Report: Minority VC Funding Lags

Report: Minority VC Funding Lags
Investor: Marlon Nichols, a PledgeLA founding member.

The Los Angeles venture capital ecosystem leads the country for the amount of capital funded to entrepreneurs from diverse backgrounds, but a new report analyzing the region’s venture capital data hints Silicon Beach’s progress is stagnating.

On Aug. 14 the UCLA Luskin School of Public Affairs, in partnership with the Annenberg Foundation’s coalition of Los Angeles-based tech and venture capital firms, PledgeLA, published a report tracking investments to diverse founders throughout last year. 

While almost a third of investments went to companies led by women, Black or Latino founders, these entrepreneurs received only $4.6%, or $6.4 billion, of the $139 billion invested by venture capital members of PledgeLA. 

These figures come two months after the coalition announced its ambitious “50 in 5” initiative at LA Tech Week. The initiative aims to get half of all venture investments to unrepresented founders in the region by 2028. For Marlon Nichols, a leader in the Los Angeles venture capital space and founding member of PledgeLA, the current numbers are discouraging.

“There hasn’t been a whole lot of progress,” said Marlon, who founded Hollywood-based firm MaC Venture Capital Management LLC. “L.A. does a better job than most cities, programs like PledgeLA help with that. But if we’re being honest, it’s still way below where any of us would want it to be.”

The Annenberg/Luskin report tracked the makeup of venture capital leadership as well, noting venture capital firms led by underrepresented minorities in the industry were twice as likely to invest in Latino and female founders and four times more likely to invest in Black founders over “traditional” firms. 

But these firms have significantly less capital runway to drive racial and gender equity in startup funding. Traditional firms had an average $335.2 million in assets under management, while firms led by people of color or women, or whose investing theses focus on diversity or representation of minorities, had a combined third of that market value.

“If we really want to see a significant shift, we’ve got to see more dollars going towards diverse fund managers,” Nichols said.

The PledgeLA report is considered to be the most comprehensive, publicly available analysis of equity in venture capital for the Los Angeles market. The group has released the annual report since 2019 with the goal of adding accountability to a financial sector seeing more players enter the Los Angeles scene. 

Researchers compiled data from the finance industry aggregator Pitchbook Data Inc. on the more than 80 venture capital firms that signed onto PledgeLA. Last year, 75 members made investments, and 884 companies received funds.

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