False Dichotomy: Why Investing in Diversity Pays Off
December 28, 2020 | Ashley Brindamour
The AVG Anti-Bias Fund offers investors a portfolio of ~20-30 venture investments that are led by diverse founders/teams or featuring a business model addressing systemic biases.
AVG creates the portfolio from deals invested in by actively managed AVG funds. We then vet them for their fit with the Anti-Bias Fund thesis. The portfolio will be largely built over ~12-18 months, with ~20% set aside for follow-ons. The minimum starts at $25K. The fund closes on March 31.
New Anti-Bias Fund Open
The Anti-Bias Fund offers investors a portfolio of about 20-30 venture investments that are led by diverse founders/teams belonging or featuring a business model addressing systemic biases. Click below to review fund materials, along with case studies on AVG portfolio companies that demonstrate the kind of investment we might add to the Anti-Bias Fund. You can also book a call with a Senior Partner if you have questions or want to learn more.
Why Diversity Pays
“There are a tremendous number of women entrepreneurs and founders of color…who are unrecognized, unfunded, and under-leveraged. This is not just an equity issue. This is a business and innovation proposition for America.”
Our thesis: Bias not only harms society but quashes the positive potential financial gains from diversity.
1. Unconscious Bias is Pervasive but Addressable
- Humans are instinctively wired for bias.
- In middle childhood, biases begin to emerge (Dore, 2014).
- Unconscious biases impact behavior (Dasgupta, 2004).
- The good news: Unconscious biases can be addressed and reduced (Dasgupta, 2013; Dasgupta & Greenwald, 2013).
2. Unconscious Bias Impacts Venture Capital Too
- While 40% of all businesses are started by women, they receive about 3% of funding each year.
- 14% of entrepreneurs are African American, but only 1% of VC-back founders are African-American.
- 8% of entrepreneurs are Latinx, but less than 2% of VC-backed founders are Latinx.
Fund Intro Webinar
Join our webinar, An Introduction to AVG’s Anti-Bias Fund, on Tuesday, January 12, at 2:00 PM EST. We’ll explain the investing thesis behind this fund, outline our process for assembling the portfolio, give examples of representative deals, and answer questions.
3. Backing Diverse Teams/Founders Has Major Financial Benefits
- Team diversity bumps valuation: those with at least one female founder did 63% better than all-male founder teams in terms of valuation change since initial investment; it’s 65% better for ethnically diverse teams.
- Teams of diverse founders at venture-backed startups create better financial outcomes — including 30% higher multiples on invested capital when acquired or IPO.
- Companies focused on addressing diverse consumers can tap into significant buying power.
- 70% of the U.S. population is comprised of women and BIPOC (Black, Indigenous, and people of color).
- Women drive 83% of all U.S. consumption through buying power and influence.
- Other underrepresented group buying power: African Americans spend $1.2 trillion annually in the U.S. Latinx consumers’ buying power is ~$1.7 trillion.
Ironically, VCs acknowledge that underrepresented entrepreneurs can have a real competitive edge into problems and markets. But biases persist, and it’s estimated that VCs are missing out on as much as $4 trillion in value by not investing in more diverse founders.
There are many more stats to offer to support the benefits of diversity — and we haven’t even touched on the social and ethical dimensions. If you’re interested in doing good while doing well by backing diverse ventures, we invite you to connect with us on our Anti-Bias Fund.
AVG’s Anti-Bias Fund offers a portfolio of about 20-30 venture investments that are led by a diverse founding team or feature a business model addressing systemic biases. Approximately 25% of the fund is reserved for follow-on investments. Minimum starts at $25K. Click below to learn more.