Visa and Mastercard push to make VC investing more diverse

Daniel Acker/Bloomberg

Despite research showing diverse leadership helps startups and the overall economy, a substantial chunk of investment still goes toward firms started by white men. Visa and Mastercard are working to address this by using their international networks to find opportunities for overlooked businesses.

At the end of the year, both card networks expanded financial inclusion programs with a focus on women and minority-owned startups. The card brands, along with a variety of payment firms and VC investors, are attempting to reach a broader range of entrepreneurs and developers, though a substantial gap remains. 

"The discrepancy in VC funding in the U.S. and abroad is a major concern," said Sabrina Tharani, senior vice president of fintech and venture partnerships at Mastercard. "Diverse founding teams build better businesses." 

Black and Latino founders receive about 1.5% of total U.S. venture funding, according to McKinsey, noting that women-led startups receive about 2% of U.S. venture funding and startups led by women of color receive about 0.1%. That discrepancy persists through the entire cycle of new firms. The average total VC funding of a startup from seed round to exit is $210 million for white-male-founded firms, compared to $91 million for a minority-founded firm, McKinsey reports. 

The issue is harming the overall economy and the investors themselves, according to McKinsey. The firm's research found that if VC investment was equal, Black and Latino-owned firms would produce an additional $1.6 trillion and $2.3 trillion in revenue in the U.S., McKinsey said, adding that firms with diverse founding teams produce 30% higher returns for their VC investors than white-male-founded firms. The lack of diversity in leadership also exists in more mature companies. Twenty-nine percent of Black, indigenous or women of color and 41% of BIPOC men are in director roles at financial institutions, according to Arizent, American Banker's publisher. Thirty-five percent of firms have leadership teams with four or more demographic groups.  

Finding new startups

Mastercard's Start Path in Solidarity startup accelerator added five early-stage startups founded by women and people of color in late December. The firms include ChargerHelp, a Los Angeles-based provider of repairs and maintenance for electric fueling stations; GoTackle, a Chicago-based seller of technology for small business; Home Lending Pal, an Orlando-based supplier of analytics tools to homebuyers; Hopscotch, a New York-based small business payment fintech; and Meter Feder, a Pittsburgh-based parking and ticket payment company. 

Start Path in Solidarity provides resources for startups with a goal of closing racial and gender gaps in small-business development. The program includes partnership readiness training, mentorship, coaching and introduction to investors. About 30% of the Start Path portfolio includes minority-founded firms. 

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"Our participation broadened our thinking about bringing products and services to unbanked and underbanked communities," said Wole Coaxum,, founder and CEO of MoCaFi, a Newark, New Jersey-based fintech, in an email.

MoCaFi has participated in Mastercard's Start Path, and Mastercard is also an investor in MoCaFi, which specializes in developing digital financial products for underserved communities. In July 2023, MoCoFi partnered with BNY Mellon to enable disbursements for consumers who may be unbanked but still receive funds from the bank's government and business clients. MoCaFi's collaboration with Mastercard has helped the firm offer services in New York, St. Louis, Los Angeles and Birmingham, Coaxum said. 

As part of the program, Mastercard tries to use its scale to provide a network effect for new startups. That can include access to the card company's technology as well as its scale. 

"There are hundreds of millions of endpoints and 3 billion cards in the market," Tharani said. "Our acceptance network is our biggest asset." 

Visa and Mastercard, which both have strategies to find revenue beyond card payments, have millions of consumers, merchants and card issuers. That audience can give an indirect boost to payment trends such as virtual cards or generative AI, and it's possible that this scale could aid in improving access to financial resources for startups.

"Large international payments companies like Mastercard and Visa have resources such as expertise, technology, and distribution channels that can be hugely valuable to fintech startups," said Zil Bareisis, head of retail banking and payments at Celent. "Having programs that make them more readily available to underserved communities is admirable."

Check writers

The gender gap can also be found in the investment community. Women make up 17.4% of decision-makers at VC firms in Southeast Asia, according to Nikkei Asia. And 77% of VC firms in the region do not have a single woman in a "check writing" role, Nikkei reports. In the U.S., about 8% of VC investors are women, according to the Center for Strategic and International Studies, which notes that 88% of U.S. VC firms have never hired a female investor.

"Most intermediaries between founders and capital are not controlled by women," said Graham Macmillan, president of the Visa Foundation, a part of the card network that writes grants and investments in small businesses in underserved communities in the U.S. and other markets. "We're looking at the person who writes the checks." 

The foundation has made an undisclosed investment in Beacon Fund, a women-led investor in Southeast Asia that provides financing for women-founded businesses in the region. 

Beacon, which did not provide comment for this article, has a portfolio that includes Noa Nang Organic, a Vietnam-based rice producer. Noa Nang Organic sells services that help farmers in the region — mostly women in the Mekong Delta — sustainably grow rice. It also trains farmers in new agriculture techniques and pays the farmers about a third above market rate. 

"At the end of the day, we want to see more micro businesses around the world," MacMillan said. "That leads to more economic participation." 

The Visa foundation also recently announced that it would invest $100 million in women-led small to medium-sized businesses in the Asia-Pacific region over the next five years. The card brand additionally launched an initiative to accelerate small-business development in the U.S., Indonesia, Mexico, Peru, Philippines and Vietnam, with other markets to follow.   

The Visa program includes elements of a startup accelerator, as well as access to emerging payment technology and financial training. 

"Access to training and development building is important, but what is essential is access to capital," MacMillan said. "While we talk about growing women-led businesses, one key is to invest in funds led by women as well. There are a lot of gaps in investing."

A lot of fintech funding is driven by founders who already have connections and know the right people, rather than necessarily have the best ideas or technology, according to Gilles Ubaghs, strategic advisor for commercial banking and payments at Datos Insights. 

"Large-scale organizations like the payment networks can help meet some of those challenges in access to funding and broader market visibility," Ubaghs said.

Visibility is also important in attracting users, according to Ubaghs. 

"Getting awareness of a fintech is half the battle in gaining end user customers," Ubaghs said. "The networks and similar large programs have that global reach into all corners of the market which can help them gain visibility and awareness of what they are up to."