A new report from the UCLA Luskin School of Public Affairs tracks investments made by LA-based venture firms connected to the Annenberg Foundation’s PledgeLA initiative. Researchers found slight increases in funding to women and Black founders when compared with the previous year. However, there are still many gaps remaining when it comes to check size and venture capital firms’ comparative assets under management.
Venture capital gaps
From an analysis of 2022 investments made by 75 LA-based venture firms in 884 tech startups led by 1,663 founders and co-founders, the following insights emerged:
- In 2022, 30 percent of companies receiving investment were led by women, Black and/or Latinx founders.
- However, these founders only received 4.6 percent ($6.4 billion) of the $139 billion invested in 2022.
- VC firms led by underrepresented minorities and those with a diversity thesis were almost twice as likely to back Latinx and women founders. They were four times more likely to invest in Black founders.
- Traditional VCs had an average of $335M of assets under management (AUM). Their assets far exceeding VC firms led by underrepresented minorities ($53M), VC firms with a diversity thesis ($33M) or VC firms led by women ($17M).
LA venture capital ecosystem
“To meet the complex challenges of the 21st century, we must ensure access to capital isn’t a barrier to innovation,” said Noramay Cadena, PledgeLA Venture Leader and Managing Partner of Supply Change Capital, who just closed a $40M debut fund. “It’s time to shift the paradigm around backing companies (and funds) led by women and people of color. Backing them is not a charitable activity. Backing them is filling long-standing innovation gaps and creating new opportunities that are great for business.”
To help focus the LA venture ecosystem on closing these gaps, PledgeLA announced a new regional goal called “50 in 5” during LA #TechWeek in June. They seek to drive 50 percent of all venture investments to companies led by women, Black and Latinx founders by 2028. This is up from the current level of 30 percent. This will require nearly doubling the current number of such companies receiving funding. But Los Angeles has long been a national leader in portfolio diversity. The peak year, 2020, showed 39 percent of all venture investments going to these founder segments.
“We’ve seen study after study highlight how women founders and founders of color are more efficient and impactful in returning more of that capital to investors,” said Annenberg Foundation Executive Director Cinny Kennard. “In an industry so driven by data, we look forward to seeing the future findings align with investment practices.”
2023 report
The 2023 report, completed by a research team led by Dr. Jasmine Hill at the UCLA Luskin School of Public Affairs, is the fourth in a series of reports on access to capital within PledgeLA venture firms. It remains the largest, most robust analysis of portfolio diversity in the Los Angeles tech ecosystem. Read the report here.
Beyond reports and regional goals, PledgeLA is deploying a new set of programs that focus squarely on access to capital. These include a new event series designed to connect LPs with underrepresented fund managers. There are plans for a new regional equity-based fund-of-funds and an updated version of the initiative’s successful VC Internship Program. This will help increase awareness of venture capital and startup investing at LA-area universities. The PledgeLA team has also collaborated with leaders in other tech hubs. The team is currently working to support the launch of a New York City-based effort this fall.
PledgeLA is a coalition of more than 215 LA venture capital firms and tech companies. They work to increase equity, community engagement and accountability among LA companies.
Curious about more ways to level the playing field? Read about the ongoing fight for gender and race equity in venture capital here.
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