Jul. 16–The diverse nature of minority businesses has made them more profitable investments, according to a major national study of minority venture capital released today.<\/p>\n
While many venture capital firms were placing their bets on high-tech firms in the early ’90s, minority-oriented venture capital funds were investing in a wide range of businesses. Minority enterprises tend to be in basics such as manufacturing, which made the funds less vulnerable when the Internet bubble burst.<\/p>\n
“What looked like a liability in the latter part of the ’90s has turned out to be an asset,” said Rhonda Holman, who oversaw the “Minorities and Venture Capital” report for the Ewing Marion Kauffman Foundation.<\/p>\n
An important finding for minority enterprises and their funds is that the report shows investments in minority-oriented venture capital are as lucrative as other venture capital investments, Holman said.<\/p>\n
Marie Gill, whose firm operates the Miami\/Fort Lauderdale Minority Business Development Center, said the Kauffman report confirms what she already knew. “We keep telling folks minority business is good business and this is a prime example of that.”<\/p>\n
She said venture capital monies have eluded minority firms for years. “If we get it we’ll make good with it,” Gill said. “The minority community is growing. This is where the economy is.”<\/p>\n
Minority venture capital funds now have about $2 billion under management. The funds reviewed in the study were most heavily invested in communications, followed by manufacturing, wholesale and retail trades, services and medical businesses.<\/p>\n
In its analysis of 24 venture capital funds, the average gross yield per firm was $1.6 million, generating an average net return of $1 million. That allowed the venture capital firms to make an average investment of $562,400 in minority enterprises.<\/p>\n
Also telling was that the minority-oriented funds were not dominated by a few highly profitable deals. Of the 117 investments, 54.7 percent yielded positive returns.<\/p>\n
The venture capital funds primarily got their funding from public pension funds.<\/p>\n
That makes sense, said Michelle Garcia, a founder of Emerging Venture Network, which works to educate minority entrepreneurs about venture capital. Pension funds have turned to minority enterprise funds because they are diversified. “Substantial returns but a lot less risk,” she said.<\/p>\n
Garcia said another factor in the minority enterprise funds’ success is they are national in scope. That made the funds less affected by regional economic problems.<\/p>\n
There has not been enough contact between old-line venture capital firms and minority entrepreneurs, Garcia said. She hopes the Kauffman report makes a difference in investors’ attitudes.<\/p>\n
“There has been a perception that minority entrepreneurs are not as profitable. As facts accumulate, I think people’s views change, but it takes awhile.”<\/p>\n
—–<\/p>\n
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(c) 2003, South Florida Sun-Sentinel. Distributed by Knight Ridder\/Tribune Business News.<\/p>\n","protected":false},"excerpt":{"rendered":"
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