Investing in Diversity & Inclusion

How Can Investors Reflect America’s Changing Demographics?


The United States is in the midst of seismic changes, and not just because of the instability wrought by the coronavirus pandemic. Long-term macro demographic trends point to a future that is more diverse, urban, and automated, and these are changes that offer compelling insights for investors who wish to further gender and racial equity.

That is the conclusion drawn by Harlem Capital, a venture capital firm based in the eponymous New York City neighborhood that invests in seed-stage enterprises led by female founders and founders of color. In late 2019, Harlem Capital raised its first $40 million fund; to date, the fund and the firm’s angel portfolio have made 26 investments. Demographic trends in the United States point to the growing power of Black and Brown consumers, as well as women—a fact not necessarily reflected in most venture firm portfolios.

“We believe that understanding how US demographics evolve over time is critical to projecting consumer behavior and identifying new market opportunities,” said Harlem Capital’s Kelly Kopchik Goldstein in an interview with Impactivate.

Tracking Macro Demographic Trends for Investors

Demographic research led by Goldstein initially sought to help the firm better identify investment opportunities tied to the changing American landscape. In May, they decided to release the research in hopes of educating other investors about the value of understanding these trends, particularly as they relate to race and gender.

“You need a strong sense of current and upcoming trends to be able to see around corners and make insightful, informed decisions about future investments,” Goldstein said.

That includes staying on top of the trajectories of each trend, which are numerous. “I could write multiple books on each demographic trend happening right now,” Goldstein said.

The 10 demographic trends shaping how investors like Harlem Capital look at the future fall into three broad categories:

  • America is becoming more diverse:
    • The purchasing power of women and minority consumers is growing
    • Hispanics are becoming America’s largest racial or ethnic minority group
    • The gender gap persists
  • America is becoming more urban:
    • America is seeing urbanization beyond its two coasts
    • Families are shifting away from the traditional nuclear family living model
    • Millennials’ are adopting distinctive spending habits
  • America is becoming more automated:
    • Artificial intelligence and automation are becoming more prevalent
    • Consumers and students face debt crises
    • Income disparities persist; an aging population requires caregiving

These demographic trends may not be surprising on their own—most are already the subject of multiple books. Yet taken together, they offer a two-pronged map for investors seeking to embrace racial and gender equity as part of their portfolio strategies.

Adults 65+ vs. Children

Source: US Census Bureau / Harlem Capital

1. Shifting Consumer Demands

Goldstein’s examination of racial demographic trends among consumers began with a core question: “What is happening in the world that’s impacting consumers, the way that they behave, and the way that they interact with brands?”

One conclusion the research came to: brands will need to reflect the growing purchasing power of women and people of color. Harlem Capital found that women are twice as likely as men to meet caregiving demands even as they represent 40% of breadwinners, which makes products tied to women’s wellness or childcare resources of special interest. Goldstein was particularly struck by the rising number of single mothers and the opportunities to invest in their needs. “That gets you thinking about women’s health and wellness companies, about real financial solutions to help families led by single mothers, about how to help them support and educate their children.”

Overlapping with the increase in racial and gender diversity in consumers is a shift in generational values. More than half of Hispanic Americans—already what Goldstein called “the most economically influential group since the Baby Boomers”—are millennial-aged or younger. From childcare to car-sharing, the younger generations’ purchasing decisions are often based on factors like unprecedented student loan debt. At the same time, these consumers gravitate toward spending money on experiences rather than things, as well as renting or sharing options. The related increase in multigenerational living situations could also reshape consumer behavior.

“As investors, we are on the lookout for businesses that are geared toward solving [the debt crisis] and helping consumers manage their debt and finances,” Goldstein explained. “These findings have helped inform our expectations for future consumer markets and piqued our interest in innovative products and services that address the evolving needs of women and minority consumers.”

Debt Share by Product Type and AgeSource: NY Federal Reserve / Harlem Capital

2. The New Employment Landscape

Twenty-first–century infrastructure and workforce development needs to be agile and advanced. COVID-19 has helped normalize remote work for many white-collar industries—one part of the nimble digital future already emerging. Pre-pandemic population growth in smaller cities in the Midwest and the South is now intensifying because of the lower cost of living and the permanent work-from-home trend.

“We have an interest in products and services that will help these growing cities manage the infrastructure and technology burdens they will face as they try to keep up with the demands and needs of their growing constituents,” said Goldstein, pointing to service delivery and micro-mobility options as examples.

There is also growing demand for caregivers and other healthcare providers, along with other science, technology, engineering, and mathematics (STEM) professionals—all opportunities for entrepreneurs to get creative, particularly those from marginalized backgrounds who may see solutions that others miss.

“I found it very interesting to dig in and see just a huge percent of the minority population thinking about or already running their own businesses,” said Goldstein, who noted that Hispanic-owned businesses in particular have doubled in growth compared to US businesses overall. “On the flip side, since conducting the research, minority-owned small and midsize businesses have been among the most negatively impacted by the pandemic and are in need of innovative solutions to stay afloat.”

Harlem Capital team

Harlem Capital team (L to R: Brandon Bryant, Gabby Cazeau, Kelly Goldstein, Henri Pierre-Jacques, Jarrid Tingle)

A New Era of Diversity and Political Engagement

What role will the government play in shaping these trends? The incoming Biden administration has indicated support for student loan forgiveness, investments in carbon-neutral STEM jobs, and other policies that could open up new doors and close others. At the heart of many policy proposals is the goal of resolving America’s dramatic income disparity, something savvy entrepreneurs can help to solve. Goldstein cited human resources tech and edtech innovations as well as improved access to equity investing as challenges that startups could address.

All of these trends portend a future that could have enormous growth through a diversity not witnessed in previous economic booms. Goldstein noted that a natural consequence of an economy designed with more women and minorities in mind is political engagement—already a priority for many millennials.

“When women and minorities get access to capital, they have a path to generating wealth,” said Goldstein. “Narrowing the wealth gap will allow a broader swath of society to provide more opportunities for their children, send kids to great schools, and donate to the political system. More women and people of color are going to have the flexibility within their work schedules to push for the change they want to see.”

Harlem Capital is a New York–based early-stage venture capital firm on a mission to change the face of entrepreneurship by investing in 1,000 diverse founders over the next 20 years. They are focused on investing in minority and women founders in the United States. To learn more visit, subscribe to their monthly newsletter, and listen to their More Equity podcast on Apple Podcasts or Spotify.

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