Shifting Attitudes and the Impact of Racial Injustice Conversations
February 02, 2021 at 04:40 AM EST
SOURCE: Morgan StanleySUMMARY:
This year, more VC firms assigned greater value to the investment opportunity that multicultural-founded companies present, and say that they are more likely to invest in multicultural- and women-founded companies in the coming year.DESCRIPTION:
The national discourse around systemic racism and the demand for racial equity in America appears to have shifted VCs’ attitudes toward investing in multicultural-founded companies. More than 3-in-5 (61%) VCs say that the Black Lives Matter movement has affected their investment strategy. This positive shift in VC attitudes and actions is considerable. In 2019, 12% of VCs surveyed said
61% VCs say the Black Lives Matter movement impacted their investment strategy
VCs recognize that multicultural-founded companies are at a structural disadvantage when it comes to funding and are badly underrepresented in their own portfolios. VCs are most likely to say that there are too few Black entrepreneurs (80%) and multicultural entrepreneurs (72%), compared to women entrepreneurs (58%). VCs’ satisfaction with their own portfolio reflects the same dynamic: Just 17% say they are satisfied with the rate at which they invest in multicultural- founded companies, while 36% are satisfied with the rate in which they invest in women-founded companies. While VCs plan to diversify in many ways, the visible underrepresentation and heightened dissatisfaction with their underinvestment in multicultural-founded companies could mean a more targeted focus on multicultural-founded companies moving forward. In what could be a breakthrough, more than two thirds of VCs we surveyed (68%) say that they are more likely to invest in multicultural-founded companies in the coming year.
80% say there are too few Black entrepreneurs
Additionally, VC firms’ priorities are now catching up with individual investors’ priorities in this area. Of those surveyed, 45% say that finding opportunities with multicultural entrepreneurs is a personal priority (about the same as last year) and, in a 10-percentage-point increase from last year, 43% of VCs say that finding opportunities with multicultural entrepreneurs is a top priority for their firm as well. Closing this gap is especially important, with more than 90% of VCs agreeing that fund managers have a responsibility to their clients to actively explore investing in women- and multicultural-founded companies.
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KEYWORDS: NYSE:MS, Morgan Stanley, vc, venture capital