Changing the Face of Venture Capital
Boston-based Mendoza-ventures, the first Latinx-owned venture fund on the East Coast, is investing in women- and BIPOC (Black, Indigenous and people of color) led startups in fintech, AI and cybersecurity.
Founders Senofer and Adrian Mendoza believe that investing in underserved populations can have a direct impact on communities, including access to financial services. That’s why 70% of their portfolio consists of startups led by immigrants, women and people of color.
Investing in Diverse Founders
VCs have a unique opportunity to help change the face of venture capital by funding more diverse founders and companies. However, this is not a relaxed job for most firms.
One of the best ways to increase VC investment in diverse startups is by investing in a fund with an affinity for these groups. For example, Mendoza Ventures, a venture capital firm founded by Senofer Mendoza, is committed to backing immigrant and women-led startups.
The firm focuses on fintech, AI and cybersecurity, with about 75% of its 12-15 company portfolio made up of startups led by immigrants and people of color, reports Mendoza.
This is a huge step toward reducing bias and making venture capital a more inclusive industry. But it will require a commitment from many LPs.
Investing in Underserved Markets
VCs are overwhelmingly a white, male-dominated industry that invests the majority of their funding into white founders (85% or $136.5 billion in 2019, according to Pitchbook). But a McKinsey study found that companies with racial and ethnic diversity have financial returns that are significantly above national averages.
Despite this, entrepreneurs throughout the country, from the Midwest to the American South, struggle to source early-stage capital. As a result, many reach escape velocity and move to the coasts seeking growth capital that can help them achieve their long-term goals.
To address this, Senofer Mendoza and her husband Adrian started Mendoza Ventures in 2016, with the goal of changing the face of venture capital. They make minority investments in seed-stage, early-stage and later-stage startups in software, artificial intelligence, machine learning, cybersecurity, and fintech sectors.
Investing in FinTech
Fintech is a technology that has the potential to revolutionize the financial services industry, and if you want to be at the forefront of this exciting sector, investing in fintech stocks could be the right move for you. But, before you start snatching up stock in companies like Affirm or Klarna, it’s important to understand what makes a successful fintech business and what kind of financial return VC investors are looking for.
FinTech companies develop new technologies to streamline and enhance processes in the financial sector, delivering a faster customer experience than traditional banking models. This nimbleness and instant gratification is exactly what consumers and businesses need.
Fintech companies can be found in all sectors of the finance industry, including banking, lending, personal finance and insurance. They often use imaginative combinations of data, software and hardware to solve problems in their niches.
Investing in AI
The world of artificial intelligence (AI) is a fast-growing area that presents investors with numerous opportunities. However, there are rare things to keep in attention before investing.
Firstly, investors should look for companies that are already making significant strides in the AI space. For example, Google-parent Alphabet is overwhelming AI to enhance its search engines and Amazon is using the technology to make personalized product recommendations.
Another thing to consider is the data that an AI company is able to collect. If the company has a unique set of data, they stand a better chance of developing unique AI systems that generate value.
Moreover, investors should also consider the sector that an AI company is operating in. If the problem that an AI company is planning to solve involves practical problems in a certain industry, then it can be difficult to predict whether they will be able to resolve it successfully.