Entrepreneurs have been at the center of the American experience for centuries. Indeed, the American Dream itself is built on the belief that anyone from anywhere can bring the next big idea to life. No telling of the American story would be complete without including our great innovators and entrepreneurs. The influence of innovators like Watson, Graham Bell and Jobs on our lives and economy has been extraordinary. As we look forward, the types of entrepreneurs we support and fund today are likely to significantly impact the economic and social direction of our country.
In recent decades, venture capital has become a dominant force in the funding of new firms with high growth potential. This significant infusion of capital, as well as the bedrock mentoring, strategic advice, and connections that come with venture capital, can be catalytic for a fledgling start-up. While we recognize and celebrate venture capital's role in helping to build successful companies that power our economy, create jobs and improve our lives, access to these opportunities has favored a limited few and this disparity could have a widespread impact.
Research shows that women and people of color have a disproportionate lack of access to the capital, support and networking that young companies need to scale and grow. By failing to supply all aspiring entrepreneurs with the same social and financial capital, we aren't tapping our nation's full potential. In fact, we may very well be stifling the creator of the next great innovation and, unconsciously, reducing the seats at the table for vast swaths of our innovators.
The numbers are stark: In recent years only 10% of venture-backed companies had a female founder. Only 1 percent of companies have an African American founder. And, notably, 75 percent of all venture capital went to just three states: California, New York and Massachusetts--leaving the other 47 states to compete for just a quarter of the pie.
Contrast this with current data suggesting that the fastest growing segment of entrepreneurs is women, followed significantly by both African-Americans and Hispanics. Female-owned firms are growing at a rate 1.5 times the national average and represent more than 9 million firms today. African American-owned firms are growing at a rate of 60% while non-minority owned businesses are growing at a rate of just 9%. Furthermore, those 47 under-funded states have produced hundreds of our Fortune 500 firms--proving that great companies can be built anywhere.
Importantly, these firms are outperforming groups that venture capital firms have traditionally funded. Women-led organizations perform 3 times better than the S&P 500 index. And when one firm peeled back their portfolio of investments, they found that the firms with a female founder performed 63 percent better than firms in their portfolio with all male founding teams. Meanwhile, McKinsey found companies with higher rates of diversity outperform their less diverse peers by 35 percent, noting a correlation between companies with commitments to diverse leadership and higher rates of success.
This data points to a powerful opportunity to energize our economy and our communities, simply by taking steps to level the playing field when it comes to investment and resources for promising new projects. In a time where so many are focused on expanding job growth, breaking down many of the bubbles in our society and ensuring economic growth does not leave communities behind, diversifying funding for entrepreneurs provides both economic and social benefits.
To make a real impact, we all need to intentionally change behavior.
We must change our vision of what success looks like. Searching for images of "successful entrepreneur" should not only bring up images of Steve Jobs, Mark Zuckerberg and Richard Branson, but should also include the faces of trailblazers such as Daymond John, Tory Burch, José Andrés and Oprah Winfrey. We must tell their stories in order to inspire the next generation of entrepreneurs regardless of gender, race, or geography and to show naysayers that entrepreneurs come from all places, genders and backgrounds.
We also must open the door to more people by acknowledging that unconscious bias is real. As 93% of investing partners at the top 100 venture firms are men, predominantly white, unconscious bias is the elephant in the room. In order to trigger a paradigm shift, we must address this pervasive bias and laud venture capitalists who make clear, unequivocal commitments to build inclusiveness and diversity into the standard criteria as they assess potential investments.
American ingenuity has brought us the quality of life we enjoy today. If we seize this opportunity to democratize entrepreneurship, we will strengthen our economy and make sure that anyone from anywhere has a fair shot at the American Dream.