Diversity Trends in Small Business Investing

Maria Contreras-Sweet, administrator of the U.S. Small Business Administration and the voice of small business on President Obama’s Cabinet, last month heralded the release of “Measuring the Representation of Women and Minorities in the SBIC Program,” a groundbreaking SBA study showing the racial and gender makeup of investment boards is tied directly to investment decisions they make, especially with regard to the race and gender of the owners of companies in which they invest.

Contreras-Sweet highlighted the importance of the findings, saying, “I have made it a top priority as SBA Administrator to ensure that firms led by women and underrepresented groups are able to reach their full potential. I know some of these challenges firsthand. Unfortunately, startups owned by women and minorities often face an even more daunting challenge accessing the capital they need to grow and prosper. This study confirms that challenge but it also shows that we can expand opportunity and increase our overall economic strength by ensuring more women and underrepresented groups are in a position to make major investment decisions.”

The report measuring the representation of women and minorities in the Small Business Investment Company program was produced by Dr. John Paglia, associate dean and professor of finance at Pepperdine Graziadio School of Business and Management, and Dr. David T. Robinson, professor of finance at Duke University Fuqua School of Business, senior strategist for research for the Duke Innovation & Entrepreneurship Initiative and an advisory board member for the Private Equity Research Consortium. Underlying research was conducted by the Federal Research Division of the Library of Congress.

During the event, Contreras-Sweet also announced a new public-private partnership with LinkedIn and other organizations called Open Network for Board Diversity (ONBOARD). This coalition will work to expand the presence of underrepresented groups on high-growth, small-business advisory boards and boards of directors and increase diversity in small-business leadership, particularly for those supported by Small Business Investment Companies. With more than 450 million members and more than two million groups using its service, LinkedIn is able to provide a platform to convene organizations and leaders who have committed to increasing access for diverse candidates to join boards. Active members of the group will benefit from exposure to Small Business Investment Companies (SBICs) and member institutions as well as information and insights shared by other members of the group. As a community-led initiative, the partner organizations will be able to help contribute and curate relevant content and participation.