IDEAS home Printed from https://ideas.repec.org/a/sae/anname/v613y2007i1p95-107.html
   My bibliography  Save this article

Traits and Performance of the Minority Venture-Capital Industry

Author

Listed:
  • Timothy Bates

    (Wayne State University)

  • William Bradford

    (University of Washington Business School, Seattle)

Abstract

This study analyzes the performance of investments made by venture-capital (VC) funds that specialize in financing minority business enterprises (MBEs). Existing studies document that MBEs have less access to financing—equity as well as debt—than similarly situated firms owned by nonminority whites. The apparent existence of a discriminatory financing environment creates an underserved market and, hence, attractive opportunities are available to firms capable of identifying and serving MBE financing needs. Analyzing cash-flow data on VC investments, we find that the minority-oriented funds earned yields on their realized equity investments that were slightly higher than the returns reported by mainstream VC funds. Considering differences in methodologies used to generate rate-of-return data for the MBE—as opposed to the nonminority-oriented funds—we conclude that the minority VC funds are earning yields on their realized investments that are at least equivalent to those of the broader VC industry.

Suggested Citation

  • Timothy Bates & William Bradford, 2007. "Traits and Performance of the Minority Venture-Capital Industry," The ANNALS of the American Academy of Political and Social Science, , vol. 613(1), pages 95-107, September.
    • Handle: RePEc:sae:anname:v:613:y:2007:i:1:p:95-107
    DOI: 10.1177/0002716207303580
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0002716207303580
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0002716207303580?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162, September.
    2. Ken Cavalluzzo & John Wolken, 2005. "Small Business Loan Turndowns, Personal Wealth, and Discrimination," The Journal of Business, University of Chicago Press, vol. 78(6), pages 2153-2178, November.
    3. Timothy Bates & William Bradford & Julia Sass Rubin, 2006. "The Viability of the Minority-Oriented Venture-Capital Industry Under Alternative Financing Arrangements," Economic Development Quarterly, , vol. 20(2), pages 178-191, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Timothy Bates & William D. Bradford & Robert Seamans, 2018. "Minority entrepreneurship in twenty-first century America," Small Business Economics, Springer, vol. 50(3), pages 415-427, March.
    2. Timothy Bates & William Bradford, 2009. "The impact of institutional sources of capital upon the minority-oriented venture capital industry," Small Business Economics, Springer, vol. 33(4), pages 485-496, December.
    3. Robert W. Fairlie, 2013. "Minority and immigrant entrepreneurs: access to financial capital," Chapters, in: Amelie F. Constant & Klaus F. Zimmermann (ed.), International Handbook on the Economics of Migration, chapter 8, pages 153-175, Edward Elgar Publishing.
    4. Robert Fairlie & Alicia Robb & David T. Robinson, 2022. "Black and White: Access to Capital Among Minority-Owned Start-ups," Management Science, INFORMS, vol. 68(4), pages 2377-2400, April.
    5. Agier, Isabelle & Szafarz, Ariane, 2013. "Microfinance and Gender: Is There a Glass Ceiling on Loan Size?," World Development, Elsevier, vol. 42(C), pages 165-181.
    6. Alicia M. Robb & Robert W. Fairlie, 2007. "Access to Financial Capital among U.S. Businesses: The Case of African American Firms," The ANNALS of the American Academy of Political and Social Science, , vol. 613(1), pages 47-72, September.
    7. Julia Sass Rubin, 2011. "Countering the Rhetoric of Emerging Domestic Markets: Why More Information Alone Will Not Address the Capital Needs of Underserved Communities," Economic Development Quarterly, , vol. 25(2), pages 182-192, May.
    8. Fausto Hernández-Trillo & Ana Laura Martínez-Gutiérrez, 2022. "The Dark Road to Credit Applications: The Small-Business Case of Mexico," Journal of Financial Services Research, Springer;Western Finance Association, vol. 62(1), pages 1-25, October.
    9. Moro, Andrea & Wisniewski, Tomasz Piotr & Mantovani, Guido Massimiliano, 2017. "Does a manager's gender matter when accessing credit? Evidence from European data," Journal of Banking & Finance, Elsevier, vol. 80(C), pages 119-134.
    10. Lloyd Blanchard & Bo Zhao & John Yinger, 2005. "Do Credit Market Barriers Exist for Minority and Women Entrepreneurs?," Center for Policy Research Working Papers 74, Center for Policy Research, Maxwell School, Syracuse University.
    11. Robert W. Fairlie & Alicia M. Robb, 2008. "Race and Entrepreneurial Success: Black-, Asian-, and White-Owned Businesses in the United States," MIT Press Books, The MIT Press, edition 1, volume 1, number 026206281x, December.
    12. Timothy Bates & William D. Bradford & William E. Jackson, 2018. "Are minority-owned businesses underserved by financial markets? Evidence from the private-equity industry," Small Business Economics, Springer, vol. 50(3), pages 445-461, March.
    13. Isabelle Agier & Ariane Szafarz, 2011. "Credit to Women Entrepreneurs: The Curse of the Trustworthier Sex," Working Papers CEB 11-005, ULB -- Universite Libre de Bruxelles.
    14. Chowdhury, Shyamal & Ooi, Evarn & Slonim, Robert, 2017. "Racial discrimination and white first name adoption: a field experiment in the Australian labour market," Working Papers 2017-15, University of Sydney, School of Economics.
    15. Judith K. Hellerstein & David Neumark, 2003. "Ethnicity, Language, and Workplace Segregation: Evidence from a New Matched Employer-Employee Data Set," Annals of Economics and Statistics, GENES, issue 71-72, pages 1-15.
    16. Anthony Edo & Nicolas Jacquemet & Constantine Yannelis, 2019. "Language skills and homophilous hiring discrimination: Evidence from gender and racially differentiated applications," Review of Economics of the Household, Springer, vol. 17(1), pages 349-376, March.
    17. Hirsch, Boris, 2007. "Joan Robinson Meets Harold Hotelling : A Dyopsonistic Explanation of the Gender Pay Gap," Discussion Papers 51, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    18. Kevin Lang & Ariella Kahn-Lang Spitzer, 2020. "Race Discrimination: An Economic Perspective," Journal of Economic Perspectives, American Economic Association, vol. 34(2), pages 68-89, Spring.
    19. Louis Alessi, 1974. "Aneconomic analysis of government ownership and reculation," Public Choice, Springer, vol. 19(1), pages 1-42, September.
    20. Lorenzo Ductor & Sanjeev Goyal & Anja Prummer, 2018. "Gender & Collaboration," Working Papers 856, Queen Mary University of London, School of Economics and Finance.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:anname:v:613:y:2007:i:1:p:95-107. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.