New Report Shows Lower Investment in Women and Founders of Color at LA Venture Companies
Data shows just eight LA VC companies account for nearly half of all capital invested in Teams led by the founders of Black and Latinx
LOS ANGELES, November 1, 2022 /PRNewswire/ — New data released today from AnnenbergTech’s PledgeLA initiative shows that Los Angeles-based venture capital firms made fewer investments in 2021 in female and founder-led companies of color from the previous year, with the largest drop in investments impacting women and women of color. From an analysis of more than 6,300 investment deals made last year in more than 4,400 companies by 67 Los Angeles-based venture capital firms, the following insights emerged:
- Funding for female founders decreased by 19% investments in 2020 only 15% in 2021. Among these, only 9.5% of companies receive funds had all-female founding teams.
- Funding for Black founders down 12% of all investments in 2020 only 5% in 2021.
Conversely, data from the report shows that venture capitalists increased funding for white male founders:
- Venture capital funding for White male founders went from 46% investments in 2020 to 53% in 2021.
The report also examines three-year trends in founder investments, finding that women and most founders of color saw a decline in their share of overall investments, despite minor increases for some groups in 2020:
- 3-year comparison (percentages in order of 2019, 2020, 2021):
- Black founders: 7%, 12%, 5%
- Women founders: 18%, 19%, 15%
- Asian founders: 26%, 25%, 24%
- White founders: 61%, 56%, 62%
- Latinx Founders: 6%, 8%, 9%
Data showed that PledgeLA venture capital firms with a diversity thesis – which is a commitment to focus their investments in companies led by traditionally underrepresented founders – were 1.75 times more likely to fund women. and 10 times more likely to fund black founders. These funds receive 25% of their assets from foundations, unlike traditional venture capital firms, which only receive 6% of their assets from foundations.
Among venture capitalists with a diversity thesis, only eight of them have contributed 54% of all capital invested in teams led by the founders of Black and Latinx in 2021around $1.5 billion.
“Despite evidence that female founders bring in twice as much capital and generate more revenue than their male counterpartsthis report shows that women – as well as female founders of color – are far too often excluded from the innovation economy when it comes to funding,” said the Annenberg Foundation CEO. Cinny Kennard. “In fact, PledgeLA was created to help fill this gap and to date the initiative has awarded more than $875,000 to 35 Black and Latinx-led startups and helped them raise more than $10 million in follow-on capital. The latest data on women and women of color proves we can’t stop now – more companies need to work to provide greater access for all founders.”
This is the third annual diversity and equity assessment at PledgeLA tech and VC member companies. Using public investment data Pitch book, algorithmic imputation, and manual review by a research team, PledgeLA coded and analyzed more than 6,300 investments made in 2021. For each transaction, representing more than 4,400 companies, PledgeLA coded the race, gender, and location of the founding team and the company. It is the most accurate multi-year study on the diversity of the venture capital investment portfolio in the Los Angeles Technology ecosystem.
Beyond venture capital data, PledgeLA has taken additional steps to increase equity in LA’s tech ecosystem, such as placing more than 60 interns from underrepresented backgrounds in paid roles at companies. local venture capitalists since 2019. The program not only provides an access point to the venture capital ecosystem, but gives participants a context on which founding segments have – and do not have – access to capital. . Alumni of this program now hold full-time positions at venture capital firms such as Dorm Room Fund, Slauson & Co., Upfront Ventures and VamosVentures. As emerging venture capital leaders, these alumni can play an important role in influencing investment decisions in years to come.
PledgeLA is a coalition of more than 200 Los Angeles venture capitalists and technology companies working to increase equity, community engagement, and corporate accountability in Los Angeles.