Like many of our clients, the Venture Capital (VC) industry is trying to improve diversity. This also means improving diversity of their investments, as well as their own teams. Black founders have been underrepresented in venture capital (VC) for far too long. Despite recent efforts to increase diversity in the tech industry, only 1% of VC-backed start-ups are founded by Black entrepreneurs. This disparity is not just a representation issue, it has real-world implications for the growth and success of Black-owned businesses.

One reason for the lack of Black founders in VC is the systemic barriers they face when trying to secure funding. Research has shown that Black entrepreneurs receive less capital and less favourable terms than their white counterparts, even when they have similar business proposals. This often leaves Black entrepreneurs with fewer resources to grow their companies and less equity to share with employees and investors.

Additionally, the lack of Black representation in VC firms exacerbates the problem. Most VC firms are still not very diverse, a trend that many are rapidly addressing, but as an example in 2021 65% of US VC firms didn’t have a female partner. However, there are some initiatives aimed at addressing these disparities and promoting Black entrepreneurship.

Today it’s hard to argue anything other than Black founders continue to be underrepresented and invested by the venture capital industry. As mentioned, the lack of funding and representation has real-world implications for the growth and success of Black-owned businesses. The industry is very focused on investing in the best ideas and as efforts improve to increase diversity, the industry will only benefit from working with a more diverse range of founders with great ideas.