The first round a company raises is the one most decided by wealth, and nobody measures it. This is what we've found from inside it after thirty-six checks.
A company's first money comes from the founder and the people closest to them, and whether a founder can raise it depends on what their friends and family have.
Most people have never heard the term Friends & Family round. It's the first outside money a company takes, and it comes from people who know the founder rather than from people who invest for a living.
It's small. It pays for the first working version of the product, the first few customers, and sometimes just the months of rent that let a founder work full time. It's a private transaction between people who already trust each other, usually on a handshake and sometimes on a SAFE, and it leaves almost no trace in any public dataset.
That's why the funding world talks about what happens after it. Venture capital is counted to the dollar and reported quarterly.
Founders start on their own savings and on the savings of the people close to them. The ones who go on to raise usually go to friends and family first, then angels, then venture funds, and fewer companies reach each step.
The latest Census data on businesses with employees puts personal or family savings as a source of startup capital for 64.5% of them, a loan or investment from family or friends for 3.8%, and venture capital for 0.5%. Most family money sits inside that first number, because Census counts a family's savings with the owner's. About half of these businesses started on less than $25,000, and among Black-owned and Hispanic-owned businesses it was nearer six in ten.
The Global Entrepreneurship Monitor found US founders needed a median of $17,500 to start in 2015 and funded 57% of it from their own money, and that 24% got money from family and 15% from friends. In GEM's 2025 survey, 31.2% of early-stage founders got money from family or friends in the past year.
Where the Federal Reserve does see the round, it's rare, and it's the largest outside source. About 2 to 3% of employer firms took any equity investment in the prior year, and among them friends or family were a source for 58%, the owners for 58%, angels for 23% and venture capital for 15%.
None of that gives the size of a Friends & Family round. The surveys measure launch capital across every source at once, or they measure which sources were used without measuring how much. The closest anyone gets is the people who give: in 2025 the typical American who backed someone else's new business put in $3,200, and more than half of them backed a family member. No survey measures the Friends & Family round as a round. The Census last asked about insider money in 2017, for a single year and with employees counted in, and has dropped the question since.
A round that shapes who gets to build a company in America isn't measured as a round by the Census, the Bureau of Labor Statistics, the Federal Reserve or any academic survey we could find.
US Census Bureau, Annual Business Survey, 2017 data, published May 2020, table AB1700CSCB01. GEM 2015 US Report, Babson, 2016. GEM 2025/2026 US Report, Babson, March 2026. Federal Reserve Banks, 2026 Report on Employer Firms, 2025 survey, published March 2026.
The figures in this paper 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.
Kauffman's national count found about 1.1 million Black Americans started a business in 2025. As a share of adults, that's more than half again the rate for white Americans. 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, against one in twelve white-owned firms. Yet Black-owned businesses are 3.4% of US employer firms, against 14.4% of the population. That suggests the drop comes between starting a business and becoming an employer, which is the stage a first check addresses.
Kauffman Indicators of Entrepreneurship, National Report on Early-Stage Entrepreneurship in the United States: 2025, published May 2026, 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, from the 2025 survey, published April 2, 2026, employer firms. Census Annual Business Survey, 2023.
Researchers followed nearly five thousand companies from their founding in 2004 through 2011. White-owned startups began with about $107,000 in total financial capital. Black-owned startups began with about $35,000. The line that matters most to 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. Two caveats. These are survey-weighted means rather than medians, and they describe a 2004 cohort in 2004 dollars. It's dated, and it's still the most complete dollar comparison of startup capital by race we know of.
It's also a reason to keep writing $25,000. A $25,000 first check is larger than the whole outside-equity gap at formation in 2004 dollars, and covers most of it in today's.
Fairlie, Robb and Robinson, "Black and White: Access to Capital Among Minority-Owned Start-ups," Management Science 68(4), 2022, Table 1. Survey-weighted means from the Kauffman Firm Survey, 4,928 firms founded in 2004 and tracked to 2011.
Every bar is on the same scale, against total capital for white-owned startups at $106,720. The last pair is outside equity, the kind of money our check is. The study treats that difference as only marginally significant (p = 0.10).
The JPMorgan Chase Institute followed small businesses banking with Chase in three states. First-year revenue was $39,000 for Black-owned firms against $94,000, and the cash buffer 12 days against 19. With comparable revenue and cash reserves, Black-owned firms 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, and we've put it after the others on purpose. The founders who never got a first check aren't in this denominator 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.
The racial wealth gap is usually quoted on total net worth. But most of a typical family's net worth is the house they live in, and a house doesn't fund a company. So we take the Census Bureau's median household net worth excluding equity in own home, white non-Hispanic against Black alone, and call the distance between them the liquid wealth gap.
It's our metric, built entirely from Census inputs, so anyone can open the table and reproduce the number to the dollar. In 2024 the typical white household held $103,020 more outside the home than the typical Black household, the widest distance in the six years of tables we track. We lead on the dollars because the check we write is an absolute amount. The Fed adds a caveat. Real average liquid wealth for Black families fell between 2019 and 2022 even as net worth rose on housing, so the gains came mostly in a form a founder can't put into a company. The six-year table, with the ratio and the derivation, is on our Research page, and we update it with each Census release.
Census Bureau, Survey of Income and Program Participation, "Wealth and Asset Ownership for Households, by Type of Asset and Selected Characteristics," Table 1, median net worth excluding equity in own home, 2019 to 2024 releases. The 2024 tables, published June 2026, are the current release. Federal Reserve FEDS Note, "Greater Wealth, Greater Uncertainty," October 18, 2023.
Outside their homes, the typical white household holds $103,020 more than the typical Black household.
A $25,000 first check is the entire non-home wealth of more than two typical Black households.
On the 2024 Census tables. It isn't a check many founders' friends and family can write.
In January 2019, The Chicago Community Trust, JPMorgan Chase and the Polk Bros. Foundation asked Next Street and the Community Reinvestment Fund to assess the city's small business ecosystem. The research identified "a specific debt capital gap in the $50,000 to $250,000 range and a desire for increased grant/equity-like products that could support startup activity for Black and Latinx entrepreneurs, who report limited availability of friends and family funding."
The last clause is the gap we work on, named by the city's own funders. The first clause is a debt capital gap in the source, so we state it as a debt gap.
A second Next Street study, for Arc Chicago and Benefit Chicago in June 2020, put 80% of the equity capital needs of Black and Latinx entrepreneurs in Chicago unmet, a gap of at least $146 million. That's pre-pandemic data and we use it with the year attached.
Next Street and Community Reinvestment Fund, USA, "Assessing Chicago's Small Business Ecosystem," January 2019, quoted from the Trust's published summary. Next Street, "The Equity Capital Gap for Entrepreneurs of Color in Chicago," June 2020.
Chicago:Blend with World Business Chicago, Startup Diversity Report covering 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.
Chicago does better than most cities on this. Among Chicago companies founded from 2018 to 2023, those founded by people of color raised 44% of the venture dollars, second-highest of any city studied, and Black-founded companies raised 2.4%, fifth-highest of any city in the report. Atlanta, at 42% to Black founders, shows how much higher Chicago could go, and a 2019 study for the city's funders found the gap starts earlier, at the Friends & Family round.
We're a Chicago fund because we're Chicago founders and we grew out of the 1871 community. We'd like Chicago to be the city where overlooked founders come to build, and a first check that's here is part of how that happens.
Thirty-six checks since June 10, 2021, $25,000 each, $900,000 in all. Twenty-eight companies are still operating and eight have closed, all from 2021 and 2022. Our companies are selected, and every founder we evaluate is scored on a ten-dimension rubric before we write a check, so these numbers describe the portfolio, not the effect of the check. The table by year, with public benchmarks for survival and follow-on beside it, is on our Research page.
Every company we back today meets the same criterion: at least one co-founder who has faced material barriers to accessing capital due to racial discrimination. The program is open to founders of any race who have experienced it.
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. We write that check for overlooked founders in Chicago, on the same terms a family would, and put every return back into the next one. A national Friends & Family fund would be the step that does it everywhere.
We built an estimate of what that would take. It's ours, and it rests on the assumptions shown beside it. We show it so a funder can see how we think about scale and check our arithmetic.
In 2023 we estimated about 6,000 investment-ready Black founders a year. How many founders are building venture-scale companies hasn't been measured for any group, so this edition builds the estimate from a fund size instead, and from what the founders of venture-backed companies go on to earn.
Our estimate, not a measurement. 6,000 first checks a year is a fund size, not a count of founders. The value applies the average payoff to founders of US venture-backed companies, about $8.0 million in today's dollars (Hall and Woodward, American Economic Review, 2010, restated in 2025 dollars), to the 3% to 10% of our founders we assume will go on to raise an institutional venture round. It's an average: most would receive nothing and a few would receive a great deal. It isn't a return to the fund.
Kauffman Indicators 2025: 0.45% of Black adults start a business each month, against 0.29% of white adults. Census Annual Business Survey 2023: 200,885 Black-owned employer firms, 3.4% of all employer firms, against 14.4% of the population. Kauffman's national rate of new employer business actualization is 9.16%, with no race breakdown, because the Business Formation Statistics carry no race field. Brookings, June 2025: parity would mean as many as 757,000 more Black-owned businesses.
More than a hundred individuals, family foundations and companies have contributed since 2021. Contributions are tax-deductible, and nothing comes back to the contributor.
Every contribution goes into the fund, and our investment committee, which includes members of the board, evaluates each founder on the same ten-dimension rubric. We write $25,000 on a standard post-money SAFE at a $4 million cap with a 20% discount, the same terms for everyone, and the check goes out with coaching, programming and investor introductions through LongJump, our operating partner.
If a company exits, the proceeds come back to the fund as another first check, which is what makes us an evergreen fund. We expect the first returns on a five to ten year horizon, and when they come we'll publish every dollar returned and where it went back out. How It Works walks through it step by step.
Peers built this way publish comparable numbers. Acumen has recovered $36.8 million of $115 million invested across 123 companies. Evergreen Climate Innovations, here in Chicago, reports five portfolio exits from a fund capitalized the way ours is.
Where a number is ours, it says so. Where it's someone else's, this is where it came from. Ask us and we'll send the underlying tables.
If you've found a figure we've got wrong, tell us and we'll correct it in the open.
Updates on the founders we back and the work behind the checks.
