Analysis of venture-capital funds that finance minority-owned businesses
The minority-oriented venture-capital (VC) industry is a small, but rapidly growing group of funds that specializes in investing equity capital in minority business enterprises. Major sources of funds for the minority VCs include public pension funds and banks seeking to comply with the Community Reinvestment Act. These institutional investors are clearly motivated by social returns as well as attractive financial yields when they choose to invest in minority VC funds. Yet our findings indicate that the minority VCs are earning high rates of return from their investments in minority-owned firms. Given their impressive record to date, the minority VCs appear to be positioned to maintain their rapid growth trajectory if institutional investors are forthcoming with the funding required to support this growth. urban.