SFE Insight | Why it’s more important than ever to support diverse founders in Scotland

Sanghamitra Karra, Managing Director, Morgan Stanley

Entrepreneurialism is firmly on the agenda in Scotland.  Business leaders, academics, and politicians have been touting Scotland’s entrepreneurial potential recently, while Scotland’s Chief Entrepreneurial Officer Mark Logan has set out his vision for Scotland to become “Start-up Nation.”

One major advantage that Scotland can leverage to achieve this national ambition is a strong financial services industry with the ability to support, enable and invest in the businesses of the future. Morgan Stanley is a key example. We sat down with Sanghamitra Karra, Head of the Firm’s Inclusive Ventures Group in EMEA, which provides access to capital and connections to early-stage technology and technology-enabled companies led by underrepresented founders, to hear about the how the programme is supporting entrepreneurs in Scotland.

 Here’s what she told us:

 What is Morgan Stanley’s Inclusive Ventures Lab and why was it established?

The lab was established in 2017 in the US and expanded to cover Europe, Middle East and Africa (EMEA) in 2021. At Morgan Stanley we connect capital to ideas so that businesses can grow, new products can be created, and communities can thrive. Even in today’s well-developed markets, access to capital is uneven, and investors miss opportunities to fund potentially successful ventures in underserved populations. Our mission through the lab is to create a more inclusive investment landscape for underrepresented founders. Over the last 6 years in operation, we have supported 69 companies who have gone on to raise over $207MM. We have also just announced our 2023 cohort consisting of 23 companies with 14 based in North America and 9 based across EMEA.

Tell us about your role?

I am the EMEA Head of the Morgan Stanley Inclusive Ventures Group leading the effort to expand the Morgan Stanley Inclusive Ventures Lab in the region since inception in 2021. I have been at Morgan Stanley for over 16 years and prior to this has held a variety of roles in Risk Management across Mumbai and London, including most recently as Global Head of Market Risk Stress Testing.

 In my current role, I’m driven by the impact that the lab has on accelerating the growth of the portfolio companies and bringing the diversity conversations to the forefront of the broader venture ecosystem. Commitment to Diversity and Inclusion is a core value for Morgan Stanley and is often humbling to see how generous our employees are with their time, expertise, and connections to help the selected companies succeed. I also particularly enjoy the selection process, where each year we review thousands of applications from innovative companies, helping me keep abreast of trends across the innovation landscape.

What does it take to succeed as an entrepreneur?

Resilience – very few companies succeed, even fewer raise venture capital. Successful entrepreneurs share a number of traits: they drive an idea, are clear in their execution and have a vision to lead employees, prospective clients and investors. But most importantly, they are resilient enough to weather the storms and overcome the challenges they face.

What are the key barriers for entrepreneurs from diverse backgrounds?

Two of the biggest barriers include access to networks and capital. Often, people from diverse backgrounds may not have any role models who have built successful businesses in their network – you can’t be what you can’t see.  When they decide to start a business then there may be a lack of access to the initial ‘family and friends’ funding that is often the first money to get the business started due to lack of disposable income. Having started the business, they may not have access to a network of potential clients or investors. For example, Research by European Women in VC shows that only 15% of all venture capital investors are women and women founded companies attract less than 2% of all venture capital deployed in Europe.

Why has Morgan Stanley stepped up their focus on the programme in Scotland?

This year Scotland, with its fertile start-up sector and established base of diverse entrepreneurs running emerging high-growth companies, was specifically targeted as a source of applications to the accelerator programme. Morgan Stanley has been established in Glasgow for over 20 years and the team here has a great understanding of the vibrant technology talent pool in the region and has strong partnerships with cluster management organisations, such as Fintech Scotland, who can help source the potential companies.

There is also a big opportunity to foster a more diverse entrepreneurial ecosystem in Scotland. Only one in five businesses in Scotland are female-led, while start-ups founded by women received only 2% of overall investment capital in the last five years. We are pleased to be playing a part in addressing this.

How does the programme enable entrepreneurs from diverse backgrounds to thrive?

For each selected company, the program includes both an equity investment of £250,000 and ongoing support for their growth and development needs through an intensive five-month programme involving Morgan Stanley mentors and advisers alongside external industry experts. The programme culminates in a Demo Day, where all participants get the opportunity to present to a network of investors brought together from across Morgan Stanley’s global networks. These investors can help provide further capital and cultivate strategic partnerships to transform the development trajectory of the businesses.

Any insights from this year’s programme?

For 2023, we received over 7900 applications of which over half were from Europe, Middle East and Africa. Nine companies were selected for this year’s cohort and you can read more about them on our website. We ran two pitch competitions in Glasgow and Edinburgh in March and identified two companies which were fast-tracked to our Investment Committee, of which one company Inicio AI led by Rachel Curtis was selected for this year’s cohort. Inicio AI delivers a virtually guided affordability assessment to help organizations save contact centre costs while improving their end customer experience.