VCs are failing diverse founders; Elizabeth Warren wants to step in

Elizabeth Warren, who earlier this year confirmed her intent to run for president in 2020, has an ambitious plan to advance entrepreneurs of color.

In a series of tweets published this morning, the Massachusetts senator proposed a $7 billion Small Business Equity Fund to provide grants to Black, Latinx, Native American and other minority entrepreneurs, if she’s elected president. The initiative will be covered by her “Ultra-Millionaire Tax,” a two-cent tax on every dollar of wealth above $50 million the presidential hopeful first outlined in January.

The fund would be managed by the Department of Economic Development, a new government entity to be constructed under the Warren administration. With a goal of creating and defending American jobs, the Department of Economic Development would replace the Commerce Department and “subsume other agencies like the Small Business Administration and the Patent and Trademark Office, and include research and development programs, worker training programs, and export and trade authorities like the Office of the U.S. Trade Representative,” Warren explained.

The Small Business Equity Fund will exclusively issue grant funding to entrepreneurs eligible to apply for the Small Business Administration’s existing 8(a) program and who have less than $100,000 in household wealth, aiming to provide capital to 100,000 new minority-owned businesses, creating 1.1 million new jobs.

Founders of color receive a disproportionate amount of venture capital funding. There’s insufficient data on the topic, but research from digitalundivided published last year suggests the median amount of funding raised by black women, for example, is $0. According to the same study, black women have raised just .0006% of all tech venture funding since 2009.

Startups founded by all-female teams, despite efforts to level the playing field for female entrepreneurs, raised just 2.2% of venture capital investment in 2018.

VCs are a majority white and male. Plus, they have a proven tendency to invest their capital into entrepreneurs who look like them or who resemble founders that were previously successful. In other words, VCs are continuously on the hunt for the next Mark Zuckerberg .

“Even if we fully close the startup capital gap, deep systemic issues will continue to tilt the playing field,” Warren wrote. “86% of venture capitalists are white, and studies show that investors are more likely to partner with entrepreneurs who look like them. This tilts the field against entrepreneurs of color. So I plan to address this disparity head on too. I will require states and cities administering my new Fund to work with diverse investment managers—putting $7 billion in the hands of minority-and women-owned managers.”

Warren this morning also announced plans to “direct” federal pension and retirement funds to recruit diverse investment managers and to require states and cities administering the Small Business Equity Fund to work with diverse investment managers. Finally, Warren, again, if elected, will triple the budget of the Minority Business Development Agency, which helps entrepreneurs of color access funding networks and business advice .

Warren, throughout her campaign for the presidency, has made a number of critiques of the tech industry.

In March, the senator announced her plan to break up big tech.

“Twenty-five years ago, Facebook, Google, and Amazon didn’t exist,” Warren wrote. “Now they are among the most valuable and well-known companies in the world. It’s a great story — but also one that highlights why the government must break up monopolies and promote competitive markets.”




News Article Courtesy Of » Kate Clark