3 billion, meaning Black-founded startups received 1.5% of the market — a slight drop from the 1.8% they saw in 2022. However, those numbers are a steep decline from the 8.9% those startups saw in 2021.

For all intents and purposes, there were no large growth rounds raised in the region last year. The largest round went to cleantech startup Cloverly, which brings carbon credits to digital applications, which raised a $19 million Series A.

Mark Buffington, co-founder of BIP Capital in Atlanta, said one dynamic that could be affecting the market is the networking needed to raise larger growth rounds — which are the main drivers in finding numbers. While Atlanta’s venture market has grown through the year, that can still be an issue — especially for Black founders.

“There are areas where there is more opportunity to build a network,” he said. “Geography can still matter.”

Boston

One region known for those large networks of venture capital is Boston. However, Beantown’s numbers also saw a substantial 72% decline in the amount of venture dollars going to Black-founded startups in 2023.

Last year, only $23 million dollars went to Black-founded startups in the region, compared to $120 million in 2022 and $150 million in 2021. One round alone represented nearly 83% of last year’s total — energy storage startup Fourth Power raised a $19 million Series A.

The scant 2023 total for Black-founded startups in the Boston area actually represented 2.6% of the region’s $13.5 billion venture market last year — which is the highest percentage share of any metro market.

However, it also represents a decline from the 5.9% share such startups received in 2022 and the 4.2% they got in 2021.

Anything else?

The Bay Area, Atlanta and Boston were not the only areas to see substantial declines.

The New York area — also one of the largest venture markets in the world — saw funding to Black-founded startups fall from $375 million in 2022 to only $185 million last year, a 51% drop.

Similarly, Los Angeles saw a 43% dip, falling from $301 million in 2022 to a scant $173 million last year.

Of course, these numbers do come at a time when geography is starting to matter less as remote and hybrid work remains the norm in tech and founders are getting more spread throughout the country.

Paul Judge, chairman of the Open Opportunity Fund, which is dedicated to supporting Black and Latinx founders, said that means it should be easier than ever for investors to find good companies, including those that are minority-led.

“It should be easier than ever to find these companies,” said Judge, who is based in Atlanta. “Investors are constantly looking for something other investors don’t know. This is something being overlooked.”

Methodology

Funding amounts and counts for the most recent year were collected through Feb. 23, 2024.

The data contained in this report comes directly from Crunchbase, and is based on reported data provided by our Diversity Spotlight partners, venture partners, our community network and news sources. The data in this report is focused on the U.S. market for underrepresented minorities, namely Black-/African American-founded companies.

Crunchbase’s dataset is constantly expanding, but there are gaps. A company may not have founders listed, or the Diversity Spotlight data may not be updated on its Crunchbase profile. We do believe we are missing companies, especially at the early stages of funding.

If you notice missing data please reach out to spotlight@crunchbase.com or verify with your company email to update your company’s Diversity Spotlight tags directly onsite.

Crunchbase, like all databases of private-market transactions, has a documented pattern of reporting delays. The data for 2023 will increase over time relative to previous years. As data is added to Crunchbase over time, some of the numbers in this report may shift.

Related reading:

Illustration: Dom Guzman