February 16, 2022

The disparities in raising funds for founders of color

Venture capital for startup funding or growth capital is out there. However, founders of color are only getting a small percentage of available funding for their businesses.

Where’s the startup funding and growth capital for BIPOC founders?

There’s plenty of venture capital money out there for startups. But it seems that founders of color are marginalized when it comes to getting their fair share of business funding. The wealth equality gap between white America and entrepreneurs of color is already wide. The ability to raise startup capital or growth capital for BIPOC founders reflects that. When it comes to access to capital for BIPOC founders, where’s the diversity, equality, and inclusion? As the markets and fundraisings landscape change rapidly (especially after the Covid-19 pandemic), there is some hope for change for founders of color.


Founders of color jump through more hurdles for funding

Crunchbase data shows that Black entrepreneurs in the U.S. got nearly $1.8B in startup and business funding through the first half of 2021, eclipsing the $1.4B in all of 2019. But this is a miniscule amount (only 1.2%) of the $147B invested in all U.S. startups throughout that time. Plus, that increase in funding for startups headed by founders of color coincides with a general increase in overall venture capital that available on the market.

However, BIPOC business owners get a (much) smaller portion of the business financing pie from banks—often at higher rates (nearly a point-and-a-half on average). Online lenders are no better and outside equity investments are dismal, with just $500 compared to the average $18,500 received by white-owned startups at founding.

There’s also the venture capital vacuum for early-stage companies, from seed to Series A or even Series B. As their companies gain traction, founders may want to seek equity alternatives for their business financing and growth capital. For some, programmatic financing can be a good solution, for “on-demand” funding that doesn’t force founders to give away ownership—with non-dilutive, flexible funding when needed. 

What’s the current funding landscape look like for founders of color?

According to Crunchbase, in 2021, Black female startup founders only received 0.34% of the total venture capital spent in the U.S. at the midyear mark. That figure was $494M and although a tiny percentage that year, it was $10M more than the full 2018 investment amount. And the dollars invested in their companies are expected to continue rising.  In 2020, just over 40% of all business funding to Black founders went to women. 

You can crunch the numbers in lots of ways, but the bottom line is that for Black founders, it’s hard to get a fair share of startup funding, working capital, or growth funding.


Alternative financing can make funding more accessible to all founders

At Capchase, our mission is to make funding more accessible to all founders; that means we look at the numbers and level the funding landscape by making capital available to founders with recurring revenue businesses. In fact, in 2021, 15% of the $1B funding we made available went to founders of color and female founders. In 2022, we’re committed to making this number even higher.

We offer a suite of non-dilutive alternative financing products to founders by bringing their future revenue into the present. Our startup funding and programmatic financing leverage your MRR or ARR to provide creative equity alternatives when you need them most. In short, our working capital launches and supports companies without founders giving up any stake in the business. Simply set up an account to launch your business funding.

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Learn more about programmatic funding: Capchase.com/Grow