Racial Disparities Persist in Web3 Funding, CCI Report Finds

Research by the Crypto Council for Innovation highlights ongoing racial disparities in funding within the web3 sector, which aims to democratize the economy. Despite intentions for inclusivity, Black and Latino founders still receive a small fraction of total investment, according to data from the Crypto Council for Innovation (CCI).

The report indicates a significant drop in overall venture capital (VC) investments by 36% in 2022 due to rising inflation and interest rates. However, investments in Black-led businesses saw an even steeper decline of 45%. Although Black- and Latino-led crypto businesses raised more in 2022 ($16.5 billion) compared to 2017 ($1 billion), this amount represented only 0.5% of the total volume in the web3 industry in 2022, compared to 7.1% in 2017.

“In market downturns, investor perceptions of Black and Latino founders as inherently risky magnify existing disparities in capital allocation.”

CCI notes that the decline is the largest year-over-year decrease in funding for Black entrepreneurs seen in the past decade. This suggests that web3 still has much progress to make in becoming equitable for all.

The research also points out that Black- and Latino-founded companies consistently demonstrate value, even during market downturns. Despite this, these groups are often the first to lose funding when financial streams diminish.

“I haven’t met too many women or Latinos in the U.S. who are building web3 projects. I think when it comes to access to capital for Latinos in the U.S., it’s just harder… I think there also is that lack of understanding of the different types of capital that are available [to founders].”

According to CCI’s calculations, fintech and data storage — key web3 areas where Black and Latino developers are active — are expected to grow by 44.4% and 45.1% respectively within the next decade. This group of developers addresses real market needs that have historically been overlooked by investors and other builders.

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