Minorities and Venture Capital: A New Wave in American Business

Abstract:     
This study of the venture capital firms that concentrate on making equity investments in minority business enterprises is based on a survey conducted in 2001 of 24 respondents from 50 venture capital funds operated by members of the National Association of Investment Companies. The issues considered include: to what extent minority owned businesses have access to venture capital, what types of businesses get such support, the origins of the venture capital funds, and the profitability of these venture capital firms.

The study revealed the following points: mature, minority-oriented venture capital funds are highly profitable; such funds did not over-concentrate in dotcoms and other high-technology ventures; and the major sources of funding for minority-oriented venture capital funds are public pension funds, commercial banks, and insurance companies.

With continued successful investing, this financial industry niche may sustain its rapid growth. These funds are less risky and may exhibit less volatility than has plagued the industry. The high returns generated by these successful companies will dispel the mistaken assumption they are low-return social investors.

Number of Pages in PDF File: 16

Keywords: Venture capital, Minority firms, African Americans, Asian Americans, Hispanic Americans, Return on investment, Investment performance

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