Robert F. Smith, chairman and CEO at Vista Equity Partners, said investing in businesses and managers that emphasize diversity, equity and inclusion remains vital, especially in a bear market.
The billionaire investor, who spoke with CNBC's Frank Holland at the Disruptor 50 Summit, said that venture capital and private equity funding should continue to expand to minority-owned businesses. The recent drop in venture capital funding, due to growing recession fears, has disproportionately hit African American, Latinx business owners and founders, he said.
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"They didn't get their fair share of opportunity in gaining access to capital during the massive bull market expansion, and now they're going through a bit of a bear market contraction. They're seeing some outsized reductions in their funding," Smith said.
"And I think that is a mistake on behalf of a lot of the VC community. The communities in America rely on everyone in many cases participating economically, and enabling these citizens to participate through venture funding and other forms of access to capital will only benefit the U.S.," he continued.
Jump in 2021 funding
Venture capital and private equity funding into Black- and minority-owned business jumped last year as investors maintained a risk-on attitude toward markets, and after the 2020 murder of George Floyd spurred a greater interest into social and economic equity.
Still, Smith said the allocation of capital toward diverse-owned businesses "needs to be more sustainable, and to increase even further from some of those modest increases." Some venture capital firms that he said are effectively identifying opportunities include the New Voices Fund.
The billionaire investor, who made headlines in 2019 after agreeing to pay off the student loan debt of more than 300 students at the historically Black Morehouse College in Atlanta, said firms should expand opportunities for young people of color.
Smith also pointed out that more institutional investors such as pension funds should also identify and allocate capital with diverse managers.
"I think there's a fiduciary responsibility there that needs to be taken quite seriously and really looking at these high performing firms that are run by you know, African American and Latinx managers, and ensuring that they get their fair share," especially when comparing underserved communities' contribution to a business, he said.