<\/em>By: Elizabeth McCluskey, Director; CMFG Ventures<\/em><\/p>\n
What percentage of venture capital (VC) funding goes to Black, Latinx and female entrepreneurs?<\/p>\n
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If you guessed somewhere near each group\u2019s share of the population, that would be roughly 13% for Blacks, 19% for Latinx and 51% for women (as per the 2020 US Census). Sadly, those figures bear little relation to actual funding rates.<\/p>\n
According to Crunchbase<\/a> and Bloomberg<\/a>, Black and Latinx founders accounted for 2.4% of VC funding (from 2015-2020) while women accounted for only 2% (in 2021, the smallest share since 2016).<\/p>\n Plenty of ways to fund inclusive innovation<\/strong><\/p>\n Why the disparity? It\u2019s certainly not for lack of opportunities.<\/p>\n According to Fundera<\/a>, 40% of US businesses are women-owned (and 64% of these were started by women of color). Additionally, research from University of South California Santa Cruz<\/a> found the number of Black and Latinx business owners in 2021 was higher than pre-pandemic.<\/p>\n Exclusion is bad for everyone<\/em><\/strong><\/p>\n Not being able to access venture capital funding can be devastating to entrepreneurs, but they\u2019re not the only ones missing out. According to a 2019 report<\/a> from Morgan Stanley, the VC industry might be leaving a trillion-dollar opportunity on the table by not investing in diverse founders. And think of the consumers who could have benefited from the products or services these companies hoped to provide.<\/p>\n Inclusion is the right thing to do\u2026<\/strong><\/p>\n Funding diverse fintech entrepreneurs allows the Discovery Fund<\/a>, an arm of CUNA Mutual Financial Group, dedicated to supporting diverse entrepreneurs developing fintech solutions, to uncover products that help credit unions meet the needs of an increasingly diverse member population. This is especially important now that 61% of all new credit union membership growth<\/a> comes from multicultural consumers. \u00a0<\/p>\n \u2026and it makes sense financially too<\/strong><\/p>\n There\u2019s ample evidence to show the financial benefits of focusing on diversity, equity and inclusion (DEI).<\/p>\n A 2021 DEI research report from Filene Research Institute<\/a> found credit unions that have DEI related to and supportive of their strategic goals realized performance gains versus peers.<\/p>\n There are Fintechs committed to financial inclusion<\/strong><\/p>\n To date the Discovery Fund has made 14 investments in promising entrepreneurs committed to financial inclusion. Here are a few highlights:<\/p>\n Home Lending Pal<\/strong><\/a>: <\/em>An AI-Powered mortgage advisor and blockchain-based marketplace that addresses the needs of first-time buyers, especially people of color.<\/p>\n Key stats<\/u>: 3.1 million Black Americans and 4.8 million Latinos are qualified but not buying homes; Black Americans are turned down for home loans at higher rates than any other race or ethnicity (16% vs. 6.1% for non-Hispanic White Americans).<\/p>\n Use case:<\/u> This software allows lenders to access the borrower\u2019s financial information without revealing their race, gender or age \u2013 essentially removing the possibility for upfront discrimination. It also helps borrowers find mortgage options and assists them in assessing their financial ability to take out a loan. This tool could be especially valuable for minority and millennial consumers who often face challenges getting a mortgage.\u00a0<\/em><\/p>\n