Hyderabad Investment：Venture capital for Black entrepreneurs plummeted 45% in 2022, data shows
In 2016, Beatrice Dixon had finally secured a deal with to carry her line of feminine care productsHyderabad Investment. But she had one problem: She was still making them in the kitchen of her Atlanta home, and she needed to scale up — fast.Surat Stock
The CEO and co-founder of The Honey Pot Company, a vaginal-wellness brand, was faced with the “impossible” task of launching in 1,100 stores and needed funding to bring on manufacturers so she could deliver on the retailer❼orders.
She managed to secure that crucial round of financing from the New Voices Foundation, a fund led by Richelieu Dennis that❼devoted to supporting women entrepreneurs of color. Using that financing, and some funding from family and friends, Dixon was able to quit her job, move operations out of her kitchen and launch in Target stores nationwide by 2017.
Some six years later, Dixon❼products are a staple in retailers across the country.
“It was really hard, man, we weren❽having any luck,” Dixon told CNBC in a recent interview about the struggles she faced securing investorsNagpur Investment. “I don❽know what would have happened if we didn❽get that money.”
Dixon is one of many Black entrepreneurs who struggled to secure funding for their businesses and relied on venture capital financing earmarked for diverse founders. While Dixon and many others have ultimately succeeded, Black-led businesses and Black founders have historically faced disparities in securing VC funding.
Overall, Black entrepreneurs typically receive less than 2% of all VC dollars each year while companies led by Black women receive less than 1%, according to data from Crunchbase.
In the wake of the police murder of George Floyd and the racial justice reckoning that followed, Black founders and Black-led startups saw historic gains in securing VC funding in 2021. However, as momentum around the movement fizzled and market conditions worsened, a lot of those gains were lost by the end of 2022.
While overall VC funding dropped by 36% in 2022 as inflation and interest rates surged, financing for Black businesses saw a steeper drop of 45%, according to the Crunchbase data. That drop is the largest year-over-year decrease Black entrepreneurs have seen over the past decade.
“There were a lot of political and cultural strife problems in 2020 and early 2021 that created a higher focus on Black and diverse founders,” said Kyle Stanford, a senior analyst at Pitchbook. “No one wants that to be the reason why they focus on investing in any group, but that did put a lot of focus on the problems that VC has had investing in anyone outside of a straight white male.”
Marlon Nichols, the co-founder and managing general partner of MaC Venture Capital, said diverse businesses tend to take the brunt of VC slowdowns because firms typically resort to the status quo in times of economic uncertainty.
Guoabong Stock
