As reported by BI, BBG Ventures has successfully raised a new fund totaling $60 million aimed at supporting founders from diverse backgrounds. This move marks a strategic shift for the venture capital firm, which was established in 2014 with a focus on exclusively backing women entrepreneurs. With funding for diverse founders experiencing a significant decline, BBG Ventures is expanding its mandate to include a broader spectrum of underrepresented entrepreneurs.

Shifting Focus Amid Declining Funding

The venture capital landscape has seen a troubling trend, particularly for founders from minority backgrounds. According to Crunchbase, Black-founded startups in the United States received only 0.3% of the total venture capital raised in the first half of 2024, amounting to just $228 million out of nearly $79 billion. This represents a dramatic 60% decrease compared to the same period in the previous year. In response to this alarming decline, BBG Ventures co-founders Nisha Dua and Susan Lyne decided to broaden their investment focus while continuing to emphasize support for women founders.

"This is not about abandoning women, but expanding our mandate to back a diverse founding team," said Lyne in a recent interview with Business Insider. The new fund will target a wider range of sectors, including healthcare, fintech, and artificial intelligence (AI), all areas ripe for innovation.

New Investors and Support

The new fund has attracted returning limited partners (LPs) who have increased their commitments. New investors also include notable names such as Melinda French Gates’ Pivotal Ventures, Fairview Capital, and Mizuho. These partnerships signify a growing commitment to funding diverse founders who have been historically underrepresented in venture capital circles. Previous investors like Nordstrom, Verizon, and Bank of America have also joined in backing the $60 million fund.

BBG Ventures initially launched with a $10 million fund focusing solely on female founders, backing companies like Spring Health and KiwiCo. After Verizon's acquisition of AOL in 2019, BBG Ventures re-established itself and raised a new $50 million fund, which included capital from institutional investors for the first time. This evolution showcases the firm’s commitment to adapting its approach while remaining dedicated to empowering underrepresented entrepreneurs.

Commitment to Diversity

Dua explained that the decision to broaden their focus reflects a shift in their thesis surrounding innovation. “There are underrepresented groups around not just gender but also race, age, and income,” she noted. The new fund will continue to prioritize female founders while also welcoming strong entrepreneurs from diverse backgrounds, with a keen interest in those creating impactful solutions in healthcare and technology.

Although the firm is excited about the potential of AI, Dua emphasized that BBG Ventures will not become solely focused on this sector. “Some funds are building a portfolio of just AI companies. That’s not us,” she remarked. Instead, the firm aims to apply AI strategically to enhance growth across various startups, with recent investments already including an AI recruiting platform for hourly workers named UpWage.

Challenges in Fundraising

Both Lyne and Dua acknowledge the challenges of raising funds in the current venture capital environment. A significant portion of VC funding in 2024 has been concentrated among a small number of large funds, making it increasingly difficult for smaller, emerging funds to attract capital. Many of BBG Ventures' LPs believe in the importance of impact investing, seeking to broaden access to capital for underrepresented founders.

"Many of our LPs believe in impact and trying to broaden access to capital," Lyne shared. The firm’s success in raising a larger fund than its previous round serves as a validation of their investment thesis and commitment to supporting diverse founders.

BBG Ventures' new $60 million fund represents a crucial step toward fostering inclusivity in the venture capital landscape. By expanding its focus to support a wider range of entrepreneurs from diverse backgrounds while maintaining a strong emphasis on women founders, BBG Ventures aims to address the alarming trends in funding disparities. As the firm moves forward, it remains committed to empowering innovative solutions in healthcare, fintech, and AI, thus driving significant change in the venture capital ecosystem.