Research uncovers lack of representation, privilege and persisting racism within the investment community as key reasons why minority groups continue to be underserved by the investment community
A new report published today by social impact private equity fund, Salonica Maroon in partnership with Mentor Black Business, has found that a lack of investment remains a fundamental barrier to entrepreneurs from underrepresented groups, with research indicating that 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 Investing In Diversity report has identified three significant barriers to minority group entrepreneurs achieving their funding ambitions, based on in-depth quantitative and qualitative research conducted amongst over 500 entrepreneurs and business founders:
- A lack of representation within the investment community
- Barriers thrown up by privilege and investment pop culture
- Persisting systemic racism within the investment community
There is significant variation in the levels of funding success experienced by different ethnic minority groups. Just 47% of White founders have given up on a venture due to lack of funding. This compares to 74% of Black entrepreneurs, 68% of those from mixed or multiple ethnic groups, and 56% of Asian business owners.
The research and its findings expose the complex and unique challenges faced by different minority groups, where Alex ‘Delz’ Erinle, one of the co-founders of Thrill Digital – a tech startup digitising the fashion industry by encouraging brands to sell digital-first fashion products to customers – said: “[Potential investors] didn’t really see how big the problem was for black people. It flew over their heads. There weren’t many investors from our target demographic, which made it almost impossible to fund our idea.” He also recollects how a lack of representation made him feel compelled to change his accent: “Unfortunately, I have this godforsaken Nigerian accent which just makes it worse. I remember trying to fake an accent in meetings to fit in.”
Among those Black founders denied funding, there is a clear sense that racism has played a part in their failure. 40% of Black entrepreneurs named persistent racism as a contributing factor in their inability to secure funding. This was also deemed a barrier by other minority groups – although less so. A third of Asian entrepreneurs (32%) and a quarter of those from mixed or multiple ethnic groups (26%) named this as a problem.
Clearly, more tailored support must be made available to diverse business leaders if they are to reach their full potential.
Akil Benjamin, Director of Mentor Black Business, commented: “Working with Salonica Maroon on this report highlights the need Black and minority founders have in growing their business. In order for things to improve, they need to access capital from people who understand them and the communities they are trying to serve; they need to be meaningfully supported in their business and as a person to deliver in such a challenging environment; and they need to have investors who have can speak with candor and have trust in them.
“In our world a report like this is a prelude to action. We look forward to following Salonica Maroon on their investment journey, supporting minority founders and allocating funds to businesses which serve new communities. It’s part of our journey towards a future centred on the betterment of Black and minority businesses in the UK, Europe and beyond.”
The report follows the launch of Salonica Maroon’s new £75m fund, aimed at diverse entrepreneurial teams and building out diverse executive management teams. Its goal is to contribute to a future economy that’s diverse, vibrant and profitable and shift the dial in creating a landscape that’s levelled, with doors open and opportunities present.
Omar Majid, head of sustainability at Salonica Maroon, comments: “Diversity brings incredible business benefits. If investment firms are to capitalise on growing diversity, they must invest in diverse founders, entrepreneurs and management teams. They need people with the lived experience and cultural sensitivity to recognise where the market gaps are, and how these can be best filled.
“However, putting this mandate into practice will demand significant change from the investment community. We must tackle clear reputational challenges and systemic racism if we’re to engage entrepreneurs from underrepresented groups, or fully comprehend the potential of their propositions. These are entrenched challenges that will not be solved overnight – but we are leading the charge with the launch of our £75m investment fund for diverse entrepreneurs. Through this, we will help people see that better diversity really does mean better business.”
*Ethnic minority entrepreneurs include all those surveyed identifying as Black, African, Caribbean or Black British, Asian or Asian British, from Mixed or Multiple ethnic groups – or any other ethnic groups.