Morgan Stanley IM: Investing in Startups Founded by Women and Multicultural Entrepreneurs

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To help close the funding gap for multicultural and women-owned businesses,¹ Morgan Stanley Investment Management and the firm’s Multicultural Client Strategy Group are launching a new fund to invest in startups led by diverse entrepreneurs.

The Next Level Fund will invest primarily in early-stage technology and technology-enabled companies that have women and/or multicultural members among their founding teams. This latest move by Morgan Stanley highlights opportunities with underrepresented business leaders, often targeting underserved markets and communities, and aims to help meet growing investor demand for impactful market solutions to address social justice, gender equality and racial equity.

The fund is part of the Private Credit and Equity strategy within the Investment Management division, which oversees more than $1.4 trillion of assets.² It will also be backed by three key corporate partners: Hearst, Microsoft and Walmart.

“We are pleased to expand our impact-oriented client offerings with the addition of Next Level, and we are proud to partner with like-minded companies that share our commitment to delivering positive social impact through compelling investment opportunities,” says David N. Miller, Head of Private Credit and Equity at Morgan Stanley Investment Management. “Our differentiated approach can help to increase access to capital for women and multicultural businesses in our target sectors.”

Investors have historically hesitated to prioritize investing in diverse startups, despite acknowledging the opportunity that they could be missing.³ In fact, 60% of venture capitalists surveyed by Morgan Stanley say that their portfolios hold too few companies founded by women and multicultural entrepreneurs,⁴ while investors in another survey reported capitalizing diverse businesses by as much as 80% less than traditional companies overall.5

“By intentionally seeking out high-growth companies founded by multicultural and women entrepreneurs, Next Level presents an exciting opportunity for disruptive startups to increase their visibility and accelerate their businesses with the support of our corporate partners,” says Managing Director Alice Vilma, Portfolio Manager of the Next Level Fund.

The fund will tap the expertise of the Multicultural Innovation Lab, Morgan Stanley’s in-house start-up accelerator, which promotes financial inclusion by providing founders of diverse tech and tech-enabled startups with access to investors, tools, resources and connections that they need to thrive.

The diverse companies will gain access to the capital provided by the fund and to the global resources and capabilities of Morgan Stanley and these corporate partners, says Vilma, who is also co-head of the Multicultural Innovation Lab. “We are pleased to be partnering with Hearst, Microsoft and Walmart on this exciting new initiative, which advances our respective companies’ goals to promote financial inclusion and access to capital for women and multicultural founders.” Eve Burton, Executive Vice President and Chief Legal Officer at Hearst, will serve on the fund’s Advisory Board.

¹ https://www.morganstanley.com/ideas/venture-capital-funding-gap

² As of March 31, 2021

³ https://www.morganstanley.com/ideas/venture-capital-funding-gap

⁴ https://www.morganstanley.com/ideas/venture-capital-funding-gap

⁵ https://www.morganstanley.com/ideas/trillion-dollar-blind-spot-infographic

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