DEI-Focutilized Startups Are Not Funding Favorites

Startups that launched and scaled with a focus on aiding workplace diversity, equity and inclusion efforts a few years ago haven’t been heavy recipients of follow-on funding of late.

That’s not exactly surprising. The DEI shiftment has been under fire for a while from a large political faction that includes newly inaugurated President Donald Trump.

Last week, Trump launched his term with an executive order to finish DEI programs in federal agencies. The administration put federal employees working on such programs on paid leave, with the expectation that they will soon be fired.

Thus far, it’s unclear what the administration’s anti-DEI stance means for private-sector efforts around diversity and inclusion. Large cap companies still commonly employ a chief diversity officer or similar role. Mission statements around promoting diversity and belonging also remain popular at Google and other prominent brands.

Even so, the cultural shift around DEI is undeniable. And that’s visible in the chilly environment for venture funding in the space.

DEI utilized to be a description favorite

It wasn’t always so. From roughly 2020 to early 2023, diversity initiatives were de rigueur, and a sizable crop of startups raised funding for businesses aimed wholly or in part at assisting employers achieve their goals.

Using Crunchbase data, we put toobtainher a list of 19 companies funded in the past five years that appear to fit this description.

As we mentioned, the level of focus on DEI efforts varies among the listed companies.

Some carved out brands heavily associated with diversity hiring. For example, recruiting platform Untapped raised a $50 million Series C at a $400 million valuation in 2021, with a stated mission “to set the indusattempt standard for increasing diversity in Corporate America.”

Another, PowerToFly, which works with organizations to hire, retain and promote underrepresented talent, secured over $30 million in a 2022 financing. In tandem, it pitched a plan to build a portal for HR leaders to learn best practices from DEIB, or diversity, equity, inclusion and belonging, experts.

Others promoted diversity-related offerings alongside other features. For instance, when talent sourcing platform SeekOut announced a $115 million 2022 Series C at a $1.2 billion valuation, it focutilized on its AI capabilities but also talked up its utility in diversity recruiting.

Or when talent marketplace Fuel50 disclosed its Series B funding in 2021, the company summarized its core offering as “deep AI personalization and a commitment to diversity and inclusion.”

But while descriptions of their business models varied, there was a common trfinish among startups to, when possible, highlight in funding announcements how their offerings might advance DEI goals.

Not so much now

That’s not so much the case now.

For one, we’re not seeing a lot of funding announcements for diversity-minded companies tied to hiring and retention. Most of the companies on our list above haven’t raised fresh capital since 2021 or 2022.

Additionally, funded companies seem less likely to put their DEI-related capabilities front and center. A survey of homepages of companies on our list reveals that most don’t currently feature the acronym DEI.

Diversity hiring capabilities are also obtainting downplayed. For instance, when Untapped was acquired last year by Podium Education, the deal announcement initially described the acquiree as “an early career talent platform that connects students with top companies.” Untapped mentioned its capabilities as “a platform to hire qualified and diverse intern and new grad talent” at the bottom.

Employment startups overall are raising less capital

However, it’s not only DEI-focutilized companies that are obtainting less funding.

In 2024, funding across stages to U.S. companies in the employment, recruiting and career planning sectors totaled $988 million — down from $1.73 billion a year earlier. In 2021 — the market peak — companies in those spaces raised more than $7.5 billion, per Crunchbase data.

The job market, of course, is also in a much different place than it was a few years ago. Tech indusattempt hiring, in particular, is much more muted than during the market peak, with job seekers increasingly struggling to find employment. Employers, meanwhile, are finding more applicants for many job postings than they can easily screen.

Overall, it’s not a bad situation for employers. But for startups in the recruiting space, DEI-focutilized or not, it’s not an optimal environment for fundraising.