Morgan Stanley Survey Finds Investor Bias Against Women, Minorites

Relevant and convincing study:

Median investment by equity investors is nearly $1 million for businesses; Drops to $213,000 and $185,000 for women and minority-owned businesses respectively

The majority of investors and bank loan officers do not see the significant funding imbalance facing female and minority entrepreneurs in the U.S., despite making imbalanced investment decisions themselves, according to a new report and survey released by Morgan Stanley today.

A survey of more than 200 gatekeepers of capital found that while the majority of investors perceive the funding landscape as balanced, their actual investments are highly skewed. The survey also found that investors judge female and minority entrepreneurs by different standards.

“The funding gap is a market inefficiency that needs to be addressed. Not only are women and multicultural entrepreneurs missing out on needed investment capital, investors are missing out on potential returns from these emerging companies, said James Gorman, Morgan Stanley Chairman and CEO. “We and other investors should be challenging ourselves not only to identify great business and product ideas by diverse teams, but also to propel them.”

The survey findings are featured in The Growing Market Investors Are Missing: The trillion-dollar case for investing in female and multicultural entrepreneurs, which examines the funding landscape and why the funding gap exists – from the perspectives of both investors and entrepreneurs – and offers a series of actionable steps investors can take to close the funding gap. The report found that if the number of women and minority-owned businesses and revenues was proportional to their percentage in the labor force, those businesses would have generated an additional $4.4 trillion in revenues.

“Investors have to see the funding gap before they can fix it,” said Carla Harris, Morgan Stanley Vice Chairman, Global Wealth Management and Multicultural Client Strategy Group Head. “The investor community is missing out on a trillion-dollar opportunity, and this report is long-overdue a wake-up call. We’re providing investors with the playbook they need to get exposure to these talented entrepreneurs and better understand the markets they’re serving and the businesses they’re building.”

Among the survey’s key findings:

Investors are not only less likely to be exposed to women and minority-owned businesses than to male and non-minority businesses, they aren’t working to increase the diversity of candidates they consider.

  • Nearly 40 percent of men say that investing in women-owned businesses is not a priority at all, compared to only 7 percent of female investors. Similarly, 31 percent of white investors say they do not prioritize investing in minority-owned businesses.
  • Investors report being less likely to connect to the sectors that female and multicultural entrepreneurs serve. Nearly half of investors (47 percent) cite an entrepreneur’s sector as a compelling reason why they invest in businesses in general, but that number drops to 36 percent for women-owned businesses and 33 percent for minority-owned owned businesses.
  • Investors judge women and minority entrepreneurs by different standards, citing that displaying confidence is disproportionately important for women and minority-owned businesses.
  • 24 percent of investors say that a confident applicant is important when considering a women-owned business, and 23 percent say the same when considering a minority-owned business, compared to only 14 percent when considering businesses in general. The same pattern is true for needing to deliver a convincing pitch.

The survey of 101 investors (e.g. private equity professionals, venture capitalists, bankers who provide capital to businesses) and 168 bank loan officers was conducted on behalf of Morgan Stanley by Brunswick Group between August 20 and September 13, 2018.

The full report and survey results can be viewed online here. (

Source: Morgan Stanley Survey Finds Investor Bias Against Women, Minorites

About Andrew
Andrew blogs and tweets public policy issues, particularly the relationship between the political and bureaucratic levels, citizenship and multiculturalism. His latest book, Policy Arrogance or Innocent Bias, recounts his experience as a senior public servant in this area.

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