Most companies start on the savings of the founder and the people closest to them. Whether that first round happens depends on what a founder's friends and family can put in, not on how good the idea is.
A company that starts without it starts smaller and closes sooner, and some never start at all. Venture funds can't invest in companies that don't exist, so anything that begins at the venture round misses them.
We write that first check. We're a nonprofit because a fund that has to pay back investors rarely can at this stage, and every return we get goes out to the next founder.
What they run on instead is the founder's savings and the people who already trust them. In the Fed's 2025 survey, only about 2 to 3% of employer firms had taken any equity in the prior year. Among those few, friends or family were a source for well over half, nearly four times the share that took venture capital.
No survey regularly records how much changes hands. It's a private deal between people who know each other, so it never shows up in the data the way a bank loan does.
A home can't be wired to a startup, so we look at household net worth with home equity taken out, and call the distance the liquid wealth gap. In the 2024 Census tables, the most recent, the typical white household had $113,200 outside the home and the typical Black household had $10,180, a distance of $103,020.
So when a founder is told to raise the first round from friends and family, what that means depends on whose friends and family. For a lot of founders the whole network together couldn't write one check, and the idea never gets tested.
The figures on this page are by race because that's how wealth and funding are counted, and our criterion names the barrier itself: "At least one co-founder who has faced material barriers to accessing capital due to racial discrimination," open to founders of any race who've faced it.
It's less than a quarter of one typical white household's.
Census Bureau, Survey of Income and Program Participation, wealth and asset ownership tables, Table 1, 2024, published June 2026. Median household net worth excluding equity in own home, white alone non-Hispanic against Black alone.
Black Americans start businesses at one and a half times the rate of white Americans, and about 1.1 million started one in 2025, by Kauffman's count. Latino Americans start at a higher rate still.
The money is where it comes apart. In the Federal Reserve's latest survey, a quarter of all Black-owned employer firms had sought funding from their owners, family, grant makers or investors in the past year and not gotten it. For white-owned firms it was one in twelve.
Kauffman Indicators of Entrepreneurship, National Report on Early-Stage Entrepreneurship in the United States: 2025, published May 2026, rate of new entrepreneurs per month, and the Kauffman Foundation press release of May 19, 2026, for the count. Federal Reserve Banks, 2026 Firms in Focus chartbook on race and ethnicity of ownership (2025 survey), published April 2, 2026, employer firms.
Researchers followed nearly five thousand companies from their founding in 2004 through 2011. White-owned startups began with about $107,000 on average. Black-owned startups began with about $35,000. The line that matters most for us is outside equity, the money an investor from outside the founder's own circle puts in for a share of the company. White-owned startups averaged $18,543 of it. Black-owned startups averaged $536. Friends and family money shows up separately in the same study, and it's small for both groups. So for a founder whose friends and family can't write the check, outside equity is what's left, and it's what Black-owned startups almost never got.
The companies that started smaller stayed smaller through 2011. Our check is outside equity, and it's why we think $25,000 is the right order of magnitude for a first check.
Fairlie, Robb and Robinson, "Black and White: Access to Capital Among Minority-Owned Start-ups," Management Science 68(4), 2022. Survey-weighted means from the Kauffman Firm Survey, 4,928 firms founded in 2004 and tracked to 2011. These are means, not medians, and they're 2004 dollars. The study treats the outside-equity difference as only marginally significant (p = 0.10).
JPMorgan Chase Institute followed small businesses banking with Chase in three states and found that Black-owned firms with comparable revenue and cash on hand are predicted to survive at the same rate as white-owned firms. In that model, survival follows the money a firm has on hand, not the race of its owner. JPMorgan Chase Institute, "Small Business Owner Race, Liquidity, and Survival," 2020.
Black-founded startups now get well under one percent of US venture dollars, down from 1.5% in 2021. This is the number most people have seen. The founders who never got a first check aren't in it at all.
Crunchbase News, annual reports published February 2023, February 2024, February 2025 and May 2026. Share of US venture dollars to Black-founded startups, all stages: 1.5% in 2021, 1.1% in 2022, about 0.5% in 2023, 0.4% in 2024 and 0.32% in 2025. Crunchbase revises earlier years between reports, and notes its own coverage gaps are largest at the earliest stages.
Venture funds can't invest in companies that don't exist.
Efforts to fix the venture numbers usually start at the venture round. The founders who'd change those numbers never got the first $25,000, so there's no company for a fund to find.
Among Chicago companies founded from 2018 to 2023, founders of color raised 44% of the venture dollars, the second-highest share of any city studied. Black-founded companies received 2.4%, and even that was fifth-highest of any city in the report. Atlanta, at 42% to Black founders, shows how much higher Chicago could go.
The gap starts earlier, at the Friends & Family round, which is where we work. We're Chicago founders ourselves, and we want this to be the city where a founder whose friends and family can't write the first check still gets one.
Chicago:Blend with World Business Chicago, Startup Diversity Report 2018 to 2023, released January 2024. Share of venture dollars raised by new venture-backed Chicago companies, and Chicago's rank among the cities in the report.
In 2019 The Chicago Community Trust, JPMorgan Chase and the Polk Bros. Foundation asked Next Street and CRF to assess the city's small business ecosystem. They found that Black and Latinx entrepreneurs "report limited availability of friends and family funding."
Next Street and Community Reinvestment Fund, USA, "Assessing Chicago's Small Business Ecosystem," January 2019, for The Chicago Community Trust, Polk Bros. Foundation and JPMorgan Chase. Quoted from the Trust's published summary.
Fifth Star Funds writes that first check for overlooked founders in Chicago, on the same terms a family would, and puts every return back into the next one.
If you're building in Chicago and your friends and family can't write that check, see whether you can apply.
$25,000 is one first check. Any amount joins the fund that writes these checks, and contributions are tax-deductible.
Back a founderUpdates on the founders we back and the work behind the checks.
