Why Investing in Women and People of Color is Essential for the Future

Author: Selena Simmons, Cortado Ventures Summer Intern, 2024

In the complex world of entrepreneurship, the conversation around diversity and inclusion has gained significant momentum. As society becomes increasingly aware of the disparities that exist within various sectors, there’s a growing recognition that investing in startups founded by women and people of color (POC) is not just a moral imperative, but a strategic advantage.

Driving Innovation and Creativity

Diversity fuels innovation. When people from different backgrounds come together, they bring unique perspectives, ideas, and problem-solving approaches. Women and POC entrepreneurs often identify market needs and opportunities that others might overlook due to their distinctive personal and professional experiences. For example, Myri Health and Bloomer Tech, both founded by women of color, address postpartum depression and develop technology for cardiovascular care and data services with female physiology at its core.

Cortado Ventures, a venture capital firm that invests in startup technology companies in the midcontinent, has an investment portfolio that consists of around 40 companies, and of those, 36.73% have a female founder or executive and 40.82% have a member of an ethnic minority on the executive team. This is a step in the right direction as studies have been shown that female-founded companies received only 2% of venture capital in 2023. Susan Moring, Principal at Cortado Ventures, stated, “When you have people with diverse backgrounds and experiences at the table, you’ll have more interesting and unique innovations,” which is apparent in Cortado’s investments. These portfolio companies range from male-owned software companies to female-owned fertility care companies. In other words… the more perspectives brought to the table, the more ground you will cover, and the more likely you are to succeed. By investing in startups founded by people with varying worldviews, we open doors to groundbreaking products and services that can completely change industries, the market and the world.

Economic Growth and Stability

The entrepreneurial landscape, like many others, has long been dominated by a narrow demographic — resulting in significant equity gaps and potential missed opportunities. Women and POC entrepreneurs face systemic barriers, such as limited access to market and capital, bias and discrimination, and the lack of mentors and representation within the industry. However, trusting and investing in diverse startups is essential for overall economic and societal growth. As of 2023, the top quartile of companies with diverse leadership are 39% more likely to financially outperform their less diverse peers.

In addition to that, a study by Credit Suisse Research Institute shows 26% of companies with at least one woman on the board have outperformed their competitors with no women on the board. By supporting women and POC entrepreneurs, we are enabling their individual success, driving economic prosperity and encouraging other women and POC to take jumps in their industries. Not only does this create a more fair playing field, but also increases innovation and creativity, expands customer bases, improves financial performance and attracts more talent. All of this growth leads to job creation and increased consumer spending.

Aligning with Consumer Values

Today’s consumers are increasingly socially conscious and supportive of brands that align with their values and identities. 70% of today’s consumers believe it’s important for brands to take a public stand on social and political issues. Companies that prioritize diversity and inclusion in their employees, such as Progressive, are able to reach and relate with a more diverse audience. 20% of Progressive’s senior leadership is people of color, and of the 15,000 new hires in 2023, 67% were women and 56% were POC.

By investing in women and POC startups, investors are connecting to this market demand and creating loyalty and trust among consumers who want to support inclusive and representative brands.

Access to Unexplored Markets

Investing in women and POC startups provides access to markets that may have been overlooked or overshadowed such as ethnically inclusive beauty and fashion products, language-specific education and healthcare, and financial literacy for minority citizens. These entrepreneurs often serve underrepresented communities with distinct needs and preferences. By supporting these businesses, investors gain entry into niche markets with significant growth potential. This benefits both parties by offering a competitive marketing edge and diversifying the investor’s portfolio, and by providing marginalized communities with possible new products/services that can change their quality of life.

Conclusion

The future of entrepreneurship is bright, and it is incredibly diverse. Investing in women and POC is not only an ethical choice but also a smart business decision. It drives innovation, fosters economic growth and meets consumer demand. As we move forward, it’s crucial for investors, policymakers and society at large to recognize and support the invaluable contributions of diverse entrepreneurs. We will create a more inclusive, equitable and prosperous future for everyone.

About Cortado Ventures

Cortado Ventures is an early-stage venture capital firm that invests in ambitious, growth-driven companies to define a new generation of economic prosperity for the Midcontinent region. As one of the largest VC funds in Oklahoma, Cortado’s focus is on tech companies bringing innovative solutions to the energy, logistics, life sciences, aerospace, and the future of work sectors. For more information, visit cortado.ventures.