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The Viability of the Minority-Oriented Venture-Capital Industry Under Alternative Financing Arrangements

Author

Listed:
  • Timothy Bates

    (Wayne State University)

  • William Bradford

    (University of Washington, Seattle)

  • Julia Sass Rubin

    (Rutgers University)

Abstract

The minority business-oriented venture-capital industry grew rapidly in the 1990s, as did its target market of large-scale minority-owned firms. This niche of the venture-capital industry traditionally relied upon the U. S. Small Business Administration (SBA) for funding and guidance. In the 1990s, another branch of the minority venture-capital industry arose that was funded largely by public pension funds. The authors’ comparative analysis of the SBA and pension fund branches of this industry indicates that the former is stunted while the latter is thriving. The analysis indicates that the SBA is too unstable an agency for promoting the minority venture-capital industry. In contrast to the SBA’s propensity to alter policy based on shifting political priorities, the pension funds have been a stable source of support for the growing minority venture-capital industry.

Suggested Citation

  • Timothy Bates & William Bradford & Julia Sass Rubin, 2006. "The Viability of the Minority-Oriented Venture-Capital Industry Under Alternative Financing Arrangements," Economic Development Quarterly, , vol. 20(2), pages 178-191, May.
    • Handle: RePEc:sae:ecdequ:v:20:y:2006:i:2:p:178-191
    DOI: 10.1177/0891242405286045
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    References listed on IDEAS

    as
    1. Timothy Bates, 2000. "Financing the Development of Urban Minority Communities: Lessons of History," Economic Development Quarterly, , vol. 14(3), pages 227-242, August.
    2. Alexander Ljungqvist & Matthew Richardson, 2003. "The cash flow, return and risk characteristics of private equity," NBER Working Papers 9454, National Bureau of Economic Research, Inc.
    3. David G. Blanchflower & Phillip B. Levine & David J. Zimmerman, 2003. "Discrimination in the Small-Business Credit Market," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 930-943, November.
    4. Timothy Bates, 1998. "Is the U.S. small business administration a racist institution?," The Review of Black Political Economy, Springer;National Economic Association, vol. 26(1), pages 89-104, September.
    5. Peter Eisinger, 1991. "The State of State Venture Capitalism," Economic Development Quarterly, , vol. 5(1), pages 64-76, February.
    6. Ken Cavalluzzo & John Wolken, 2005. "Small Business Loan Turndowns, Personal Wealth, and Discrimination," The Journal of Business, University of Chicago Press, vol. 78(6), pages 2153-2178, November.
    7. Timothy Bates & William D. Bradford, 1992. "Factors Affecting New Firm Success and Their Use in Venture Capital Financing," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 2(1), pages 23-38, Fall.
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    Cited by:

    1. Timothy Bates & William Bradford, 2009. "The impact of institutional sources of capital upon the minority-oriented venture capital industry," Small Business Economics, Springer, vol. 33(4), pages 485-496, December.
    2. Julia Sass Rubin, 2006. "Financing rural innovation with community development venture capital: models, options and obstacles," Community Development Innovation Review, Federal Reserve Bank of San Francisco, issue 3, pages 15-27.
    3. Timothy Bates & William Bradford, 2007. "Traits and Performance of the Minority Venture-Capital Industry," The ANNALS of the American Academy of Political and Social Science, , vol. 613(1), pages 95-107, September.
    4. Julia Sass Rubin, 2011. "Countering the Rhetoric of Emerging Domestic Markets: Why More Information Alone Will Not Address the Capital Needs of Underserved Communities," Economic Development Quarterly, , vol. 25(2), pages 182-192, May.

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