‘We aim to open investors’ eyes to opportunities,’ Gorman says
Businesses run by women and people of color receive a sliver of the funding that those run by white men do. A new report from Morgan Stanley puts a finer point on why: Investors are biased.
In a survey of more than 200 investors and lenders, researchers found that funders see fewer pitches from women and minority entrepreneurs, and when they do, they hold them to higher standards. “Everyone has preconceptions and biases and investors are no different (both known and implicit),” the study’s authors wrote. “But these seldom work for the benefit of women and people of color when trying to source funding.”
As a result, investors leave major profits on the table. “By illuminating that gap, we aim to open investors’ eyes to the opportunities they are missing,” James Gorman, chief executive officer of Morgan Stanley, wrote in the report.
Some of the bias plays out when investors project future performance. Funders are twice as likely to think women and minority-owned businesses will perform below market average compared to those run by white men.
In fact, once minority-owned businesses receive angel capital, they perform in line with peers, according to the report. Firms owned by women typically do better.
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