Founders And Venture Capital: Racism Is Costing Us Billions by Daniel Applewhite

TLDR: America is losing out on over 1.1 million minority-owned businesses, and as a result, foregoing over 9 million potential jobs and $300 billion in collective national income.

Helpful:4

Topic Tags:Venture Capital, Diversity, Racism

Relevant Questions:

  • Do minorities get fair funding?
  • How does racist investing cost the economy money?
  • How can VC firms work to increase profits while increasing racial equity?

Summary:

  • VCs Are Investing Less In Innovation
  • In 2016, venture capital financing decreased by almost one-third, from $77.3 billion to $52.4 billion. Power and structural racism have crippled the startup ecosystem, and entrepreneurs of color seeking early-stage financing are suffering the most.
  • Less than 1% of American venture capital-backed founders are black and the percentage of Black's in decision making roles within Venture Capital isn't much better.
  • With a growing minority population and decreases in early-stage investment, startup ecosystems are feeling the impact. Since 2014, early stage and seed round investments have decreased by over 40%, while over $55 billion in late-stage investments have been made in companies like Uber, Space X and Airbnb.
  • Ross Baird, Founder of Village Capital, has taken an interesting approach to combating investor bias by implementing what they call the Peer Selection process. The belief is that entrepreneurs are better at equitably identifying good deals in comparison to traditional investors.

Follow Up Questions:

What are some ways to reduce hiring bias?