Latinx founders see drop in VC funding as investors withdraw from underrepresented groups

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The latest Crunchbase data shows that Latinx-founded companies in the United States raised $250 million out of $39.85 billion allocated in venture funds in the US this third quarter – or about 0.63%. Q3 totals are a sharp decrease from $2.3 billion. The cohort grew in the third quarter last year and has seen a dramatic decline from the $1.3 billion increase in the second quarter of this year.

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Overall, 1.5% of all enterprise dollars so far in 2022 have been allocated to Latinx-founded companies, down from 2.5% last year, according to Crunchbase analysis.

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The numbers are not surprising. Overall, this year has seen a dramatic drop in venture funding to minorities and women. TechCrunch previously reported that Black Founders raised $187 million this Q3, which means that given historical data trends, the amount allocated to Latinx-founded companies won’t be far from that amount.

Meanwhile, Pitchbook found that women-founded companies have raised 1.9% of all venture funds so far this year, a decline once again from the 2.4% raised by the group last year. TechCrunch previously noted that investors pull back to their old network to fund their familiar founders amid an economic downturn — and those people tend to be white people.

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The somewhat encouraging news is that funding for early-stage Latinx-founded companies is on pace to exceed the 2021 total; The decline we are seeing in the above numbers has come from a reduction in late-stage funding. The reality is that women and minorities are not doing well when it comes to creating VCs, and promises of change have been lost. Last year, US companies founded by Latinx raised $8.5 billion. As of the end of the third quarter of 2022, that number stands at $2.7 billion, which means it won’t even come close to surpassing last year’s record-breaking amount.



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