Investors Perceive Funding Landscape as Balanced, Despite a Substantial Gap in Their Actual Investments in Female and Multicultural Entrepreneurs

I visited LinkedIn’s headquarters to talk with Editor in Chief Daniel Roth about the perennial problem of underinvestment in female and minority entrepreneurs that we’re all far too familiar with. Fixing this problem and making a way forward is what motivated me to start Morgan Stanley Inclusive Innovation and Opportunity[EF1] , an initiative designed to level the investment landscape and provide access to capital and investor networks for women and multicultural entrepreneurs.  

Why is this important to me? And why should it be important to every investor? I was once on the other side of this equation and quickly found that I needed to find what I call a “sponsor” – somebody who could advocate on my behalf when I wasn’t in the room. Without sponsors in the investment community ready to find and advocate for these entrepreneurs, opportunities are missed for both entrepreneurs and investors.  

We have the evidence in our latest report, The Growing Market Investors Are Missing, where we surveyed more than 200 investors and bank loan officers and here’s what we found.  

While the majority of investors perceive the funding landscape as balanced, their actual investments are highly skewed.

Nearly 80% of investors and bank loan officers believe that women and multicultural business owners receive either the right amount, or more, capital than their business model and fundamentals suggest they deserve.  Yet the median investment by equity investors in business opportunities overall is nearly $1 million and only $213,000 and $185,000 for women and minority-owned businesses, respectively. 

Investors judge women and multicultural entrepreneurs by different standards.

Investors reported that when considering investment opportunities, various factors are weighted differently depending on the race and gender of who is in front of them. They expect female and minority entrepreneurs to check additional boxes beyond those like a quality management team and a sound business strategy that are required for all types of businesses.  

There is enormous opportunity for entrepreneurs and investors alike.

We found that if the number of women and minority-owned businesses and portion of revenues matched their percentage in the labor force, those businesses would have generated an additional $4.4 trillion in revenues. That’s HUGE.  

Here’s the good news – there’s a way forward and there are actionable steps for us to get there. Check out our report to learn more.

http://www.morganstanley.com/trilliondollarcase