Latinx founders see VC funding drop as investors retreat from underrepresented cohorts

The latest Crunchbase data shows that Latinx-founded companies in the United States raised $250 million out of the $39.85 billion allocated in venture funds in the U.S. this Q3 — or about 0.63%.1 The Q3 sum is a sharp decrease from the $2.3 billion the cohort raised in Q3 last year and a dramatic decline from the $1.3 billion raise in Q2 this year.

In total, 1.5% of all venture dollars so far in 2022 have been allocated to Latinx-founded companies, a drop from 2.5% last year, according to the Crunchbase analysis.

The numbers are not surprising. Minorities and women overall are seeing dramatic dips in venture funding this year. TechCrunch previously reported that Black founders raised $187 million this Q3, which meant, given historical data trends, the amount allocated to Latinx-founded companies wouldn’t be too far from that sum.

Meanwhile, PitchBook found that female-founded companies have raised 1.9% of all venture funds so far this year, which is, again, a drop from the 2.4% the group raised last year. TechCrunch noted before that investors tend to pull back toward their old networks to fund the founders who are familiar to them amid economic downturns — and those people tend to be white men.

The somewhat encouraging news is that funding for early-stage Latinx-founded companies is on pace to exceed 2021’s total; much of the decline that we see in the above numbers came from a decrease in late-stage financing. The reality remains that women and minorities are not faring well right now when it comes to raising VC, and promises of change have dissipated. Last year, Latinx-founded U.S. companies raised $8.5 billion. Through the end of Q3 2022, that number stands at $2.7 billion, meaning it won’t even come close to passing last year’s record-breaking sum.

Source link