Causal VCs bridge investments disparities for British founders of colour, but what more can be done to support those who require nuanced support?
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1 in 5 Brits Denied Investment Based on Identity
The lack of diversity in Britain鈥檚 start-up ecosystem mirrors that within Britain鈥檚 investor community, with new research suggesting multi-ethnic owned startups only receive 0.24% of total fund allocations for UK-based start-ups.听Although there are numerous dedicated causal funds set up for founders of colour in the UK 鈥� such as Google鈥檚 Black Founders Fund and Salonica Maroon鈥檚 拢75m fund 鈥� they represent a fraction of an investment market which saw 拢12.4bn invested in UK startups throughout the first half of 2022 alone.
Whilst causal VC鈥檚 provide an essential path to bridging investment disparities across the UK鈥檚 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听鈥� 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听first-of-its-kind national study听from QU听unveiled that a staggering听34% of Asian-Brits听&听38% of Black-Brits听agreed that large-scale investors won鈥檛 consider them a viable investment opportunity.
Emphasising the roadblock that founders of colour face from the outset, a further听35% of Asian-Brits听&听31% of Black-Brits听respectively听stated that they听had听to resort to friends and family in order to secure investment听to scale their business. QU鈥檚 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,听QU鈥檚 findings听has听unveiled that听49% of听British-Asian business owners state they stopped working on their enterprising idea because they鈥檙e unable to raise funding, with a further 39% of听British-Black听business owners from听ethnic minority communities stating听the same, with disparities emphasising the notion of varied experiences.
In light of this, QU鈥檚 co-founder –听Marla Ubhi – argues that there is a clear need for a diversified investment strategy across all sectors to actively elevate听ethnic minority owned businesses听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听the wide range of communities and heritages that make up Britain鈥檚 ethnic minority population.
