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To solve this problem, these critics say, investors need to look beyond their own networks and make their own industry more inclusive. Currently, only around 4% of all venture capitalists are black, according to the National Association of Venture Capital. “You can’t just hire a person and you’re done. You can’t just tick a box, ”says Frederik Groce, director at Storm Ventures. Groce says improving diversity needs to be done systematically, rather than just promoting a black investor in a company or giving money to the first black founder who walks in the door. “I don’t think we’ve seen enough change happening yet, but I remain cautiously optimistic,” he said.
Groce co-founded a non-profit organization called BLCK VC in 2018 to support other black investors like him; its goal is to double the number of black VCs by 2024. In June, the group launched a seven-week training program called Breaking Into Venture, designed to bring black applicants to analyst and associate positions in companies. “This is our attempt to say, if you are having trouble finding talent, or if you think there is a ‘pipeline problem’, well, no, there is a filtering problem,” says Groce. “If you only look at rentals at Stanford, Harvard, Princeton, Yale” – which graduates some estimates are owned by up to 40% of CVs – “so you created an artificial filter”. The first Breaking Into Venture cohort came from a variety of other educational and professional backgrounds. Groce says half of this cohort now has venture capital jobs. But as Groce points out, the work of industry diversification still falls disproportionately on people of color, and everyone needs to do more.
“I think 2020 has crystallized for a lot of people that we have to do better and build more intentionally,” said Alexis Ohanian, co-founder of Reddit and Initialized Capital, a venture capital firm, in 2012. In November, Ohanian announced a new fund called Seven Seven Six, with a Operator in Residence Program to find and train future VCs through hands-on experience and formal mentoring. The program’s open application process aimed to seek applicants beyond the well-covered networks of Silicon Valley. “I wanted to set up something that was really deliberate from day one that could look at how to make the adventure work from first principles and generate even greater returns, and seek out an even greater range of founders. », Explains Ohanian.
To longtime diversity advocates in venture capital, these recent efforts seem too little, too late. After Ohanian declared the Twitter earlier this month, 2021 would be “the year we start to see black and brown investors in the ranks of venture capitalists,” investor Ellen Pao highlighted that there had not been a single black or brown investor at Initialized Capital, nor at Seven Seven Six. When asked about this, Ohanian said he was not responsible for hiring at Initialized, and that Seven Seven Six has only been around since November. “I am delighted that she is so motivated to give us her feedback so early in our lives,” he said. (Pao did not respond to an interview request.)
As the Year of Big Promises draws to a close, the question is whether these conversations will continue and to what extent industry leaders will remain committed to a more equitable future. Howard thinks there may be enough individual investors who are starting to change the status quo. He mentioned Steve Case, the founder of AOL turned investor whom he met while raising funds for his fundraiser. Case created Rise of the rest, a fund to support founders who are otherwise overlooked in Silicon Valley. “He’s actually putting money in front of the founders, and it’s not $ 25,000 – it’s half a million dollars, enough for you to build something in a sustainable way,” says Howard, who received an investment. “In general, investing in diverse management teams is good business, and funds should do so without segregated capital.”
Plus, in the competitive startup world, having investors like Case on board can make a huge difference in raising more money. “Once a founder receives a condition sheet, everyone is like, ‘Who’s in it? If anyone’s around, the others say, “I’m comfortable doing that too,” Howard said. “If we can change a small community of people around us, it means other people have more equity. And then they can say, ‘I am too.’ “
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