Unlocking Alpha: Our Thesis on Investing in Underserved Founders

At Kapwa Capital, our investment thesis centers on a simple yet powerful belief: Early-stage founders from underserved communities are over-performing yet overlooked. We see immense potential—both financial and social—in these entrepreneurs who consistently defy the odds. By investing in them, we’re tapping into a deep well of untapped alpha.

Overlooked Yet Overperforming

Despite increased awareness around diversity in venture capital, funding disparities persist. In 2022, Black and Latinx founders received just 1% and 1.5% of U.S. VC funding, while women-founded startups secured only 1.9%. However, when funded, these founders often outperform their peers. For example, a Boston Consulting Group study found that women-founded startups generate 78 cents in revenue per dollar of funding, compared to 31 cents for male-founded companies. Research conducted by Kauffman Fellows shows that diverse founding teams are more capital efficient, generating 30% higher return on investment when venture-backed. Additionally, a study by the Ewing Marion Kauffman Foundation revealed that immigrant entrepreneurs are more likely to start businesses and are overrepresented among high-growth companies. 

When given the opportunity, underrepresented founders demonstrate remarkable efficiency in scaling their ventures.

Our mission at Kapwa Capital is to support these high-potential founders from the earliest stages. We rigorously vet startups with strong fundamentals that align with our values of inclusivity and impact. Research supports our approach: Morgan Stanley found that more diverse companies yield higher returns and lower volatility compared to less diverse teams, and First Round Capital reported that companies with at least one female founder perform 63% better than all-male teams. A study by Defiance Capital also revealed that 70% of 2,018 unicorn founders from the U.S. and U.K. from 2013-2023 were considered “unassuming founders” (immigrants, women, etc.).

The Power of Resilience: A Success Story*

Iman Abuzeid was born to Sudanese parents in Saudi Arabia, where her father worked as an ear, nose, and throat surgeon. Influenced by her entrepreneurial grandfathers, she left her medical career to transition into healthcare consulting at Booz & Co., then went on to receive her MBA from Wharton.

Abuzeid has broken barriers in the healthcare industry by addressing the nursing shortage in American hospitals. Her startup, Incredible Health, was founded in 2017 and operates as an advanced platform connecting nurses with open positions at U.S. hospitals. In August 2022, under Abuzeid’s leadership, the company raised $80 million, reaching a valuation of $1.65 billion, making her one of the few Black female founders to achieve this milestone.

Abuzeid represents the resilience and innovative thinking that underserved founders bring to the table, shaped by their own diverse perspectives on the world. She is a testament to Kapwa Capital’s dedication to supporting founders solving critical problems based on lived experiences while shaping more inclusive industries.

Conclusion

The opportunity in investing in underserved founders is clear. At Kapwa Capital, we’re committed to unlocking this alpha while fostering generational wealth in communities historically excluded from venture capital. By supporting these entrepreneurs, we’re not just investing for financial returns—we’re investing in a more equitable future.

*The company highlighted herein is not an investment held by Kapwa Capital and is included for reference only.