Credit: Charles Forerunner, StockSnap
Credit: Charles Forerunner, StockSnap

New research from the U.S. Small Business Administration (SBA) affirms that increased representation for women and minorities in the venture-capital world is good for female entrepreneurs.

The SBA oversees the U.S. Small Business Investment Company (SBIC) program, which was designed to improve access to venture capital for small firms. And the program is putting its money where its mouth is — since its inception in 1958 through December 2015, it has deployed an estimated $80.5 billion in capital through about 172,800 investments.

SBA officials sought to better understand how diverse the SBIC program — and the larger VC world — is, and how female and minority representation impact investment decisions. So the SBA’s Office of Investment and Innovation teamed up with Federal Research Division of the U.S. Library of Congress and several financial scholars to process data collected by the SBA, compare them to outside data on the broader VC world from sources like investment resource Pitchbook, and publish its findings.

“The goal of this report is to contribute to a growing body of knowledge about gender and racial diversity in the venture-capital and private-equity arenas,” wrote the authors of the report, which was released last week.

The effort reveals that gender diversity is, slowly but surely, on the rise — particularly among SBIC program participants. In all, 11.9 percent of SBICs had women investors on their payroll, while in the larger VC world, 7.9 percent of firms could say the same. Researchers also observed improvements in minority representation in the investing world, though they noted a lack of research into racial diversity within VCs to support those observations.

Still, apparent improvement in diversity among investors involved in the SBIC program proved to be beneficial for female-owned firms. Researchers found that diverse investment firms were two to three times more likely to invest in their ventures — 18 percent of gender-diverse SBICs invest in women-owned portfolio companies, compared to only 14 percent of SBICs led by men alone.

Unfortunately though, similar benefits were not realized by minority entrepreneurs. “There is no evidence to suggest that gender-diverse SBICs invest more than non-gender-diverse SBICs into portfolio companies led by racially diverse individuals,” the study found.

Even so, the researchers concluded that “diverse populations are better served by and through a diverse team of fund managers.” Perhaps the SBIC program will step up efforts to fund minority-owned businesses as its next project.

Read the full report.