A Recent Study Revealed That VCs are Leaving Trillions of Dollars on the Table

Morgan Stanley recently released a study called “The Trillion-Dollar Blindspot” showing that trillions of dollars are left on the table by venture capital (VC) firms who won’t invest in women and minority founders.

“I think it’s important that people start to think to themselves that we could be in fact cheating our LPs if we don’t give ourselves full access to all of the opportunities that are out there,” Carla Harris, vice chairman at Morgan Stanley told Bloomberg’s Alix Steel on “Bloomberg Daybreak: Americas.”

The report shows that only 17 percent and 18 percent of investors say they “very frequently” review startups and businesses led by women and minorities, respectively.

“When VCs are thinking about investing they say ‘no’ in most cases to women and multicultural entrepreneurs is because the product or the process or the opportunity doesn’t fit,” Harris said.

The study reports 46 percent of investors said traditional business sectors were a compelling factor when assessing a potential investment, but only 33 percent said the same about minority-led businesses.

Not only did the report show data, but it also gave VCs and investors advice on how to take advantage of the trillions of dollars left on the table by failing to invest in women and minorities.

“Make sure that you have women and multicultural investment professionals at the table, they can introduce the entity, the VC to other networks or opportunities. They can get you comfortable that it’s not really a risk,” Harris said.

Harris goes on to say that there are ample amounts of data that prove that investing in women and minority-led companies is beneficial and provides positive returns on investments. She references the 2019 Kapor Capital Impact Report that focused on disrupting the traditional VC mindset by investing in women and underrepresented startups.

“That’s all they did for the last six and a half, seven years was invest in multicultural and female founders and they beat all of the indexes,” Harris said.

Based on the data, it’s clear that venture capitalists and investors are missing out on the potential return on investments from failing to diversify their portfolios with women and minority founders.