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May 04, 2023 | Tom Ballard

Newly released report offers recommendations to address VC funding disparities

Olin-Brookings Commission offers three recommendations to address the fact that the VC industry does not work well for women, Black, and Latinx founders.

Last fall, the Olin-Brookings Commission — a partnership between the Olin Business School at Washington University in St. Louis and the Brookings Institution, supported by The Bellwether Foundation — assembled a commission of entrepreneurs, venture capitalists (VC), and public policy experts to tackle a significant problem: that the VC industry does not work well for women, Black, and Latinx founders.

After analyzing the problem, the blue ribbon group developed evidence-based solutions that are designed to drive more equitable VC funding, and those recommendations are outlined in a recently issued report titled Bridging the Start-up Funding Gap for Women, Black and Latinx Entrepreneurs. There are three key recommendations.

  • Increased transparency: Commission members recommended that data leaders like PitchBook and Crunchbase should create options for expanded self-reporting in leading databases and provide a straightforward way for researchers and stakeholders to access and analyze data through a secure platform interface or data sharing agreements. Additionally, investors and mentors should also encourage founders to self-report information in leading databases in respectful ways.
  • Government support: VC’s one goal is to make the largest possible return for investors. Therefore, the most promising solutions are those that incentivize venture capitalists for making diverse choices. For policymakers, that means creating a policy environment that doesn’t perpetuate the status quo but, rather, encourages an innovative community that is inclusive. The government already provides benefits to the industry today through “carried interest” incentives for VCs, favorable tax treatment for nonprofit foundations, pension funds and endowments, and grants through Minority Business Development Agency and State Small Business Credit Initiative (SSBCI).
  • Increase public awareness: Commission members said an advocacy group is needed to not only hold each other accountable but to also amplify data findings and influence public policy. Such a group would support future progress by maintaining ongoing media relations and social media campaigns and hosting events and conferences to explore additional solutions. Additionally, an advocacy group could create a public dashboard for venture funds and their investors with diversity-based metrics.

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