The share of U.S. startup funding directed toward companies founded by Black founders and entrepreneurs hit a multi-year low in 2024, despite a slight increase in overall venture capital funding.
According to data, startups with a Black founder or co-founder secured only $730 million last year—just 0.4% of all venture funding. This marks a more than two-thirds decline from the funding levels seen three years ago, highlighting a concerning downward trend.
To understand the broader picture, it’s useful to examine annual funding trends since 2020. While funding for Black founders saw an increase during the push for diversity and inclusion initiatives in previous years, 2024 saw a sharp decline, indicating significant challenges in securing investment.
Sectors with the Largest Funding Rounds
Despite the overall decrease, a handful of Black-led startups managed to secure sizable investments in 2024. Some of the most significant rounds included:
- Twelve – A cleantech company converting CO₂ into jet fuel and other products raised $200 million Series C in September, led by Capricorn Investment Group, Pulse Fund, and TPG.
- Zing Health – A Medicare Advantage provider focused on improving health outcomes in diverse populations secured $140 million in September.
- Pyka – A developer of autonomous electric aircraft raised $40 million Series B in February, led by Obvious Ventures.
- Eleanor Health – An outpatient addiction treatment provider landed $30 million Series D in February, with General Catalyst leading the round.
- FinQuery – A financial automation platform raised $25 million in April.
Underrepresentation of Black Founders in Venture Capital
Even with these successful funding rounds, Black founders remain severely underrepresented in venture capital investments.
Daryn Dodson, managing director of Illumen Capital, argues that persistent racial bias among investors plays a significant role in the disparity. With over 48 million Black Americans, representing 14.4% of the U.S. population, the share of venture funding should theoretically be much higher if investments were distributed proportionally. However, Black-founded companies consistently receive far less than this share, despite the community’s strong entrepreneurial presence.
One major gap in funding lies in artificial intelligence. While AI startups have dominated venture capital in recent years, not a single Black-founded U.S. AI company raised more than $100 million in funding last year, according to Crunchbase.
Challenges for DEI Initiatives
The decline in funding also coincides with increased political pushback against diversity, equity, and inclusion (DEI) programs in both the public and private sectors. The current administration has actively scaled back DEI-related initiatives in government, and several large corporations, including Meta and Target, have downsized or eliminated diversity programs.
However, some companies—including Costco and JPMorgan Chase—have maintained their commitments to diversity efforts, signaling that private sector support is still present, albeit in a shifting landscape.
In the venture capital space, diversity-focused funds faced legal challenges. For example, the Fearless Fund, which specifically supported Black women entrepreneurs, was forced to shut down a grant program after facing lawsuits alleging discrimination.
Looking Ahead to 2025
The outlook for 2025 remains uncertain. While the drop in funding for Black founders was stark, there is potential for improvement. Given the overrepresentation of Black founders in healthcare startups, a strong year for health-related venture funding could provide a boost.
While venture capital trends can be unpredictable, advocates for diversity in funding remain hopeful that investors will recognize the value of backing a broader range of entrepreneurs in the years ahead.
