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 program to advance entrepreneurs of colour.

In a series of tweets published this morning, the Massachusetts senator proposed a $7 billion Compact Company Equity Fund to offer 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 single dollar of wealth above $50 million the presidential hopeful initially outlined in January.

The fund would be managed by the Division of Financial Improvement, a new government entity to be constructed below the Warren administration. With a aim of building and defending American jobs, the Division of Financial Improvement would replace the Commerce Division 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 Compact Company Equity Fund will exclusively problem grant funding to entrepreneurs eligible to apply for the Compact Company Administration’s current 8(a) system and who have significantly less than $100,000 in household wealth, aiming to offer capital to 100,000 new minority-owned companies, building 1.1 million new jobs.

Founders of colour acquire a shocking disproportionate quantity of venture capital funding. There’s insufficient information on the subject, but study from digitalundivided published final year suggests the median quantity of funding raised by black girls, for instance, is $0. According to the identical study, black girls have raised just .0006% of all tech venture funding considering that 2009.

Startups founded by all-female teams, regardless of 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 verified tendency to invest their capital into entrepreneurs who appear like them or who resemble founders that have been previously profitable. In other words, VCs are constantly on the hunt for the subsequent 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 research show that investors are additional probably to companion with entrepreneurs who appear like them. This tilts the field against entrepreneurs of colour. So I program to address this disparity head on as well. I will demand states and cities administering my new Fund to function with diverse investment managers—putting $7 billion in the hands of minority-and girls-owned managers.”

Warren this morning also announced plans to “direct” federal pension and retirement funds to recruit diverse investment managers and to demand states and cities administering the Compact Company Equity Fund to function with diverse investment managers. Lastly, Warren, once more, if elected, will triple the price range of the Minority Company Improvement Agency, which assists entrepreneurs of colour access funding networks and business enterprise advice .

Warren, all through her campaign for the presidency, has created a quantity of critiques of the tech business.

In March, the senator announced her program to break up massive 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.”