Philanthropy is not doing enough to advance inclusive investment practices that ensure equitable access to capital for people of color and women, a report argues.
According to the report, An Economy for All: How Philanthropy Can Unlock Capital for Women Entrepreneurs and Entrepreneurs of Color Through Inclusive Investing, systemic biases deeply embedded in investment practices are restricting access to capital for people of color and women, who represent 38 percent and 50.8 percent of the U.S. population, respectively, but only 17.5 percent and 19.4 percent of business owners. In 2017, only 5 percent of entrepreneurs backed by venture capital were African American or Latino, and just two percent of venture capital funding went to women entrepreneurs.
The study found that systemic and implicit biases not only perpetuate inequities for underrepresented entrepreneurs and their communities but also create inefficiencies in the allocation of capital and undermine potential investment returns.
Between 2007 and 2012, minority-owned businesses created 72.3 percent of all new jobs in the United States, while women-owned businesses created 1.24 million more jobs between 2007 and 2015 than did male-owned businesses. The report also cites a study which found that over ten years of investments (2005-2014), companies with a female founder performed 63 percent better than those with all-male founding teams.