Virtual Hearing - Combatting Tech Bro Culture: Understanding Obstacles to Invest... (EventID=114974)

Video Description

Connect with the House Financial Services Committee Get the latest news: https://financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinancialCmte Follow us on Twitter: https://twitter.com/FSCDems ___________________________________ On Thursday, June 30, 2022, at 12:00 p.m. (ET) Task Force on Financial Technology Chairman Lynch and Ranking Member Davidson will host a virtual hearing entitled, “Combatting Tech Bro Culture: Understanding Obstacles to Investments in Diverse-Owned Fintechs." - - - - - - - - Witnesses for this one-panel hearing will be: • Jenny Abramson, Founder & Managing Partner, Rethink Impact • Sallie Krawcheck, CEO and Co-Founder, Ellevest • Marceau Michel, Founder, Black Founders Matter • Abbey Wemimo, Co-Founder and Co-CEO, Esusu • Maryam Haque, Executive Director, Venture Forward Introduction The proliferation of financial technology companies (fintechs) that are leveraging new technologies to provide financial services and products in recent years has been made possible by largescale investments, especially by venture capital (VC) funding. VC is a form of private equity and a type of early financing for startup companies and small businesses. VC firms target companies with high growth potential in exchange for equity in the company. VC firms often assume high risks on a portfolio that includes several startups with the expectation that many will fail, but if a few reach the targeted returns, VC investors will be generously rewarded. According to some researchers, the top quartile of VC funds “have an average annual return ranging from 15% to 27% over the past 10 years, compared to an average of 9.9% S&P 500 return per year for each of those ten years.”1 VC firms have demonstrated a strong interest in technology-based companies, including fintechs. In 2021, VC investments in the fintech industry reached $35 billion.2 However, the majority of that investment has been directed towards White and male-founded companies, with a small minority directed at companies founded by women (2%) and people of color (23%), 3 with Black founders receiving only 1% of investments and Latinx founders receiving just 1.8%. 4 This hearing will investigate the lack of diversity in the VC ecosystem, challenges faced by diverse fintech founders in raising capital, the impact of diverse-owned fintechs and diverse-owned VC funds on communities of color, and what policy tools could be considered to help promote greater VC funding for fintechs founded by women and people of color. Overview of Venture Capital Although the size of VC investments appears relatively small when compared to the overall size of the global capital markets (which exceed $100 trillion), VC plays an important role in promoting entrepreneurship, innovation, and invention.5 Startups funded by VC may form the pipeline for future transformative companies that become drivers of economic growth. For example, many well-known publicly traded technology companies, including Alphabet, Apple, Meta, and Amazon, were once VC funding recipients.6 Some VC firms have made efforts to diversify their portfolios; however, critics have noted that these efforts have been mainly limited to “impact investment” portfolios that are often motivated by reputational pressure.7 Many fintechs espouse the main focus of their companies as reaching consumers who are underserved by traditional financial institutions, including women and people of color,8 so the lack of VC available to diverse-founded fintechs is potentially troubling as it could hinder innovation that would benefit underserved consumers. In aggregate, the size of VC investments in the fintech industry nearly doubled between 2020 and 2021 to reach $35 billion, according to S&P Capital IQ. 9 S&P Capital IQ breaks down the U.S. private fintech investments into broad categories of investment and capital markets technology, payments, insurance technology, digital lending, banking technology; financial media; and data solutions, and found that VC investments increased in all categories between 2020 and 2021. ... Hearing page: https://financialservices.house.gov/events/eventsingle.aspx?EventID=409522