Skip to content Menu
Diversity in Investments

The Solutions Exchange

In an interview with NACUBO, Celena Aponte of the Nasdaq Entrepreneurial Center discusses some of the barriers to, and ultimate benefits from, increasing diversity in investments and fund managers.

By Liz Clark

Employing diverse fund managers is critical to accessing top entrepreneurial talent. “As America’s population becomes increasingly diverse, this investment approach is growing ever-more important as a strategy for locating black and brown entrepreneurs who will be an essential part of a high-performing portfolio,” says Celena Aponte, vice president for strategy at the Nasdaq Entrepreneurial Center, where she leads learning initiatives in an effort to understand and explore how to make entrepreneurship more accessible and sustainable.

Established in 2014 with support from the Nasdaq Educational Foundation, the Nasdaq Entrepreneurial Center serves entrepreneurs from around the world through free workshops, trainings, and events designed to support the “whole entrepreneur,” empowering founders to uncover solutions and spark change.

In a conversation with NACUBO, Aponte discussed some of the ways the Center is fostering inclusive and resilient entrepreneurship, as well as strategies for increasing diversity in university endowments, even during a period of massive upheaval.

Please describe the programming the Nasdaq Entrepreneurial Center delivers to help investors and entrepreneurs as well as the center’s concept of the “whole entrepreneur.” How does the Center engage with issues of diversity, particularly within higher education?

The Nasdaq Entrepreneurial Center builds agile programs of support for entrepreneurs based on their needs and pain points. All of our offerings, from educational programs to coaching and mentorship, are offered at no cost. Everything we design is anchored to the individual entrepreneur—who we believe is the company’s biggest asset. To support founders, we have developed an approach designed to build mindsets, skillsets, and agency, thereby nurturing what we call the “whole entrepreneur.”

To date, we have run more than 687 programs serving more than 18,000 entrepreneurs. Of these entrepreneurs, 49 percent are women and 61 percent are minorities. Individuals from 103 different countries have taken our classes, and many of our current and aspiring entrepreneurs are students.

We are in a unique position to see how challenging it is—especially for founders of color, women, and people who don’t have access or are not networked to traditional Silicon Valley funds—to raise capital in those first make-or-break years of business. This perspective has sparked a committed interest in understanding what it takes to flow venture capital dollars to underrepresented entrepreneurs. The Center received a grant from a large financial institution to look at university endowments as limited partners, specifically to learn how they are thinking about investments in entrepreneurs of color and in what ways universities see diverse talent as part of their mission.

Have you seen diversity as a challenge when trying to match venture capital with struggling entrepreneurs?

I haven’t met an entrepreneur yet who has said that they haven’t struggled. It’s core to the entrepreneur experience. You are literally building something that has never been done before; that’s hard on a good day. What we’re seeing is that entrepreneurs of color, women, and founders without “Silicon Valley-traditional” backgrounds—including geography and socioeconomics—do struggle more. Not all entrepreneurs are beginning their journey from the same place. Without resources and support in the beginning, just starting becomes that much harder.

Celena Aponte
 Senior Vice President, The Nasdaq Entrepreneurial Center

What is meant by diverse managers, and what should college and university endowment professionals know about these firms? Can you give a sense of the number of diverse firms operating today? How well do they perform, compared to traditional firms?

There’s a strong business case for investing in diverse managers because diverse managers represent the fastest-growing populations of entrepreneurs. The State of Women-Owned Businesses Report, commissioned by American Express, found that women of color represent 39 percent of the total female population in the U.S. but over the past year have accounted for 89 percent of the net new women-owned businesses, approximately 1,625 per day.

Yet, several recent studies have shown that the numbers of investors capitalizing on this large, growing population are miniscule by comparison. African American female venture capitalists aren’t even 1 percent of all venture capitalists, nor are venture-backed female founders even 1 percent of total venture-backed founders. According to Census Bureau data, Latinos accounted for half of the U.S. population growth between 2008 and 2018 but are represented by less than 1 percent of total venture capitalists and 1.8 percent of total venture backed founders.

It is logical that if you want more funding to go to black, brown, and women founders, then allocate capital to black, brown, and women general partners. Another way to capture economic opportunity is by investing in funds that prioritize diversity as part of their primary investing thesis. As an example, I like the Commonfund’s definition of diversity: including people of different races, cultures, classes, genders, and abilities, in a group organization or industry.

We are in the midst of unprecedented times, where the challenges facing business today are very different than just a few months ago, and even last week. We also know the world won’t be the same after this global health and economic crisis that is now combined with our current civil rights movement, and, in some communities, devastating civil unrest. It is important to recognize that there is an undercapitalized, underserved black and brown population ripe with opportunity, especially in this time of change.

The 2019 NACUBO-TIAA Study of Endowments found that only 4 percent of college and university endowments use investment companies that are owned by women or persons of color. Why do you think this gap exists?

There are several reasons for this. First, there’s simply huge inertia when it comes to maintaining the status quo. If you’re doing something, you’ve made your career doing things a certain way, and it’s working, why change? Also, there are structural challenges. There’s an efficiency issue of sourcing new, diverse managers because it takes a huge amount of time to find them and get to know them. In addition, a lot of diverse managers are raising small funds of $20–50 million. Together, this check-sizing issue and efficiency issue make changing managers challenging for institutions.

There is also the barrier of perceived risk. When an emerging manager starts a new fund, they lose their track record from wherever they’ve come from before. They are essentially a blank slate and need to prove themselves again. That makes it difficult for funds to manage risk through due diligence.

Times of unprecedented economic distress, as we are experiencing now because of the coronavirus pandemic, are about survival—not about taking on more risk. As part of our programming at the Center, we teach our students and entrepreneurs about “resilience” and “disruption.” We are going to see entire industries reimagined, and demands for new products and services emerge, but at the Center we know one thing is certain: Early stage entrepreneurs will be at the forefront of all this change.

Right now, there are new policies being put in place and stimulus packages that have put public investment into private markets. There is a civil rights movement and civil unrest facing our communities and felt around the world. There is also an opportunity to economically reset and address some of the bigger social inequalities that exist and that college and university students face. Wheels are in motion that will surface serious changes and disrupt business as usual. This is a historic time to not just seize new economic opportunity but commit to building a more equitable world for your students current, and future. What side of history do you want to be on?

Why is an emphasis on entrepreneurship important for higher education, and what recommendations would you make for institutions as they try to grow the entrepreneurs of the future?

During the 2020 NACUBO Endowment and Debt Management Forum (EDMF), Leslie Brunelli, senior vice chancellor for finance and treasurer at the University of Denver, stated that “entrepreneurship is the new ‘global.’” It permeates everything. Just like all business is now global, all business has to be entrepreneurial. Entrepreneurship creates the mindset, skillsets, and agency critical in order to help individuals self-actualize their ideas, and in turn contribute to our economy and society. Entrepreneurship is critical to the future of work, the future of education, and to rebuilding economies in recessionary periods like the one we’re in now.

As a presenter and participant at the EDMF, I learned that a lot of universities also have a charter to the local community. They are drivers of their local economies, enabling people to stay and work in those communities, many of which today are struggling to survive. Whether students choose to stay and work in the community, create their own venture, or work for an organization, it is increasingly important to teach students to be entrepreneurial because it is precisely now, when they are no longer entering a booming job market, that they need the entrepreneurial qualities of a growth mindset, creative problem-solving skills, vision, communication skills, and determination.

At the Center, we’ve seen that the student entrepreneurs who participate in our programs usually have experienced some kind of entrepreneurial activity on campus. Don’t underestimate your role as educators to inspire students to solve the world’s biggest problems. You are uniquely positioned to create opportunities for these students that last far beyond their four years with you. Entrepreneurship is a lifelong journey.

"...diversity is not a value. It’s the future of entrepreneurship, venture, and economic growth in our country—especially today..."

For institutions of higher education, it is also important that you don’t underestimate the role you play as asset owners and the influence you can have on the future of entrepreneurship. The next 10 years will look very different than last 10, and there is a lot to gain from having a hand in this future. Being intentional in how you allocate venture dollars, to whom, and why is critical to an institution’s commitment to entrepreneurship.

Whether you start really small, whether you start by asking questions, or whether you start to look seriously at a certain diverse manager or diverse investing strategy as part of your future planning, you are actualizing your mission. Aligning your endowment to support and really fuel the growth of your current and future students by investing in entrepreneurs can benefit our world because we need entrepreneurs now more than ever.

Many college and university governing board members and, specifically, investment committees may see increasing diversity as political and believe they have to prioritize their fiduciary duties ahead of such politics. How do you respond to concerns that intentionally hiring women- or minority-owned firms might conflict with the institution’s long-term performance or other investment goals?

Boards facing this conversation aren’t alone. But, again, diversity is not a value. It’s the future of entrepreneurship, venture, and economic growth in our country—especially today. The future state looks very different than it did one or two months ago. What are you doing as a board to prepare for it?

As I said earlier, the next 10 years will look very different from the last 10 years, and this can be seen in college enrollment. Census Bureau data show that in 2020, the majority of U.S. children identify with a race other than non-Hispanic white, and that figure is expected to rise to two in three children by 2060. In 2016, 40 percent of associate degrees and more than 30 percent of bachelor’s degrees were earned by students of color. Students of color make up more than half of first-generation college students, and more than half of all undergraduates are female.

These data are an important indication that the consumer is changing. This means investor talent to capture this new growth has to think differently, which necessarily means having different backgrounds and relationships, different networks, and different understandings of what problems exist in the world.

Venture capital has a historic lack of racial equity. A recent study conducted jointly by RateMyInvestor and Diversity VC showed that 77.1 percent of founders were white—regardless of gender and education. In 2019, All Raise found that 10 percent of all venture capital investors were women, which marked the greatest number of female decision-makers in venture ever. In a between Deloitte and the National Venture Capital Association (NVCA), just two percent of all partners in the U.S. venture capital firms were LatinX. In the same study, there wasn’t a single black venture partner in the sample. The result is a lot of groupthink.

The NACUBO 2016 National Profile of Higher Education Chief Business Officers showed that just 12 percent of chief business officers at the surveyed 713 college and universities were members of racial or ethnic minority groups, and fewer than one-third were women. So, we know that there’s some incongruity between our own business offices and our own student population.

We are seeing that same incongruity in the capital allocation fields as well. So, that’s why, circling back to your question about governing boards and investment committees, there is a strong business case for diversity as a strategy to diversify your returns.

In 2019, the California Public Employees’ Retirement System (CalPERS) announced that it was dropping most of its emerging managers for its pension funds and moving to internally run equity index strategies. What impact might this development have on other organizations’ efforts to use diverse managers?

Everyone is trying to reduce capital costs. For CalPERS, this meant moving its management team in-house, which it was able to do because it is a very large institution. The individual choice of an institution shouldn’t call into question the value of emerging managers. Certainly, the optics of the move probably are more damaging than what CalPERS is trying to do, which is decrease their cost of capital and increase returns for asset owners.

We also see it’s been a constant challenge to align the scale of the large institutional investor with new managers in the market. I think there’s a really exciting opportunity to work with institutions of all sizes and for emerging managers to understand what support mechanisms are needed. Ensuring that this capital can connect with the right opportunity is where the center is focused and some of the work it is excited to support.

What other actions can college and universities take to advance their efforts in this space?

First, be involved with entrepreneur efforts run by students, or be aware of them. What are the problems your students are solving, how, and why? Your students are going to go out into the world, and they are going to build and create and design, so understanding what they are investing their time in is important as a lens for learning and understanding what may be coming in the future. You have an opportunity to peer through a looking glass to five or 10 years in the future. That’s powerful.

Second, learn from each other by sharing innovations. What are the structures for fundraising for specific investment strategies like diverse managers? What’s working at other institutions? How are you aligning investment committees to take action? Also, use NACUBO; it is a great forum for sharing this learning and diligence. And make sharing that diligence a priority. If you’re doing more co-investment, then share with each other; de-risk with each other. More emerging managers that are seeded and new models tested and shared will be the rising tide that will lift all boats.

Make an effort to get know family offices and foundations. They have the flexibility to be first movers, as they should be, and they’re deploying high-risk capital. Especially now, they have the unique ability to be at the forefront of change. Explore a fundraising/development strategy that could include a family office or foundation gift to the endowment as a separate sleeve or specifically for this type of strategic investing.

And finally, join the conversation. Let’s keep talking about this and figuring out what the mechanisms of support are now and what they need to be as the world continues to change.

What’s going to help the most? I don’t have the answer. But I know that creating ways to continue learning and exploring, to continue understanding, and to build solutions together is critical to the future of entrepreneurship, the future of your students, and the future of an opportunity-rich world for all. You have an important role to play in all of it.

LIZ CLARK is vice president of the NACUBO policy and research team. 

Aponte offers 3 actionable steps endowment managers can take to help increase and ensure diversity in their investment portfolios. Read more.



Liz Clark

Vice President, Policy and Research


Related Content

Members Only

Closing the Equity Gap

COVID-19 shines an even brighter light on the racial and systemic rifts that exist in education and throughout society.

Stepping Toward Diversity

Celena Aponte, vice president of strategy at Nasdaq Entrepreneurial Center, offered some initial steps that endowment managers can take to help increase and ensure diversity in their investment portfolios.

2023 NACUBO-Commonfund Study of Endowments

This annual survey provides comprehensive analysis of investment returns, asset allocations, and governance policies and practices at higher education institution endowments and affiliated foundations, representing over $630 billion in endowment assets.