Investing in Diversity – Bridging the Funding Gap for Underrepresented Groups
Diversity brings incredible business benefits. This has been proven with a number of studies associating gender, ethnic and cultural diversity with improved financial performance.
Therefore, it stands to reason that investors should actively pursue businesses with diverse management teams, or helmed by diverse founders. However, the sad truth of the matter is that this is not the case.
Instead, a lack of investment remains a fundamental barrier to entrepreneurs from underrepresented groups. According to our research, ethnic minority entrepreneurs are over a third (36%) more likely than White peers to have given up on a venture due to a lack of funding.
The significance of this issue cannot be downplayed, as funding is critical in enabling businesses to grow. Without this, ethnic minority founders will fail to reach their potential in terms of personal wealth creation, company valuations and subsequent contribution to the UK economy.
A lack of funding will also hamper innovation for ethnic minority groups, some of which have unique requirements from products and services. Ethnic minority entrepreneurs’ lived experience means they are best placed to identify these, and create the products and services needed to fill market gaps.
That’s why we’ve launched a £75m investment fund specifically to support those from minority groups, including women and ethnic minorities. Through it we also hope to help the investment community see that better diversity really does mean better business, and contribute to a future economy and society that’s diverse, vibrant and more profitable.
More than this, we’ve also gone to great lengths to delve deeper into this issue as a whole.
Investing in diversity: bridging the funding gap for underrepresented groups is a report compiled from extensive research amongst over 500 entrepreneurs and business founders to explore why access to funding remains such a barrier for minority groups – and vitally the role the investment community must play in abolishing this.
Carried out in partnership with Sapio, our quantitative research surveyed 501 diverse business owners and entrepreneurs in May 2021. We also carried out a qualitative study in partnership with Mentor Black Business, which was formed as a proactive response to the systemic racism black people face in the industry following the global protests from the death of George Floyd last year. The insights, covering the barriers to funding these underrepresented groups continue to face, along with clear areas for improvement, are outlined in full in the report, which is available to download here.