By CultureBanx Team 

Bias in AI tools is worsening the funding gap for diverse entrepreneurs

Black founders received $228M less than 1% of VC funding in the United States

Despite years of public commitments to racial equity, the venture capital world still has a representation problem. In the first half of 2024, Black-founded U.S. startups received $228 million in funding, or about .3% of the nearly $79 billion that went to U.S. based startups, according to Crunchbase. While the startup economy boasts endless talk of disruption and innovation, it remains deeply traditional in one way: who gets to build, scale, and profit. Bias in human decision-making isn;t the only thing holding Black entrepreneurs back anymore, now it’s coded into the algorithms.

Why This Matters: Access to capital shapes the business landscape. If certain entrepreneurs remain boxed out, the economy misses out on diverse ideas and real-world solutions rooted in underserved communities. From fintech to healthtech to green energy, inclusive founders are innovating but without capital, that innovation never scales.

AI-powered tools are increasingly used to evaluate pitches, assess market potential, and recommend funding opportunities, Entrepreneur reported. However, those systems are trained on historical data that reflects entrenched disparities. If mostly white male founders got funding before, the algorithm assumes that’s who will succeed again. This “tech solution” is reinforcing old gatekeeping with new code.

There has been a community-driven response with platforms like Stackwell, a fintech app designed for Black wealth-building, and Squire, a Black-owned barbershop management tool, are proving that homegrown innovation works. Crowdfunding, revenue-based financing, and cooperative models are helping founders build outside the VC system entirely.

We can’t forget the rise of Black-led accelerators, including programs by Google for Startups and Black Ambition, founded by Pharrell Williams, have been building new on-ramps. These initiatives provide not just funding but networks, mentorship, and visibility crucial ingredients for startup success.

Situational Awareness: These founders don’t need a handout, just fair access to capital, minus the coded gatekeeping. The tech world loves disruption, so it’s time to disrupt who gets funded and who gets left behind. True innovation requires new models, inclusive metrics, and investment strategies that reflect the full talent of our culture.

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