The viability of the minority-oriented venture-capital industry under alternative financing arrangements

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.