The racial and gender makeup of investment boards is tied directly to the investment decisions they make, especially when it comes to funding companies led by people of color or female founders, according to a new study released by the U.S. Small Business Administration.
SBA Administrator Maria Contreras-Sweet highlighted the importance of the findings, stating in a press release, “I have made it a top priority as SBA Administrator to ensure that firms led by women and underrepresented groups are able to reach their full potential. I know some of these challenges firsthand. Unfortunately, startups owned by women and minorities often face an even more daunting challenge accessing the capital they need to grow and prosper. This study confirms that challenge but it also shows that we can expand opportunity and increase our overall economic strength by ensuring more women and underrepresented groups are in a position to make major investment decisions.”
SBA Partners With LinkedIn
Contreras-Sweet also announced a new public-private partnership with LinkedIn and other organizations called Open Network for Board Diversity (ONBOARD). This coalition will work to expand the presence of underrepresented groups on high growth small business advisory boards, boards of directors, and increase diversity in small business leadership, particularly for those supported by Small Business Investment Companies (SBICs). The SBA’s new partnership with LinkedIn is intended to build diversity on corporate and investment boards and closing the investment gap for women and people of color.
With over 450 million members and more than 2 million groups using its service, LinkedIn is able to provide a platform to convene organizations and leaders committed to increasing access for diverse candidates to join boards, according to a press statement. Active members of the group are expected to benefit from exposure to SBICs and member institutions as well as information and insights shared by other members of the group. As a community-led initiative, partner organizations are to help curate relevant content and foster participation.
Racial and Gender Funding Patterns
The goal of the study was to find answers to challenging questions regarding lending patterns to women and minority-owned businesses and return on investment for SBICs. The report was produced by John Paglia, associate dean and professor of finance at Pepperdine Graziadio School of Business and Management; and, David T. Robinson, professor of finance at Duke University Fuqua School of Business, senior research strategist at the Duke Innovation & Entrepreneurship Initiative, and advisory board member for the Private Equity Research Consortium.
“There is still more to do, but from this research, it is clear women and minority leaders at small business investment companies play an important role in bridging a lending gap to women and minority-owned small businesses,” said Paglia in a press statement. Identifying these relationships at the investment company level helps to close that gap, and we’re honored to lend our expertise in private capital and finance to this important effort to promote diversity in small business financing.”