By Elizabeth McCluskey, Director, CMFG Ventures
What percentage of venture capital funding goes to Black, Latinx and female entrepreneurs?
If you guessed somewhere near each group’s share of the population, that would be roughly 13% for Blacks, 19% for Latinx and 51% for women (as per the 2020 U.S. Census). Sadly, those figures bear little relation to actual funding rates.
Plenty of ways to fund inclusive innovation
Why the disparity? It’s certainly not for lack of opportunities. According to Fundera, 40% of U.S. businesses are women-owned (and 64% of these were started by women of color). Additionally, research from University of South California Santa Cruz found the number of Black and Latinx business owners in 2021 was higher than pre-pandemic.
Exclusion is bad for everyone
Not being able to access venture capital funding can be devastating to entrepreneurs, but they’re not the only ones missing out. According to a 2019 report 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.
Inclusion is the right thing to do…
Funding diverse fintech entrepreneurs allows the Discovery Fund, 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 comes from multicultural consumers.
…and it makes sense financially too
There’s ample evidence to show the financial benefits of focusing on diversity, equity and inclusion.
A 2021 DEI research report from Filene Research Institute found credit unions that have DEI related to and supportive of their strategic goals realized performance gains versus peers.
There are fintechs committed to financial inclusion
To date, the Discovery Fund has made 14 investments in promising entrepreneurs committed to financial inclusion. Here are a few highlights:
- Home Lending Pal: An AI-powered mortgage advisor and blockchain-based marketplace that addresses the needs of first-time buyers, especially people of color.
- Listo: An AI fintech platform that provides more inclusive access to affordable financial services for Latino consumers.
- Zirtue: A relationship-based lending and alternative bill pay application that simplifies—and protects—loans between friends and family with automatic monthly loan payments.
We’re still a long way from true VC inclusion — but we hope these investments inspire others to follow our lead.