Causal VCs bridge investments disparities for British founders of colour, but what more can be done to support those who require nuanced support?
1 in 5 Brits Denied Investment Based on Identity
The lack of diversity in Britain’s start-up ecosystem mirrors that within Britain’s investor community, with new research suggesting multi-ethnic owned startups only receive 0.24% of total fund allocations for UK-based start-ups. Although there are numerous dedicated causal funds set up for founders of colour in the UK – such as Google’s Black Founders Fund and Salonica Maroon’s £75m fund – they represent a fraction of an investment market which saw £12.4bn invested in UK startups throughout the first half of 2022 alone.
Whilst causal VC’s provide an essential path to bridging investment disparities across the UK’s private sector, there are fears that founders from certain minority communities are still overlooked in both investment opportunities and nuanced financial support due to a culture of classing all ethnic minority Brits in the same bracket.
To highlight how detrimental this oversight is, QU – leaders in business coaching for disenfranchised founders – has commissioned nationally representative research which found how barriers to accessing finance for founders of colour varied across different ethnic minority cultures in the UK.
Many Ethnicities Still Rejected By Large-Scale Investors
Reinforcing the notion that different experiences in raising finance is symbolic of the need for nuanced advice, the first-of-its-kind national study from QU unveiled that a staggering 34% of Asian-Brits & 38% of Black-Brits agreed that large-scale investors won’t consider them a viable investment opportunity.
Emphasising the roadblock that founders of colour face from the outset, a further 35% of Asian-Brits & 31% of Black-Brits respectively stated that they had to resort to friends and family in order to secure investment to scale their business. QU’s data demonstrates the importance of community support networks for scaling amongst founders of colour. This points to the fact that community experience and sentiments play a pivotal role in scaling growth, and thus needs to be replicated by wider investment funds that invest into founders of colour.
Mirroring this sentiment, QU’s findings has unveiled that 49% of British-Asian business owners state they stopped working on their enterprising idea because they’re unable to raise funding, with a further 39% of British-Black business owners from ethnic minority communities stating the same, with disparities emphasising the notion of varied experiences.
In light of this, QU’s co-founder – Marla Ubhi – argues that there is a clear need for a diversified investment strategy across all sectors to actively elevate ethnic minority owned businesses to scale-up status within the UKs startup ecosystem, rather than a need to develop dedicated funds which do not address the wider issue of the fundamental lack of access to finance for the wide range of communities and heritages that make up Britain’s ethnic minority population.