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Venture capital: Diverse founders present a ‘massive market opportunity,’ VC Include CEO says

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VC Include CEO & Founder Bahiyah Yasmeen Robinson joins on Yahoo Finance Live to discuss the lack of diversity in VC funding and how to create more opportunities for people of color.

Video Transcript

[MUSIC PLAYING]

ALEXIS CHRISTOFOROUS: Welcome back to "A Time for Change." The pandemic may have slowed most of us down, but not so for new companies trying to get up and running. In 2021, startups raised a record $329 billion, double the previous year. That's according to a new PitchBook report. But how much of that money went to diverse founders?

Here to dive in is Bahiyah Yasmeen Robinson, founder and CEO at VC Include. Bahia, thanks so much for being with us. So for people who are not familiar, this fund, it's a non-profit membership-based fund. Tell us a little bit about the work you're doing there and how you're focusing on diverse businesses.

BAHIYAH YASMEEN ROBINSON: Absolutely. Thank you so much for having me. So in 2018, we embarked on creating a platform to aggregate best in class fund managers with the express mission to amplify and accelerate investment both into the asset managers, as well as into founders, right, into companies.

MARQUISE FRANCIS: And following up there, you now have a fellowship for BIPOC fund managers. Tell us more about how that came about and what exactly you're looking for in those candidates.

BAHIYAH YASMEEN ROBINSON: Absolutely. So the fellowship on the VC side was really designed to support first-time fund managers that were looking to invest in diverse founders, looking to invest in the new majority. You know, when I started this journey about eight years ago, there were about 20 or so Black women, for instance, founders, that had raised more than a million dollars. And that number has increased now to about 100. But out of 23.5 million Black women, that number is still very low. And so what we realize is that asset managers, or VC funds, private equity funds, specifically investing in underrepresented founders actually can increase that number on aggregate.

ALEXIS CHRISTOFOROUS: So Bahiyah, talk to me a little bit about the trends you've been seeing especially during the pandemic because we've talked a lot here at Yahoo Finance about the fact that women were disproportionately impacted by the pandemic and left the workforce in droves. And not all of them have come back. I'm wondering what the numbers are with regards to women and startups. What are you seeing there? And what's the appetite like for VC money for those businesses?

BAHIYAH YASMEEN ROBINSON: Well, what's interesting is that even though the number of investments into the VC space has increased exponentially, it's actually decreased for women. And so there's a challenge there in finding and investing in women-led startups.

And again, the same thing is happening. What's happening is that corporates and other asset allocators are kind of standing up and saying, look, we want to invest in more asset management firms, we want to invest in more historically underrepresented founders. But it's happening incrementally. It's not happening as quickly as the market is investing in venture.

MARQUISE FRANCIS: Yeah, and to that point, minority and women-owned firms manage only 1% of assets under management. And yet, they produce better investment returns than their non-diverse counterparts. What are folks really not understanding about the successes really plain in sight?

BAHIYAH YASMEEN ROBINSON: Yeah, I mean, absolutely. I think, again, COVID has done an interesting thing, which is really spotlighted the fact that 1.3% of assets under management are managed by women and people of color together, right? So that's a huge market, a massive market opportunity. And so I think both the understanding that there is a correlation between asset managers, investment teams that are more diverse and women-led actually correlate into a higher investment into some of those funds that are led by new majority and women-led companies.

And it's continuing to increase. I think on the allocator side, we get a lot of interest and a lot of coming to us to pick our brains about how can corporates and other large financial institutions and asset managers, asset allocators continue to increase investment into those types of founders.

MARQUISE FRANCIS: And I'm sure there's a lot of folks watching really wanting to know how can they get involved. So what sectors are really hot right now? And are there any particular regions in the country where you're seeing businesses really booming?

BAHIYAH YASMEEN ROBINSON: Midwest and Southeast is booming. Of course, there's been a lot of migration patterns coming out of some of the larger tier 1 cities into some of the smaller cities. And we don't know if that trend is going to increase over time or if there's going to be a bounceback to some of the larger urban centers like a New York, a Los Angeles, a San Francisco. But there's been a lot of kind of movement into the Austin, the Miami, the Atlanta markets. And so I think that's spreading some of the opportunity throughout the nation.

But I think that we'll see in terms of trends, obviously, Web3, kind of crypto, decentralized organizations is going to be something that's going to continue to increase, as well as ESG. And one of the things that our franchise and a lot of our training and education centers around is environmental and social governance. So not just making sure that there's inclusion and diversity, both in the company level and at the fund manager level, but there's also an environmental consideration as well.

ALEXIS CHRISTOFOROUS: And sort of from your perspective there at VC Include, what would you say are some of the biggest obstacles, but also some of the biggest opportunities to diversify businesses?

BAHIYAH YASMEEN ROBINSON: Well, we know that the stats are very clear. Women-led firms outperform. New majority, or some folks still say minority firms, diverse firms, outperform the market, both, again, the company level, as well as at the fund manager level. And so there's several studies that prove that from all the major financial institutions and consulting firms that manage the $70 trillion of assets under management.

I think that massive opportunity is investing into these firms and into these founders, picking the right teams, making sure that there's an ecosystem approach to investing and making sure that there's more inclusion, and therefore more opportunities to drive market rates of returns in the market, global markets.

ALEXIS CHRISTOFOROUS: All right, we're going to have to leave it there. Bahiyah Yasmeen Robinson, founder and CEO of VC Include, thanks for being here today.

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