A coalition of 10 global nonprofits and academic institutions led by the Nasdaq Entrepreneurial Center with support from J.P. Morgan Chase examined 2,000 U.S. funding rounds between the first quarter of 2020 through the second quarter of 2022 for a report on the state of equity in venture, and found that white founders received on average $35 million more across the capital stack, from seed through late-stage, than non-white founders, raising $120 million versus $85 million for diverse founders. I’ll pause here, and let that sink in. 

The report, with data from Extend Ventures, delves into a variety of important data points and learnings, but a big takeaway for Nicola Corzine, the executive director of the Nasdaq Entrepreneurial Center, a Nasdaq-backed nonprofit that provides resources and events for entrepreneurs, is that “the disparities of funding, if anything, have been over-indexed at the seed level,” she says, meaning there’s been too much focus on just that stage. “We’re not catching up. In other words, just because we’ve got extra money into the seed round does not mean that Series A, Series B, Series C, and beyond [are] getting any better. If anything, it continues to get worse” for non-white founders, she told Fortune. 

She emphasizes that the VC community needs to think about “making sure that bias is caught…across the entire capital stack.” That’s what Corzine says is “a really big warning, because I think many have said, ‘Well, look at all the accelerators or incubators or people that are now focusing in on one stage, aren’t we doing better?’” 

The answer is, it doesn’t look like it: There’s been various commitments to fund Black and diverse founders in recent years, like Google’s Black Founders Fund or Goldman Sachs’ One Million Black Women funding commitment. I also recently wrote about J.P. Morgan and pre-seed investor Techstars’ $80 million fund for pre-seed and seed-stage diverse founders. Meanwhile, other VCs are focused on funding diverse founders, largely in early stages.

Yet that doesn’t seem to be trickling up, at least so far. Per the report, there were fewer and fewer minority founders in later stages: Out of 281 seed rounds examined in the report, 75 were for minority-owned startups (with 24 for mixed-race founders), which then decreased to 72 out of 251 for early stage VC rounds, and further down to 46 out of 189 for late stage deals. According to Corzine, a big part of that problem is that founders of color are “receiving [fewer] dollars, but expected to go the same distance” in terms of business milestones as white founders who “have more money and more opportunity to perform to those conditions. The odds are stacked against [them] from the start,” she said.  

It all looks, and is, bleak. But those in power in the VC space, largely limited partners and investors, can and need to change. Corzine says that certain LPs, in particular family offices that had a generational change in leadership, are making more “positive” strides. As part of the report, the consortium also spoke with LPs and facilitated LP dinners to discuss these issues and learn from others doing it differently. 

Meanwhile, the report highlights several areas where changes could be made, including in supporting junior investors’ ability to write smaller checks and build a track record “for future promotion or fund launch” and to focus on “increasing diversity at the partner level for more immediate change.” And founders with more influence—those whose companies are unicorns and perhaps have more sway with big-time investors—can advocate for having a cap table that’s full of VCs who demonstrably care about diversity, Corzine suggests, or, as the report notes, can “pull emerging managers into deals.” And data transparency is crucial, too, she notes. 

All of this puts a lot of faith in an industry as clubby, white, and insular as venture capital. But Corzine’s message for investors—both VCs and LPs—is that this is a time “to really lean in and see this as not only a great…way in which to generate incredible IRR [internal rate of return] as you move forward,” but also a way “that you can learn from others.” 

After all, how many more of these grim reports do we need to spur change?

See you tomorrow,

Anne Sraders
Twitter: @AnneSraders
Email: anne.sraders@fortune.com
Submit a deal for the Term Sheet newsletter here.

Jackson Fordyce curated the deals section of today’s newsletter.

Update, March 8, 2023: The online version of this newsletter has been updated to clarify the relationship of the Nasdaq Entrepreneurial Center and to include a reference to Extend Ventures.

VENTURE DEALS

- Homz, a Dallas-based multifamily housing company, raised $50 million in pre-seed funding led by Nanban Ventures. 

- BetterNight, a San Diego-based sleep care provider, raised $33 million in funding. NewSpring led the round and was joined by HCAP Partners and Hamilton Lane. 

- SpotDraft, a New York-based contract lifecycle management solution for startups, raised $26 million in Series A funding. Premji Invest led the round and was joined by Prosus Ventures, 021 Capital, Arkam Ventures, Riverwalk Fund, and 100x Entrepreneur Fund. 

- Highway Benefits, a Manhattan Beach, Calif.-based employee benefits platform, raised $3.1 million in seed funding led by XYZ Venture Capital.

PRIVATE EQUITY

- ScioTeq, an OpenGate Capital portfolio company, acquired IRTS, a Toulon, France-based displays and embedded computers manufacturer for defense, aerospace, and industrial applications. Financial terms were not disclosed.

- Turf Masters Brands, backed by CenterOak Partners, acquired Fairway Green, a Charlotte- and Raleigh-based lawn service company. Financial terms were not disclosed.