Venture Capital Diversity Declines in 2020

Greetings and welcome back to The TechCrunch Exchange, a weekly newsletter focused on startups and market activity. It’s largely derived from the daily column featured on Extra Crunch, but is available to all readers, designed for your weekend perusal. You can sign up for it here.

First, sincere congratulations on reaching the end of the week. For those in the United States, the past seven days have been exceptionally eventful. A constant stream of significant news and widespread concern have characterized the period since the president’s announcement of a positive COVID-19 test. It’s understandable to feel exhausted. Simply navigating this period deserves recognition.

Second, my intention was to share some encouraging information with you this weekend, as you’ve earned it. Unfortunately, that won’t be the focus of our discussion.

On Friday, The Exchange examined recent findings regarding the venture capital funding secured by female founders during the third quarter. The data originated from the U.S., but it’s reasonable to assume it reflects broader international patterns. Regardless of this consideration, the data presented a concerning picture.

During the third quarter, female founders and co-founders based in the U.S. completed 136 funding rounds, totaling $434 million, according to PitchBook’s data. While this represented a slight increase in the number of rounds compared to Q2 2020, the total dollar amount was considerably lower. Furthermore, it marked a decline compared to Q3 2019. Notably, the overall venture capital landscape experienced strong performance.

Here’s supporting data from PwC and additional insights from my previous employer, Crunchbase. The key takeaway is that female founders are experiencing comparatively poorer outcomes even as venture capital activity is at a high level. This trend will likely reinforce existing disparities and inequalities within the startup ecosystem.

On a related note, here’s some further discouraging news. Vern Howard Jr., co-founder and CEO of Hallo, a startup that has secured approximately $2 million in funding, as reported by Crunchbase, gathered data on the venture capital performance of Black founders in Q3. His objective was to determine:

The number of funded Black founders was 31.

Expanding the range of funding amounts to encompass both smaller and larger investments wouldn’t significantly alter the outcome. However, the resulting figure – a mere 2.2% of the total – is deeply troubling.

Market Notes

Details surrounding the OpenDoor-SPAC agreement became more defined this week with the release of some financial information. While certain figures are preliminary, other aspects are encouraging, allowing for a clearer understanding of the rationale behind optimistic projections for the company’s future.
Affirm has confidentially submitted its initial public offering paperwork, and Root has publicly filed to go public. Further details regarding Affirm’s plans can be found here, and an analysis of Root’s S-1 filing is available here.
It’s important to note YCharts’ recent acquisition by a private equity firm. The company reported to TechCrunch that it anticipates exceeding $15 million in annual recurring revenue this year, suggesting a substantial sale price.
Greycroft successfully secured a significant amount of new funding, totaling $678 million, divided between a $310 million fund for early-stage investments and a $368 million fund focused on growth-stage companies.
The relevance of Greycroft’s fundraising lies in the fact that venture capital firms continue to successfully raise capital despite the current economic climate. This mirrors the challenges founders face in securing funding during the COVID-19 pandemic, a situation VCs themselves navigate.
TechCrunch provided an in-depth report on the burgeoning API startup sector, gathering insights from both venture capitalists and founders to explain its rapid growth in 2020.
Despite a difficult summer, Airbnb’s recovery is potentially remarkable. The Exchange investigated the strategies that enabled the company to rebound so swiftly.
Finally, highlighting noteworthy funding rounds from Market Notes: Zira.ai secured $3.1 million, Grid AI raised $18.6 million to empower machine learning developers, Instacart obtained an additional $200 million at a valuation approaching $18 billion, mmhmm raised $21 million in a particularly memorable round, Unqork secured $207 million – prompting an examination of its implications for the no-code market – and GoPuff raised a further $380 million, resulting in a valuation of $3.9 billion for the delivery service.

Various and Sundry

As we continue to follow the growth in savings and investment driven by fintech companies globally, Freetrade, a UK-based platform comparable to Robinhood, reported exceeding £1 billion in order volume during September. This represents a significant achievement!
Freetrade has also recently introduced a premium, subscription-based service option. This move addresses the fact that the payment-for-order-flow revenue model utilized by Robinhood is prohibited in the UK market.
Remaining within the fintech sector, Yotta Savings is an innovative startup offering users a savings account with the potential to win substantial cash prizes. I’ve been receiving inquiries about this company, but I delayed coverage until it was clearer whether their approach was simply a novelty or a genuine customer draw.
Yotta has experienced rapid expansion, growing from 8,000 accounts to over 30,000 in recent weeks and accumulating $100 million in deposits. This development warrants our attention.
Coinbase experienced a reduction of one in twenty employees as a result of its new strategy to maintain neutrality on political issues deemed unrelated to its primary business objectives by its CEO. As a for-profit entity with substantial financial resources, the company’s core objective is profit generation.
In relation to this, Can from The Margins astutely observed that “remaining apolitical is itself a political position.” This is accurate, and represents a decidedly conservative stance.
Furthermore, Coinbase’s CEO articulated a commitment to “fostering an inclusive environment where all individuals can thrive, irrespective of their background, sexual orientation, race, gender, or age.” Regardless of intent, this constitutes a political position, and is not directly tied to the company’s defined core mission. This position arose from a debate concerning equal opportunities in the workplace.
I would like to share a relevant article on this topic published by TechCrunch from a venture capitalist’s perspective, and these reflections from a technology professional on how a company can consistently align itself with the less favorable side of historical events.
Concluding this week’s collection of news, Ping Identity has acquired ShoCard. While Ping Identity is now a publicly traded company, and therefore typically outside the scope of our coverage, we are following this story because TechCrunch previously reported on ShoCard (2015: “ShoCard Is A Digital Identity Card On The Blockchain”), and because the startup specializes in cryptocurrency-related technologies.
It is not common to see a public company intentionally and openly acquire a blockchain startup with a significant financial investment. Further details about the transaction can be found here.

I thoroughly enjoy creating this newsletter and appreciate you taking the time to read it. It is, however, an evolving project. Please feel free to reply with your suggestions for future content, or simply share a charming photo of your pet – either option is welcome.

Chat soon,

Alex