Bridging the Investment Gap
By: Vonetta Young, Strategic Advisor of Inspire Access and Kat Braun, Assistant of Inspire Access
In the dynamic realm of investment capital, a significant challenge looms large – the racial and gender investment gap. As of 2023, a mere 2% of investment capital reaches companies founded solely by women in the U.S.*
This glaring disparity calls for innovative solutions, and Inspire Access is at the forefront, actively working to bridge the investment gap.
In the US today, the investment capital landscape grapples with serious imbalances. Early-stage funding disproportionately favors men-only teams, leaving women-only teams with a mere 2.8% of all venture funding. In 2023, 76.2% of the earliest-stage funding (pre-seed SAFEs and convertible notes) went to men-only teams, a gap wider than in the previous three years.* This stark reality emphasizes the urgent need to address the investment gap and create a more equitable playing field.
For founders of color, Black, Latino, and Middle Eastern/Arab, the percentage of pre-seed SAFE and convertible note funding also fell in 2023. Black founders, despite making up 1.6% of founders in this group, received only 1% of funding.*
The investment gap, and lack of access to investment capital, has played a critical role in the even greater issue of our time, the widening racial and gender wealth gap. The racial wealth gap is vast, black families have only 12 cents and latino families only 21 cents for every dollar a white family owns.* As for the gender wealth gap, women have only 32 cents for every dollar of wealth owned by men.*
At the same time we observe the expanding wealth gap, we know that entrepreneurship and business ownership is pivotal in building wealth, for both business owners, employees, and their communities.* As long as female and diverse founders aren’t receiving investment capital to develop and maintain thriving businesses, the racial and gender wealth gap will persist. It’s time for us to put capital to work and bridge the gaps.
Beyond these inequities having endless negative impacts for women and people of color, they prove to be tremendously harmful to the US as a whole.
In reality, by limiting women and people of color access to investment capital to start and run businesses, we were missing 75% of our collective brain power, ideas, solutions, and successful companies that we as a global community could benefit from.
It is also estimated that the dampening effects of the racial wealth gap alone (not including the gender wealth gap) will cost the US economy between $1 trillion and $1.5 trillion between 2019 and 2028—4 to 6 percent of the projected GDP in 2028 on consumption and investment.*
Supporting diverse founders, unlocking their potential, opens up a new world of opportunity and financial success. Research underscores the undeniable link between diversity and profitability. Diversity in leadership, especially women in senior roles, positively impacts a startup's success, sparking innovation, increasing growth, and generating higher returns on funding.* Women-founded startups, on average, generate more revenue per dollar of funding compared to male-founded startups. By investing in women and people of color, we tap into new innovative solutions, success stories emerge, and wealth is built, helping close the racial and gender wealth gap.
At the heart of Inspire Access is our vision for founders and fund managers to get equal access to investment capital.
By closing the racial and gender investment gap, and in turn, narrowing the wealth gap, we further contribute to building a thriving society for all. Inspire Access has built a platform to tap into philanthropic capital to direct it towards companies and funds led by women and people of color. Read this article to learn more about how it works and get involved.
SOURCES:
The VS Female Founders Dashboard
Women and Wealth Insights for Grantmakers, Asset Funders Network
Wealth Gaps between White, Black and Hispanic Families in 2019, Federal Reserve Bank St. Louis
The economic impact of closing the racial wealth gap, McKinsey Institute for Black Economic Mobility
