Report: VC Funding To Black Community Expected To Drop Up To $130 Billion This Year

A new study shows that the number of first-time Black investors is rising, but limited leadership roles impede their ability to allocate capital.

The analysis was released February 22 by BLCK VC, a nonprofit focused on increasing representation of Black investors in venture capital. The second edition of the 2023 State of Black Venture report reveals how Black investors are participating and progressing in the venture ecosystem.

In a stunning development, the report showed “total amount of venture capital fundraising in the US is expected to decline between $120 billion and $130 billion in 2023, adversely affecting Black fund
managers’ ability to raise more capital.” Further, 68.4% of the VC raised in 2022 went to established managers, posing a risk for emerging Black fund managers looking to raise new capital in upcoming years.Developed in partnership with Silicon Valley Bank (SVB) and Amazon Web Services (AWS), the report emphasizes discrepancies in access to funds and tracks partner- and non-partner-level representation of Black investors.

“Venture capital is a pillar of innovation and financial growth for the American economy, but the industry’s ability to transform the business landscape is inhibited because it fails to tap the valuable experiences of Black investors and entrepreneurs,” says Samer Yousif, interim CEO at BLCK VC. “The release of the second edition of BLCK VC’s report shares actionable steps the industry can take to galvanize change and break down systemic barriers.”

In a new development, the report showed “total amount of venture capital fundraising in the US is expected to decline between $120 billion and $130 billion in 2023, adversely affecting Black fund
managers’ ability to raise more capital. Further 68.4% of the total VC raised in 2022 went to established managers, posing a risk for emerging Black fund managers seeking to raise new capital upcoming years.

According to a news release, this edition of the report highlights Black women’s disproportionate under-representation in the industry, expands BLCK VC’s examination of the Black venture ecosystem to incorporate junior to mid-level talent, exposes the adverse impacts of the industry’s homogeneity on decision-making and financial returns, and provides actionable guidance on how stakeholders can collaborate to build an equitable and inclusive ecosystem.

Equality for Black women in venture continues to lag. Black women investors are disproportionately represented in non-partner-level roles, with only 16.7% of the Black women in the study’s sample having partner roles. The absence of Black women decision-makers at firms reduces investment opportunities and the level of diversity in the overall investment industry.
Black junior- and mid-level talent disrupts the status quo. The report reveals that 45% of Black partner-level investors in venture capital acquired their highest degree from an Ivy League university. When considering junior to mid-level talent, only 26% of these individuals hold degrees from these universities. The data indicates that, while partner-level investors align with the industry trend of Ivy League representation, there is greater diversity in university pedigree among junior- and mid-level talent. Changes in the educational background of investors are a positive development within the industry, leading to a more diverse range of perspectives and ideas as they reach partner roles.
The potential of junior Black grows from mentorship. Trends across career paths of Black investors offered a more complex image of existing barriers. BLCK VC’s data indicates that while 42.5% of the individuals had no promotion in the past year, most of those promoted rose from analyst and associate positions – a positive indicator for junior talent.
Black fund managers need to focus on later-stage investments. The overall number of first-time Black fund managers is growing, with 28.6% of Black fund managers launching their first fund in the last year. Yet, Black fund managers tend to focus on early-fund investments with smaller check sizes. Increased Black checkwriters across venture capital can bring diversity and representation to the industry, leading to more inclusive growth and opportunities for Black investors.

“By enhancing the collective strength of the venture community, BLCK VC works toward breaking down obstacles,” says Sydney Sykes, Co-founder of BLCK VC. “Companies cannot afford to miss the valuable talent, skills, and perspectives that Black investors bring. It’s time to invest in the current and emerging pipeline of Black venture capital leaders and their ideas by supporting their fundraising efforts and empowering them to make more investment decisions.”

Data from this report was obtained through a survey of 225 Black investors at various stages in their careers through an independent review of Crunchbase data and BLCK VC’s proprietary databases.