VCs shouldn’t confuse risk management with not funding diverse founders

The news that funding for Black founders is falling was no shock to the Black community, much of which was raised with the aphorism, “when white America catches a cold, Black America gets pneumonia.”

U.S. startups received VC funding of around $75 billion in Q1 and about $50 billion so far in Q2, despite investors pulling back and valuations decreasing as the markets trend downward. But as funding in the wider private market plummets, Black founders are seeing an even sharper decline: They received $1.2 billion in Q1 and only $324 million thus far in Q2, which was raised by only a handful of companies. If this trend continues, we’ll have taken a step backward from the record-breaking funding that Black founders saw last year.

Yet, regardless of how the market behaves, we still have a problem: Investing in Black founders is deemed too risky by some investors, who retreat to their networks and fund what they find safe and familiar when things get tough.

But Charlie Jarvis, co-founder of art exchange platform Fairchain, says investors shouldn’t conflate playing it safe with investing in less diverse founders. He argues that now is the time to double down on those with different perspectives.

“We’re in a culture of innovation and doing things in ways that nobody has done before,” Jarvis told TechCrunch. “It’s worth believing that someone approaching things from a new perspective — a perspective informed by virtue of their identity — is likely to create some very powerful solutions.”

A silver lining remains, though. Black founders received 1.2% of VC funds this year, meaning the low funding we’re seeing is nearly on par with the cohort’s usual funding levels, proportionally speaking. That means this uncertain economic climate is effectively business as usual for many Black founders, allowing many to further their focus on fighting for economic equality.

TechCrunch reporting indicates there is a growing focus on educating Black entrepreneurs to build sustainable businesses, more demand to scale Black-founded existing startups and an urge to invest in the community.