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Diversity isn't a priority for investors, report finds

A Morgan Stanley report shows that investors don't see a funding gap for businesses owned by women and minorities, but the money doesn't add up.


Morgan Stanley's report focuses on investors and their perceptions about diversity. 

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If you ask the majority of investors, there's no funding imbalance for women and minority entrepreneurs. 

According to a Morgan Stanley report out Tuesday, women and minority business-owners tend to receive less funding than their white male counterparts. However, about eight out of 10 investors think women and minority entrepreneurs get either the right amount or more capital than their business models deserve.

The report, titled "The Growing Market Investors are Missing: The trillion-dollar case for investing in female and multicultural entrepreneurs," surveyed more than 200 "gatekeepers of capital" and found out that diversity just isn't much of a priority. 

The survey comes amid increased talk of inequality in the tech industry, ranging from the percentage of women and minorities at tech companies to who exactly gets the money to start businesses. Data from VC database Pitchbook from January showed that women founders got about 2 percent of venture capital money in 2017. The Morgan Stanley report found the median investment by equity investors sits at about $1 million. But for women-owned businesses it's $213,000 and for minority entrepreneurs, it's $185,000.

The report also reveals a potentially significant challenge to changing any of that. 

"Investors have to see the funding gap before they can fix it," Carla Harris, Morgan Stanley's vice chairman for global wealth management, said in a statement. 

About 40 percent of men surveyed said investing in women-owned businesses isn't a priority, compared with 7 percent of women. Along those lines, 31 percent of white investors said investing in minority-owned businesses isn't a priority. 

Investors also acknowledge holding women and minority entrepreneurs to different standards: 24 percent and 23 percent said they look for confidence from women- and minority-owned businesses, respectively. That's 10 percentage points higher than when considering businesses in general.

There's an economic cost to the prevailing attitudes. The report found that if "number of women and minority-owned businesses and portion of revenues matched their percentage in the labor force," their combined annual revenue could be as much as $4.4 trillion higher.

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