From The Editor's Desk: To Grow a More Diverse Startup Ecosystem, Start At The Seed...

news.crunchbase.com
4 min read
fairly difficult
Black and Latino startup founders receive only a tiny fraction of venture funding, according to Crunchbase data. The industry can encourage more diversity by focusing on what happens at the seed stage, our managing editor writes.
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We have to do better.

That was my first thought after reading Crunchbase's first Diversity Spotlight Report. Published last week, the report offers a comprehensive look at the U.S. venture funding landscape for Black- and Latino-founded startups.

Our report underscores the extent to which minority entrepreneurs are largely shut out from participating in the incredible wealth generated by the tech industry.

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So far in 2020—another blockbuster year for venture funding despite a global economic downturn—Black and Latino founders have raised just 2.6 percent of the total VC funding for U.S. startups. That's despite those two demographic groups combined making up 32 percent of the U.S. population. In the San Francisco Bay Area, just 1.8 percent of the total venture capital invested since 2015 has gone to Black- or Latino-founded companies.

There are no easy or quick fixes for an issue as intractable as systemic inequality, but one area in the report stuck out to me as something the venture industry can start to improve upon immediately: Seed-stage funding.

As noted in our report, minority entrepreneurs often struggle to make it past the seed stage. At this nascent phase, with little more than a promising idea to go on, founders and their ideas are typically assessed on squishy, subjective criteria rather than provable business metrics. Underrepresented founders who don't fit the typical mold of what a startup founder looks like— young, white, brash, male—often have the door shut in their faces before they've even had a chance to make a go of a viable idea.

How do we start to effect meaningful change?

Ditch the 'warm intro'

Many VCs will only talk to a founder who's been introduced by someone they both know.

One recent study found that founders who get in front of a VC via a "warm introduction" from a…
Marlize van Romburgh
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