After a booming five quarters in a row of funding growth, Black entrepreneurs and founders are now seeing a significant slowdown in funding. Why is this, and what can be done to bring fund raising levels back over $1 billion? Bahiyah Robinson, CEO of VC Include, joins Closing Bell to discuss why Black founders are seeing a slump, how to open the capital pipeline, and when entrepreneurs can expect investors to return again. 

Closing Bell

Black-Founded U.S. Companies See Funding Slowdown This Quarter

Welcome back to closing bell onto the news everyone. Well after five consecutive quarters of funding growth, black founded companies are starting to see a slowdown and new crunch based data showing that so far this quarter, the total amount of money invested in companies with black founders has fallen from 1.2 billion To just $324 million. That spread among just 35 business deals. So what's happening and what sort of risk does this present for black entrepreneurs joining me now is bahia Robinson ceo of VC include a nonprofit that focuses on equitable access to capital and investment opportunities. But he thanks so much for coming on the show. Why do you think that raises? We're so happy to have you offer? Black owned businesses have declined this quarter. Well, the decline has been across the board. I think Adventure Capital obviously, um, LPS and asset owners have started to pull back because of the market right? The market is, um, you know, is very volatile right now and we're, and the market is trying to correct itself. We're also thinking about, you know, is there going to be a recession? And so there's a lot of, um, of a wait and see approach of the last quarter or so, um, which I think will start to, you know, increase. I think markets will start to open up a bit and some of that capital will flow hopefully as much as, or more than the last five quarters, but I do see that this is just a challenging and choppy market Reality right now and hopefully we'll, we'll continue to open up. Yeah, I think that's a good point. I mean, obviously we're seeing risk assets across the board tumble by some extent more than 30% on the NASDAQ. And even for some of these individual high growth technology companies that sometimes act like startups, I mean some of their evaluations are down 70%. So it is a bit dramatic. But any concerns to hear that this might stifle innovation that what is happening now and the lack of funding going to black founded startups could create some sort of domino effect down the road. I mean, let's face it, innovation quickly in black communities and with black startups has been stifled pre 2020. And obviously what we saw is that when George Floyd and the pandemic happened, there was kind of a aha moment right of asset owners that are saying, look, we need to diversify our portfolios from a gender and ethnic perspective, but we also need to really capture alpha so that the next 5-10, years that you know, will be able to um, you know, make sure that our portfolios are resilient. And so I think, you know, the market opportunity as well as the kind of pause in the market to say, what are we missing here, allow these last five quarters to start to, I never like to say an avalanche, it's really a trickle right? But to continue to kind of open up that pipe to let a little bit more capital flow. And so as much as there's a bit of a, of a pause, I do see, particularly in particular sectors like family offices and, and foundations, that there's a continuing push to diversify portfolios to look at untapped opportunities and untapped markets. And a lot of that comes from, you know, black founders. And so it's exciting to see and have those conversations behind closed doors that they're still committing to capital across startups directly. And also for fund managers, which is what BC include and include franchise really does is make sure that there's a resilience along the capital stack like that. Um, okay. But yeah, I want to share some numbers with you, I'm sure obviously, you know, these for our viewers. I do see that last year funding for black founders peaking at $4.3 billion invested. But companies, those companies, black founders still receiving just 1.3% of all adventure and growth equity. So it remains, I think even historically as it has been a very, very, very small overall percentage. How do we change that a couple of ways? I mean, one of the big things that we advocate is investing more in asset managers, right, that are, that are brown or that are black and brown that are black black led funds. Right. So whether it's venture capital, private equity, making sure again, creating that resilient capital stack and being able to identify these new market opportunities that drive alpha, you know across new um new customer segments. Right? And so because Black founders have not been able to optimize innovation and really drive innovation, particularly in the 12 or 13% of the black community through technology. This is a major huge opportunity for for founders to really connect with black asset managers that understand those new market opportunities. And that's one of the things that were very committed to and include. So I do want you to talk to me more about what you're doing as the ceo of EC include. Obviously you're trying to make this a more equitable future. What are some of the current projects in the pipeline that you're working on? Sure a few things. One is, you know, climate resiliency and climate justice. We have a climate justice initiative that we just rolled out to provide working capital for bipac led climate funds, mostly black and female lead funds. We provided a million dollars across 10 funds to really build out their E. S. G. Impact and climate um measurements and metrics because metrics is a big question around what does impact mean? What does E. S. G. Mean? Are we really greenwashing and to really dig into that? Um the other thing that we've done in the last year is we've supported 10 black mostly black, also found fund managers who are raising between 25 $55 million. You can see a lot of those stories on B. C. Include dot com and really supporting them in their journey to build resilient sustainable asset management firms at scale. So these are some of the things that we look to do. In fact, we have an asset management firm ourselves that's looking across sustainability in E. S. G. To invest in funds as well as founders that fit that model that happened to be um, you know, people of color black and brown and women led companies and funds. Alright, but here you got your hands full. Thank you so much for joining us on this june team. But he is the ceo of VC include.