Morgan Stanley's diversity accelerator is doubling in size and increasing its investments in the startups. An exec explains why the program has been so successful.

  • Morgan Stanley just doubled the number of participants in its Multicultural Innovation Lab.
  • The diversity incubator also increased the size of investment in each startup from $200,000 to $250,000.
  • Alice Vilma, managing director and co-head of the accelerator, spoke to Insider about the program’s future in a virtual environment. 
  • Visit the Business section of Insider for more stories.

A Morgan Stanley accelerator program focused on supporting startups with diverse founders is doubling the number of participants its takes on each year. 

The bank announced Tuesday its Multicultural Innovation Lab, which is in its fifth year, will expand to include 20 companies annually as opposed to 10. The startups will be split between a winter and summer session. 

The accelerator program targets tech-based startups in the post-seed to Series B stage that have a multicultural or woman founder, cofounder, or C-suite member that serves as a key decision maker. 

Historically the accelerator has invested $200,000 per company, but this year that commitment has increased to $250,000.

The expansion of the program’s size and investment into startups comes as a result of its past success and a push to do more in the space, Alice Vilma, managing director and co-head of the Multicultural Innovation Lab, told Insider.

“There has been a lot more attention paid to some of the inequities that have developed over time in certain industries, VCs being one of them as well,” Vilma said. 

“We had the ability to increase the amount of funding to entrepreneurs,” she added. “And a lot of that was around making sure that we had enough of a stake in this company to make it worth their while and meaningful but still allow them to run their businesses.”

The program, which has worked with a total of 44 companies, has proved successful in helping early-stage startups. Two past participants have been acquired: Trigger Finance by Circle; GitLinks by Infor.

Meanwhile, several of the startups have gone on to additional fundraising rounds with new investors. One example is Goalsetter, a Black-owned kids and family finance app that raised a $3.9M seed round in January from Vista Equity Partners’ Robert Smith and NBA stars Kevin Durant and Chris Paul, among others. 

The winter cohort of 11 startups was selected from over 700 applications and includes companies across multiple sectors — from fintech, ed-tech, and med-tech to e-commerce, social networking, and enterprise software. 

Banks have increasingly looked to roll out diversity accelerators

The five month program will begin in February and culminate in July with a demo day where the startups have the opportunity to present to potential investors from Morgan Stanley’s network of clients and partners — including institutional investors, corporate investors, family offices and high-net-worth individuals. 

The accelerator builds a customized curriculum for each company to help startups achieve their objectives over the five-month period. The curriculum spans financial strategy, legal, public relations, sales, human capital, operations, and cybersecurity. Digital marketing has been a more recent addition, along with new expertise as a result of Morgan Stanley’s acquisition of E-trade. 

More banks have looked to create diversity accelerators in recent years, such as Goldman Sachs’ Launch with GS, established in 2018, or Barclay’s 12-week accelerator, created in 2020. 

“We’ve seen other models come to bear since we’ve launched the program, and as a result I think there are enormous similarities because there’s a model that they’ve been following — which is ours,” said Vilma. 

A key piece of Morgan Stanley’s program, Vilma said, is the fact it brings in potential investors throughout the program to interact with startups as opposed to waiting until demo day. 

“We believe they should be ready to speak to them at anytime, as well as understand what investors might be looking for.” Vilma said about startups’ relationship with potential investors. “And then we use all of that data and information that they are getting to then set their business objectives so they can actually reach them.”

The accelerator’s future may include international expansion and a hybrid virtual program 

While the accelerator traditionally runs in-person, this will be the first group to participate entirely through a virtual model (last spring’s group spent nearly two weeks in Morgan Stanley’s offices before the COVID-19 pandemic began). Vilma said that while the virtual model makes the community aspect of the program a challenge, it has also brought about unforeseen benefits. 

“We’ve certainly been able to work with companies who we might not be able to work with because we were virtual,” said Vilma. “Having a virtual program allows us to potentially have companies in the cohort that are not in the United States.” 

Even as the pandemic restrictions lift, the accelerator may consider a hybrid model, especially as the next stage of the program may include international expansion. There is also excitement around expanding class size as well as moving into new locations, Vilma said. 

“Other locales in the world have some of the same disparities that we can — now that there’s a model that’s working — provide a solution for,” she said.

Source: Read Full Article