Traits and Performance of the Minority Venture-Capital Industry.

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 industiy. [ABSTRACT FROM AUTHOR]