Fighting funding disparity with Amazon Catalytic Capital

In October 2022, Amazon launched its Catalytic Capital initiative, investing $150 million in funds to underrepresented entrepreneurs. Now, AWS is further accelerating the conversation through strategic partnerships and data-driven reporting with the publication of the State of Black Venture Report, launched Tuesday at the 2023 State of Black Venture event hosted by BLCK VC at the AWS Startup Loft in San Francisco, California.

When new founders have access to venture funding and mentorship, they go on to build solutions that transform our society, create jobs that strengthen our communities, and inspire the next generation of founders to begin their journey toward entrepreneurship and innovation. Unfortunately, not all entrepreneurs and startups are funded equally.

While the funding disparity is well-documented, not many people understand the full scope of the issue. For instance, of all available venture funding, underrepresented founders receive just 1.87%. Black, Latino, women, Indigenous, and LGBTQIA+ entrepreneurs miss out on more than 98% of the financial backing that could take their startups to the next level.

What’s more: funders of marginalized identities are underrepresented in the venture capital industry. According to State of Black Venture Report, a 2022 report published by BLCK VC, Black partners in 2020 comprised just 3% of all partners across the industry. The same report tells us that Black funders are up to four times as likely to fund Black startups than non-Black funders.

Let’s be clear: Black entrepreneurs are underrepresented and underfunded because the people most likely to invest—Black funders—are underrepresented and underfunded. The result is a lack of the kind of resources that allow startups to grow and scale. It also creates a vacuum in the mentorship that propels both entrepreneurs and junior investors toward success in their earliest stages.

The same is true for and women founders and funders. While Latino investment professionals grew in 2022 according to LatinxVC, they still only represent 2% of the overall venture funding industry. And only 35% of those professionals identify as women. Minority- and women-led firms manage just 1.4% of the $8 trillion venture capital and private equity industries.

The data is clear: Diversity in entrepreneurship relies on diversity among investors.

AWS has taken a collaborative and multifaceted approach to the issue. Initiatives like the Amazon Catalytic Capital initiative and the AWS Impact Accelerator deploy capital directly to underrepresented founders. Not only that, but AWS is funding organizations and research that bring the venture capital disparity into clearer focus and help founders and funders connect.

The role of AWS is to foster an ecosystem that facilitates a network that brings underrepresented founders, funders, and the organizations into closer contact so that they can support one another. AWS has teamed up with organizations like Diversity VC, LatinxVC, StartOut, and BLCK VC, whose missions are not only to support underrepresented founders and funders, but to produce data-driven reports that lend credence to the conversation.

This month, BLCK VC hosts its second annual State of Black Venture event on February 22nd at the AWS Startups Loft in San Francisco. The organization convenes a panel of Black leaders to share their triumphs and challenges on the road to becoming funders. BLCK VC’s accompanying report, State of Black Venture, gathers data through surveys, interviews, and extensive industry research to elucidate the sobering issue of the funding disparity.

The report also offers some encouraging news:

The number of Black partners is growing. Through their research, BLCK VC discovered that 83% of Black investors have either launched their own fund or have joined new firms where they have greater influence. Nearly a third (27%) of these funds launched in the last two years, signaling a strong upward trend. What’s more, more than half of all Black funders are reported to be actively mentoring Black junior mentors, either within their network or at their firm.

Digitalundivided finds that, despite the reality of the venture funding gap, underrepresented founders continue to persevere. Their 2022 Industry Insights Report reveals a positive trend in leadership among Black and Latina women founders, especially in healthcare, financial services, and education. Not only are Black and Latina women more likely than ever to found startups in these industries, but they are more likely to secure funding.

There’s more work to be done, and shedding light on the funding gap through impactful, in-depth research is a vital part of the process. The better we understand our challenge, the better we can work towards a solution. Publications such as the 2022 State of Black Venture Report acts as a guiding light as we work with our partners to build pathways to success for underrepresented founders.

Learn more about Amazon’s Catalytic Capital initiative and the AWS Impact Accelerator.

You may also want to join the upcoming AWS Impact Accelerator: Latino Founders. Applications are open from March 6 – March 17, 2023.