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Writer's pictureIbe Imo

Venture Funding for Black And Diverse Founders Is the Paradox Of Equilibrium


Courtesy—Collection of the Supreme Court of the United States

Expanding opportunities to achieve higher success rates in acquisitions, IPOs, and ROI.


One year later, the U.S. Supreme Court's decision to end affirmative action reverberates across institutions and corporations. Black investors make up only four percent of venture capitalists, and Black-founded startups receive less than one percent of $136 billion U.S. venture funding. The venture industry and American stakeholders must explore technology tools to help embrace diversity, identify more opportunities, and generate higher returns on investment.


McKinsey & Company stated that achieving parity in investments in Black and Hispanic ventures could generate an additional $3.9 trillion if investment and equity correlated to their market share of the U.S. population. If the U.S. venture industry aims to identify investment opportunities that solve human problems, the conversation must evolve beyond paradigms of nuanced socioeconomics or a utopian equilibrium.


“I want to provide things that people need and things that I can use that are very authentic to me," said Serena Williams, Serena Ventures Managing Partner, who recently invested in the multi-billion-dollar topical pain relief market and has also invested in fourteen companies with $1 billion of cumulative valuation. Capway, an inclusive financial technology startup led by Sheena Allen, attracted investments from top VC firms, including Y Combinator, Fearless Funds, and Lombard Street Ventures. This is a prime example of the case for inclusivity, which expands deal opportunities and helps solve America's biggest problems.

Courtesy—Marla Aufmuth/WireImage

Esusu, a Black-founded and inclusive financial technology startup, surpassed a $1 billion valuation in its January 2022 Series B. "We founded Esusu with the vision of using data to bridge the racial wealth gap and create more equitable financial opportunities for low-to-moderate income households in this country,” said co-founder Wemimo Abbey. Abbey and his co-founder Samir Goel grew topline 600% year-over-year in 2021, and planned to triple headcount post-fundraise. 


The case for inclusivity in the U.S. venture industry is not an appeal for unmerited advantages over White or Asian founders and investors. Rather, the case for inclusivity is an all-in approach that achieves higher success rates in acquisitions and IPOs, and higher returns on investment.


During Q2'24, Artificial Intelligence (Al) remained the most attractive area of VC funding, with U.S.-based companies like CoreWeave, a cloud AI startup, raising $1.1 billion of equity and $7.5 billion of debt, targeting an IPO in 2025. Algorithms are becoming viable solutions for investors to demystify market trends, assess market fit for products developed by diverse founders, and amplify viable investment opportunities.


Amidst fears of recession and prolonged high interest rates, overall VC funding declined by 37% in 2023, and financing for Black-owned ventures dropped by a whopping 71%. Black-owned ventures were hurt more during the downturn in the venture industry, but “AI has the potential to enhance access to capital for Black and diverse founders,” said Abolaji Adesoji, IBM Data and AI Platform Senior Product Manager. 


AI algorithms that can help expand venture funding and increase return on investments include Deep Neural Networks (DNN), Bayesian networks, and Automated Machine Learning (AutoML). While these tools can offer tactical support to  VC firms, AI risks  reinforcing existing biases that prevent investors from identifying more unicorns like Tope Awotona’s Calendly and Wemimo Abbey and Samir Goel’s Esusu. The percentage of Black-founded startups receiving venture funding reflects demographic and racial disparities in the U.S. It’s our responsibility to ensure that AI solutions prioritize equity, transparency, and accountability and mitigate the risks of reinforcing biases in venture funding. 


On August 1st, 2024, the European parliament enforced the EU AI Act to regulate AI systems across the EU’s private and public sectors. Broadly, by categorizing risks posed by generative AI in order of severity of adverse impact, the U.S. Venture Industry can apply the AI Risk management framework, conceptualized by the EU AI legislature, to build algorithmic features and functionality that expand venture investment and funding opportunities.



The Supreme Court and Congress have a responsibility to interpret the Equal Protection Clause of the Fourteenth Amendment and tackle the idea of a merit-based utopia, which ignores 248 years of American history – over a third marked by the Reconstruction era, Jim Crow, and the recent and fragile triumphs of the Civil Rights Movement. Since the United States was never founded on equilibrium, the myth of a merit-based utopia ignores the foundational baselines of legacy systems and personal equities. The responsibility falls on all Americans, the Venture Industry, Big Tech, the Supreme Court, and Congress to clarify and mitigate biases that prevent diverse investors from having equal opportunity and capital to solve human problems and uphold a self-evident American truth “that all men are created equal, that their Creator endows them with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”

Ibe Imo (Journalism ’25) is a Harvard Master of Journalism candidate, storyteller, and technology professional. He is a fitness enthusiast and enjoys outdoor activities, including hiking and trail cycling.

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