The amount of venture capital going into Latinx-founded startups surged last year, but such companies still get a disproportionately small percentage of total venture dollars, according to a new report.
Latinx-founded companies across the US raised $6.8 billion last year, according to the Jan. 26 report from Crunchbase. That amount was up 143% from the $2.8 billion such companies raised in 2020.
Perhaps more significantly, given that venture funding of all startups reached record levels last year, the share of venture dollars that flowed into Latinx-founded companies increased as well, hitting 2.1% last year from 1.7% in 2020.
The four biggest funding totals raised by Latinx-founded startups across the U.S. last year were raised by San Francisco companies. They included Brex Inc., which raised $725 million in a series D; Hinge Health Inc., which raised a $700 million total in two rounds; Faire Wholesale Inc., which raised $660 million via two rounds; and BetterUp Inc., which raised $425 million through two rounds.
Venture firms also poured money into startups based in Latin America. Such companies raised $20 billion in venture funding in 2021, up 320% from the prior year, according to Crunchbase.
Still, the news wasn't all good.
Nearly 78% of the money raised by Latinx-founded startups in the U.S. went to later-stage companies, according to Crunchbase's report. While later-stage funding of Latinx startups has swelled in recent years, the amount of money going to early-stage companies has grown much more modestly.
Latinx-founded startups raised $205 million in angel, pre-seed and seed funding in 2021, up just $20 million, or 11%, from the amount of such funding they raised in 2018, according to Crunchbase. Those startups raised $1.3 billion in other early-stage rounds last year, up about 63% from the tally in 2018.
Meanwhile, even with the big increase in funding overall, the proportion of total venture investment that went to Latinx startups was still well below the proportion of Latinx people in the U.S. population. Some 18.5 of Americans are Hispanic or Latino, according to the U.S. Census Bureau.
Latinx entrepreneurs face other financing challenges. In California, national banks are 91% less likely to approve a loan for a Latinx business owner than for a white one, according to data from Stanford University's Latino Entrepreneurship Initiative.
