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Money Buzz 12/03

The state of VC investments in minority-owned firms, the rising cost of audits and accounting, and more

This story appears in the December 2003 issue of Entrepreneur. Subscribe »

Minority Rule

VC investments in minority-owned firms, often considered charitable or public relations endeavors, actually realize competitive yields and similar risk levels as those made in mainstream ventures. So says the recently released Minorities and Venture Capital, an in-depth study of 24 funds.

"The results suggest that based on levels of returns and risk, [minority venture] entrepreneurs should be able to seek mainstream financing," says William Bradford, professor of finance and business economics at the University of Washington, Seattle, who partnered with Timothy Bates, professor of economics at Detroit's Wayne State University, to conduct the study. "For the decade ending in 2000, mainstream VC firms earned rates of return averaging 20 percent-just less than the 24 percent average return for the 117 investments made [in minority companies] by participating firms."

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