How is capital flowing to Asian and Pacific Islander founders, leaders, and communities?
4 min read · May 31, 2024
New Power Labs
In celebration of Asian Heritage Month, we dug deep to understand how capital flows to Asian and Pacific Islanders (AAPI), a diverse group of people that makes up roughly 20% of Canada’s population and an increasing share of newcomers.
Without good Canadian data, we looked to the US. Three insights worth highlighting:
Asian and Pacific Islander communities tend to be major contributors to economic prosperity:
AAPI-owned venture firms accounted for 19% of US-based firms among the global top-100 tech investors (“2023 Midas List,” Forbes, 2023), far outstripping their share of 6.2% in the US population.
AAPI-owned businesses in the US are 16.9% less likely to shut down, 20.6% more likely to generate profits of at least $10,000, and 27.2% more likely to hire employees compared to white-owned businesses. (“Race and Entrepreneurial Success,” Robert W. Fairlie and Alicia M. Robb, 2008)
Yet Asian and Pacific Islander business owners and communities face barriers in accessing capital and other resources and opportunities.
31% of AAPI business owners in the US said they had challenges accessing capital. (“Women & Minority Business Owner Spotlight,” Bank of America, 2023)
AAPI communities in the US receive less than 0.2% of foundation giving, and less than 1% of corporate philanthropy. (“Seeking to Soar: Foundation Funding for Asian American and Pacific Islander Communities,” Asian Americans / Pacific Islanders in Philanthropy, 2018)
South Asian women are the most educated group in Canada with 37% earning a university degree, yet among the most underemployed – making up 20.4% of the Canadian unemployment rate in 2020. (Pink Attitude, 2020)
We lack data for meaningful insights into funding to and representation within asset management of these communities in Canada.
The State of Diversity report by CVCA in 2021 showed representation of racially and ethnically diverse private equity partners has grown 4% to 10.1% from 2019-2021. Most of this growth is attributed to East Asian and South Asian partners, while Middle Eastern partners remain few and far between. The report does not provide disaggregated data on the representation of Asian and Pacific Islander partners.
The majority of the data we found pertains to the US, as data on funding to Asian and Pacific Islander entrepreneurs, leaders, and communities in Canada is limited. Most data sources cited also do not specify whether their definition of ‘Asian’ encompasses communities such as South Asian, South East Asian, West Asian, and Middle Eastern beyond East Asian.
Asian and Pacific Islander communities play a crucial role in shaping Canada and economic landscape. If we believe that US data is a good proxy, funders and investors across the capital spectrum in Canada have an untapped opportunity.
Full-text version of the infographic:
Population
People of Asian origin represent 19.3% of Canada’s population (Canada Census 2021). *this includes South Asian, East Asian, South East Asian, and Middle Eastern or West or Central Asian.
People of Asian origin represent 6.2% of US population (US Census 2020). *this includes South Asian, East Asian, South East Asian, Middle Eastern or West or Central Asian, Native Hawaiian, and Pacific Islanders.
Entrepreneurship
AAPI-owned businesses in the US are 16.9% less likely to shut down, 20.6% more likely to generate profits of at least $10,000, and 27.2% more likely to hire employees compared to white-owned businesses. (“Race and Entrepreneurial Success,” Robert W. Fairlie and Alicia M. Robb, 2008)
One-in-five AAPI business owners in the US believe they will never have equal access to capital. (“Women & Minority Business Owner Spotlight,” Bank of America, 2023)
Data gap: Data specific to AAPI entrepreneurs in Canada is not available.
Asset management
In the US, across asset classes, 2.4% of firms are AAPI-owned, yet they only manage 0.3% of assets under management and 1.8% of funds. (“AAPI in Asset Management,” Association of Asian American Investment Managers, 2020)
AAPI-owned venture firms accounted for 19% of US-based firms among the global top-100 tech investors. (“2023 Midas List,” Forbes, 2023)Data gap: Data specific to AAPI asset managers in Canada is not available. The State of Diversity report by CVCA in 2021 showed representation of racially and ethnically diverse private equity partners has grown 4% from 2019-2021. Most of this growth is attributed to East Asian and South Asian partners, while Middle Eastern partners remain few and far between.
Philanthropy
AAPI communities in the US receive less than 0.2% of foundation giving, and less than 1% of corporate philanthropy. (“Seeking to Soar: Foundation Funding for Asian American and Pacific Islander Communities,” Asian Americans / Pacific Islanders in Philanthropy, 2018)
More than 60% of US foundations say that they provide little or no grant dollars to organizations serving AAPI communities. (“Overlooked,” The Center for Effective Philanthropy, 2020)
Data gap: Data specific to philanthropic funding for AAPI communities in Canada is not available. However, a 2021 report by Imagine Canada noted that less than 5% of philanthropic funding in Canada is directed towards organizations serving people of colour, including Asian and Pacific Islanders.
Impact Investing
Data gap: Data specific to impact investing for AAPI founders and communities in Canada is not available.
Venture capital
17.7% of venture-backed founders in the US are Asian. (“Diversity in US Startups,” RateMyInvestors, 2019) *not self-reported data.
Data gap: Data specific to venture capital for AAPI founders in Canada is not available.
Debt & access to financial services
31% of AAPI business owners in the US said they had challenges accessing capital. (“Women & Minority Business Owner Spotlight,” Bank of America, 2023)
41% of AAPI business owners in the US said they would obtain funding from personal savings, and 29% from personal credit cards. (“Women & Minority Business Owner Spotlight,” Bank of America, 2023)
Data gap: Data specific to access to banking and financial services for AAPI founders in Canada is not available.
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