Transcripts For CSPAN3 Hearing On Barriers To Investment In

This Committee Hearing runs just over when we look at the founders of companies that received this Investment Fund and there is an obvious trend towards white males. A lack of diversity is a trend in any industry that Venture Capitalists invest in it is troubling in this space. A significant number of fintech target women and people of color. Cryptocurrency companies which froze all customer deposits while on the other hand women and founders of caller with well thought out, substantive Business Plans remain in the waiting room. Black founders of matter and rethink impact are working to address the diversity gaps. It should not be on these funds to pick up the slack. Large Venture Capital firms to s and workforces to reflect the country. Consumer companies claim to serve. Additionally, founders should not be limited to Impact Investing while formative Diversity Efforts four Diversity Efforts when it makes sense to diversify. Industry advocates have argued for looser regulatory arguments. Claimant accredited claiming accredited investor requirements are the bane of diversity. I welcome policy approaches such as reporting requirements and a scorecard that would push Venture Capital to abandon the Old Boys Club culture. The exclusive culture to determine where and who they invest in. As we approached the slowdown in Economic Growth and Venture Capital is drying up in some spaces, how will we ensure that women and founders of caller are not further left out of the space color are not further left out of the space . I know from their experience and work that they care deeply about the issue, this issue for their willingness to share their perspectives. I recognize my friend and Ranking Member mr. Davidson for five minutes for his opening statement. I would like to welcome all of our Witnesses Today. We appreciate your time and testimony. The ability to raise capital is the growing stone cornerstone of any growing economy. America holds 50 of the worlds investment capital. I am concerned that america is losing the edge of my gifts is nearly 25 of global gdp. It has given us the best markets for goods, services, capital, intellectual property, and more. America has dominated the industrial revolutions, computing, internet, and more. As we look at fin tech, we see in action by congress and over action by the sec fcc driving capital generation offshore. The liquidity in this space is offshore. We need to look at how do we get more of the capital here in the United States of america even though an of the founders are either i think we can agree that this has had negative consequences. The quarters of Venture Capital goes to founders in three states, california, massachusetts, and new york, likely contributes to the diverse lack of diverse funders that receive funding. Due to the geographic concentration and the existing networks. What are the downstream effects. . See founders outside of the d. C. Locale struggle to raise capital, usually 310,000,000 dollars. We have funding from investors focused on growth and scale. This only compounds the lack of diversity in the long run. Republicans have introduced bills that will enhance Capital Formation so that more minority and women owned the store can get off of the ground some of these ideas include the improving capital allocations for newcomers act from mr. Timmons. This bill codifies the recommendation from the Small Business Capital Formation Advisor Committee and what increase the number of investors to help fund and invest in more entrepreneurs in their own community. Many of whom are women and minorities. Developing our aspiring leaders, this bill would expand the spoke of qualifying investments allowing large funds to deploy more capital to smaller funds. This bill would create a new micro Offering Exemption to allow broader access to capital for emerging entrepreneurs and Small Businesses. We have bills to deal with the accredited investor rule which basically says you cannot make investments in these companies unless you have already made a lot of money. People are people are people are barred. This would be one of many remedies we could supply. One of the most important things we could do in this accredited investor space is undone and an issue in congress where it is not in the founder community. I look forward to hearing from our Witnesses Today and i are those on the panel who have worked incredibly hard to build successful businesses. With that i yield back. I yield back. You i very much. Thank you very much. We welcome a panel of distinguished witnesses and we are thankful for their presence. We have the ceo of aloe vest alovest. We had a cofounder of esuzu. We have the founder of black founders matter. We have the managing partner of rethink impact. We have mariam, the executive director of venture forward. When this is reminded that their oral testimony will be limited to five minutes. I would ask you be mindful of the timer so that we can be respectful of both your colleagues and witnesses and the Committee Members time. Your written statements have been made part of the record. You are recognized for five minutes to give an oral presentation of your testimony. You white. Thank you. Thank you for the opportunity to testify today. I have spent my career on wall street as a cfo, i am a data ceo. We are the Financial Planning platform for women. A mission to get more money in the hands of women. We are a diverse company. In an industry in which Leadership Teams are 30 23 percent women, we are 84 . In an industry in which the Leadership Teams are 11 people of color, we are 50 with a similarly diverse board. We count among our investors rethink impact represented here today. Penny pfbs capital. And women run angel investing groups like this. We have completed a 53 million capital raise, making us the very rare woman run fin to reach the milestone. We have gone over the numbers but they are worse than you say. 1 of fintech dollars, that means you can count limit run fintechs on your women run fintechs on your fingers. Some specifically targeted the represented founders. This is not translated into later state funding. It can be capitalintensive. In my experience it is because few women investors are enrolled to write bigger checks and because this is a pretty guarded, raising earlystage capital can sometimes make it harder for women ceos to get the next round of funding. As Research Indicates this is poor bias on the assumption that you are not good enough to get funding from the guys. Women run businesses provide as good or better result than all mill teams. The implication is significant given that Financial Services are our economys lifeline. I will give you a thought experiment. Do you think it is a coincidence with a 98 of Mutual Fund Assets managed by men and 86 of Financial Advisors being men that women report they are not well served by the industry. Or that when i was running merrill lynch, and then trusted their Financial Advisor more than their doctor. Women closed their account after their spouses death. Is it an coincidence that we are the only wealth tech app with was of the downloads by women at about 95 . Versus the 20 and 30 for the others . This is not because women are not good at math or do not like to invest more they are riskaverse. There is zero evidence of that. It is a story we tell ourselves to explain why women are not engaging. The issue is that few companies focus on womens needs. It is because Women Entrepreneurs start a funding. Your constituents invest less of their money, losing out on market returns and causing them hundreds of thousands of dollars. For some, millions of dollars over their lives. This is why the gender wealth gap is at 32 cents for a white womans white mans dollar. Some of your women constituents are not a toxic relationship that they cannot leave, dead and drops that they cannot quit, they do not have the money. I do not think any of us want that for our daughters. It also blocked Economic Growth. The dollar is not spent on Small Businesses in your hometown. The political contribution is not made. That is be clear, the solution is not for women are norse to work harder. 2 of venture builds means there is 50 more investor meetings and earnings models. 50 more time away from the business. We got here by doubling and tripling down on the women, raising some of our realms through specialpurpose vehicles. Often sponsored by the minute investors. They got access to a later stage deal in a strongly performing intact that they would not have otherwise have. A win win, 70 plus have new investors from underrepresented groups. Unheard of at our stage. We live to fight another day, working to get more money in the hands of women. Thank you. Next we have you, your recognized for five minutes to give an oral presentation. Thank you so much. Members of the committee, a thank you for this opportunity to appear before you today. I want to express my deepest gratitude to the staff for your tireless effort. I am the cofounder and coceo of harlem based companies. This is one of the few black owned start ups in the world to be valued at a billion dollars. When i started in the slums in nigeria i lost my father at the age of two, my mother, and my sister raised mate. In 2009 i migrated to 22 degrees in minnesota. My mother and i will try and turned away from major banks because we do not have a credit score. My mother pawned my fathers wedding ring and borrowed money from Church Members to afford my first year of college. I cofounded esusu. Your financial identity should never determine where you end up in the world. Credit is fundamental to find stability and upward mobility. Financial exclusion makes American Dreams unattainable for millions. And it released by the Consumer Protection bureau confirmed that approximately 45 million americans are credited as unsupportable. Americans spend an average 1100 in rent, over 1. 44 trillion annually. That is their largest expense. Over 90 of renters do not get credit for paying rent on time. In two financial exclusion. This helps bridge the gap by reporting on payments to the three Credit Bureaus, helping renters establish and improve credit scores. This would help them unlock quality financial products. When renters encounter hardship and cannot afford to pay rent we also pay them with their interest microloans to keep them and their families in their homes. Investments and never spent text, according to forbes, u. S. Contact is a combined 162 billion. In 2021, a Venture Capital investment reached 35 billion. What male led start ups received over a 70 of investments compared to 1 for black founders. This fact shined a light on the realities of investments in intact landscapes in fintech landscapes. I offered three thoughts on what obstacles persist. People stay with people that they know it. It is 5 of patient investors are women, black, or capitalist. They understand the mission and generate unrealized return from being with us since day one. Due to the implicit or unconscious bias, many investors do not consider people of color to be entrepreneurs. I spoke to 326 investors before we had a one bit on us. Investors struggle to relive the problems that we seek to solve. Our personal experience is to be under banked. They are likely to be less of interest to them. I would recommend asking institutions under the purview of the committee to implement solutions. Create tax incentives to establish banks and Credit Bureaus to work with and adopt technologies developed by minority owned startups. Create tax incentives established by Venture Capitalists to place investments that minority and immigrant startups. Tax Regulation Services sectors engage in minority owned startups so that founders can share their perspectives and challenges. I believe investing in a minority for Tech Companies can generate outsized returns and have profound impacts on many. The Company Funded by the sons of immigrants is valued at 1 billion. Our story is only possible if you want to go fast, you go alone. If you want to go for, you got together. Working together to make the union more perfect. Let us be trying. You have a remarkable story. We have mr. Michelle, you are now recognized for five minutes to give an oral presentation of your testimony. Thank you. I am the founder of the black founders matter find, i am an passionate advocate and it is my honor to share my thoughts and observation on this timely matter. Much like the illegal end of slavery and the racial integration and affirmative action, our Society Needs accountable methods to facilitate positive change. You see how we have not i am nervous. It is nerveracking. Even though we have seen these put into place in our society they have not created parity for all of us. It has pushed social progress forward. We need measurable intentionality to be able to do that. What i am asking that you consider is holding a Venture Investment accountable to finally integrate in a meaningful way. We have nothing integration in this state. Have been many empty vows to improve the statistics we see, however there has been no Significant Movement or bringing founders into their portfolios. This month, i decided to take action. I launched the pledge for venture funds to make a real and measurable commitment to change. This pledge entailed investing 25 of the current fund in a startup led by bipoc women and to hire within their funds 25 bipoc women as well. When you do see change in the space and representation both in the portfolio and also within the firm itself. This was done with the clear objective for all people to work towards. We will not see any change. Technology culture had weakened our economy and limited the solution that the First Founders are creating. The important connection to that is that our lived experiences that have diverse patterns are able to bring to the companies that they create and have their communities in focus on creating such products and services. In my experiences, i have learned the importance of what you have to be intentional. After making the first five investments from our front i realize we had only made investments in black men. He made an effort to only the deals bite black women. This led to some of the biggest deals were able to get into, invest in olympic legends, and other incredible women. We were able to invest alongside the Serena Williams and this came from making a concerted effort to focus on female founders. Our communities have little choice in the Financial Institutions and companies that serve us. Fintechs who target our communities without connections is a form of financial manipulation. Without any accountability, it will continue to occur. We have seen women prove themselves to be more capable and yield higher returns and should increase interest in such ventures. Working with founders exists outside of the comfort zone for these funds. These funds have a benchmark based on what they already know and what already exists. When you bring in the founder, parking problem solving from a different direction, it does not benchmark with them. Much like when cities and municipalities realize what a revitalized district and neighbor puts in, they provide incentives to attract investment. I agree with my previous speaker around creating incentives in order to bring more investment specifically to founders of caller and also to emerge find mine emerging Fund Managers are working to solve this gap specifically. We have seen there are more emerging funds and a specific focus on the missed opportunities. These funds the more capital and investors and an incentive to bring them altogether. Are there ways to incentivize funds to focus on the gap . Is there money to be created for emerging funds . I believe that it takes multiple approaches to tackle the disparity. This committee is esteemed, there are policies that will transform not only what can happen now but for generations to come. Creating metrics for funds, funding for emerging funds that are focused on the space and incentivizing investment in these funds will push the needle forward. What makes our country remarkable is the ability to push forward and continue to grow. We have missed abramson missed abramson. Welcome. Welcome and the esteemed member of the task force, as the managing partner of rethink impact, the largest Venture Capital fund in the u. S. Investing in female and nonbinary ceos, i am honored to be here with you today. To give you a brief context, before i became a Venture Capitalist i was a technology ceo. The only woman on a given state. As a data nerve from stanford i researched the numbers and le