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Morgan Stanley’s Carla Harris: Social Unrest Is Prompting Big VC Firms To Invest In Women and Multicultural Entrepreneurs

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Big American venture capital firms are transitioning from apathy to awareness to action when investing with companies owned by women and multicultural entrepreneurs, a fresh survey by investment banking powerhouse Morgan Stanley reveals.

That crystalized analogy comes from Carla Harris, vice chairman and co-head of the Multicultural Client Strategy Group at Morgan Stanley. She talked with BLACK ENTERPRISE about her firm’s second annual VC survey. Expressing her optimism with the report, Harris cited how attitudes and actions among 76 U.S.-based venture capital (VC) firms have changed in the last year. She says VCs today have greater willingness to invest with black and other diverse firms, enterprises that have for years and continue to struggle to gain such funding. She acknowledges those firms need capital to grow and boost their market value.

Simultaneously, the survey showed more change needs to occur. For instance, as some progress has been made since 2019, traditional VCs remain less likely than women or multicultural VCs to see the value of investing in firms founded by diverse entrepreneurs.

In general, venture capitalists often offer funding to startups or emerging small businesses that need working capital and display long-term growth potential for an equity stake.  A VC might also provide funding for older firms in financial trouble but show profitability potential after restructuring. The ante is high as the value of capital investment in the U.S. was nearly $108 billion in 2019, research firm Statista reports.

Carla Harris Morgan Stanley venture capital
Carla Harris speaking at the Morgan Stanley Senior Multicultural Leaders Conference in June 2019. (Photo courtesy of Morgan Stanley)

Harris says there are at least five points from the report that the VC industry should seriously ponder. The No. 1 point Harris says she was most encouraged about is that 75% of VCs reported it is possible to have a strategy that prioritizes diversity and doing well performance-wise. Harris claims that was not evident a decade ago when Environmental, Social, and Governance (ESG) investing was just becoming a thing.

“VCs are now saying you can prioritize this and not give up anything on returns,” Harris says.” That’s a big deal because it’s a breakthrough.”

Four other top findings from Harris:

  • 43% of VCs disclosed finding opportunities with multicultural-founded companies is a “top priority” for their firm. That is a 10% point increase from 2019.
  • 59% of traditional VCs strongly agree it is possible to have an investment strategy that intentionally invests in women and multicultural entrepreneurs while still maximizing returns. That is up from 47% a year ago. “Now you are seeing more and more reports from investors saying that these companies that were founded by people of color and women of color are outperforming companies in their portfolio as a whole,” Harris says. She noted Morgan Stanley has been talking about that the last two to three years. “VCs are now seeing this as space they want to play in,” she says. “It’s a big deal because this new information is now getting out into the marketplace.”
  • Of the traditional VCs surveyed, 61% reported that the Black Lives Matter (BLM) movement has affected their investment strategy. Along with the BLM, Harris noted the COVID-19 pandemic, the George Floyd murder and national protests have made VCs not only pay more attention to social unrest but also be more aggressive in doing business with black and other diverse firms.
  • Over two-thirds of the VCs, 68%, are more likely to invest in multicultural-founded firms in 2021. She said that percentage is significant because VC firms typically are not that forthcoming in talking about what their investment intentions are. “We thought it was a breakthrough that they were willing to report that.” She also believes that the social unrest may have impacted the firms’ responses.

Harris says she is really excited about the new optimism as it shows white, male VC investors are more likely to invest in black-owned VC firms. She says that is vital as the diverse firms can use the capital for many purposes. They can provide the funding to businesses they work with to help them perform such actions as they attract new customers, hire more people, launch new products, expand into new markets and boost manufacturing capability.

“Without new capital, you can’t  increase your company’s value.”

Yet, some obstacles exist when it comes to hiring diverse firms. Just 59% of traditional VCs, versus women (83%) and multicultural VCs (84%), are convinced it is possible to have an investment strategy that intentionally invests in women and multicultural entrepreneurs while still maximizing returns.

The survey further shows traditional VCs are much unlikely to believe it is possible to maximize profits by investing in diverse entrepreneurs and they are doubtful to have taken actions to address racial representation among their portfolio company founders.

The online survey was conducted for Morgan Stanley by Brunswick Group in August 2020. The VCs questioned were almost exclusively leads or co-investors with an average equity check size of $2.65 million.  The profile of survey respondents is included in the report.

So, the next big question — and perhaps the biggest challenge — is if traditional VC firms will do what they reported they will do with black and other multicultural firms moving forward.

Harris says the true test will be to see if there are markedly different outcomes with those firms when the New York-based investment bank does its next VC report.

“Morgan Stanley will be looking at how many VCs actually did more business with black VCs and how much more capital was invested in those firms,” Harris said. “I think a year from now will tell us a lot. I am  optimistic that this is more than a moment.”

 

Lyron Foster is a Hawaii based African American Musician, Author, Actor, Blogger, Filmmaker, Philanthropist and Multinational Serial Tech Entrepreneur.

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Best Stocks To Buy Now? 4 Cyclical Stocks To Consider

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While the economy appears to be on the uptrend, could these cyclical stocks follow suit?

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Today is Malbec World Day. This is how it is celebrated in Mexico

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Wines of Argentina celebrates the eleventh edition of Malbec World Day with a Mexico online store. The festivities run from April 15 to May 15.

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Vegan Fried Chicken Entrepreneur Rejected $1 Million Shark Tank Offer; Acquired Multi-Million Dollar Facility to Expand Company Vision

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California entrepreneur Deborah Torres pitched her vegan fried chicken on season 11 of ABC’s hit TV show “Shark Tank.”

Torres offered the Sharks a $500,000 investment opportunity in exchange for a 10% stake in the company. Instead, billion-dollar investor Mark Cuban decided to partner with guest shark Rohan Oza and offer $1 million for 100% of the company. Torres would receive a 10% royalty.

Torres rejected the offer. Recently, her company acquired a multi-million dollar former food production warehouse in a San Diego Opportunity Zone to expand their vision.

“We are so blessed and excited to acquire our own warehouse facility while still maintaining 100% ownership of the company. I have God, my family, our team, and our awesome fans and customers alike to really thank for the incredible support. Dreams really do come true when you don’t give up or let someone steal your imagination. This is only the beginning,” said Torres told Times of San Diego.

Vegan Fried Chicken Entrepreneur Turned Down Shark Tank Offer

When Torres introduced her fried vegan chicken to the Sharks, they immediately fell in love with it. “This batter is extremely tasty,” shark Lori Greiner said. “It’s got some zip to it.”

“You fooled me,” Barbara Corcoran said.

The Sharks bought into the idea of fried vegan chicken but challenged the financials that Torres delivered.

“On [Shark Tank] there were many edits of conversations to make it appear that I wasn’t intelligent enough for obvious dramatic effects of the ‘shocking’ ending,” Torres told VegNews.

She felt that her appearance on Shark Tank did not accurately portray her business acumen. Torres graduated from high school at 15 and received her first degree at 17.

“I think God works in mysterious ways because what was meant to harm me propelled me to where I am today—the proud and sole owner of the world’s largest vegan fried chicken manufacturing company and 100-percent owner of a multi-million dollar manufacturing facility.”

Torres felt that the Shark Tank offer was not a reflection of the true value of her company. In 2019, she declined the offer and now she projects exponential growth for the company going forward.

Giving Birth to a Plant-Based Brand

Deborah Torres is the founder of Atlas Monroe. The plant-based company specializes in fried vegan foods. According to VegNews, Atlas Monroe is on track to become the largest manufacturer of deep-fried vegan chicken in the world.

What motivated the creation of vegan fried chicken? Her father’s type 2 diabetes diagnosis. Torres decided to experiment with a vegan diet. One of her main priorities was to develop delicious foods that were healthy.

“My whole family and I went on a raw, vegan and organic diet for 90 days. We grew really ‘hangry’ at each other from just eating salads and fruit salads,” Deborah told CNBC. “After the 90 days, [my father] was completely healed. We vowed to stay organic, plant-based and natural. We continued to experiment, and Atlas Monroe was born.”

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