One Year of VC Unleashed: Musings on Equity in Venture Capital

Photo by Aaron Burden on Unsplash

Written by Michelle Dhansinghani & Tanvi Lal

It’s been over a year since we officially launched VC Unleashed and we’re spectacularly proud of our progress…

• An active and engaged community of over 250 BIPOC MBAs — with numbers constantly growing.
• 80+ attendees at our inaugural VC Unleashed Conference and 200+ attendees at our national happy hour celebrations — featuring VC badasses like Mike Devlin, Ashley Ramirez, Abir Liben, and many more.
• A fintech breakdown series with incredible investors & founders like Elliott Robinson of Bessemer, Ola Oyetayo of Verto Payments, and Maggie Love of SheFi to name a few.
• Multiple VC skill-building events on topics like building an investment thesis, breaking into venture, venture math, and more featuring amazing speakers like Sydney Thomas, Af Hernandez, Jennifer Richard, Alicia Lau, Sergio Marrero, and our very own Mia Farnham and Michelle Erikson.
• An incredible Board of Directors (Jesse Martinez, Swarnali Mitra, Jason Schuman) and a phenomenal student leadership team (Mallory Bell & Benji Haye)
• A fresh new website (!!)
• Countless jobs, resources, and events shared

As we celebrate our progress, we’re also painfully aware of how much more needs to be done. From annual reports still showing how desperately underfunded founders of color are to the funding of Adam Neumann to the recent Launch House news — entrepreneurship, VC, and tech continue to be areas where women and minorities fight for equal access.

From our vantage point as peer leaders in the VC x equity space, we wanted to share some general musings on the state of equity within VC firms and VC-adjacent spaces. These are simply our opinions and experiences. We share them to bring awareness to the experiences of people of color, women of color, and racial minorities within the VC ecosystem.

Note: VC Unleashed focuses on racial diversity and this post discusses racial & gender inclusion (note: data on Native American representation in tech is limited — we’d love to see more of this, as well as more data/support for the LGBTQ+ and Veteran communities).

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The Good

• Conversations about funding inequity are increasing. Funds are paying attention to their portfolio mix across founders of color and women founders. More entrepreneurs are looking for values-aligned investors so funds’ commitment to racial and gender equity is a value-add.
  We are excited to see some funds intentionally incorporate checks for bias into their investment process — whether it’s something as simple as justifying in more detail why this deal, why this amount, etc. or relying on more data-driven approaches to sourcing/evaluating.
• Institutional LPs are intentionally setting aside money to support underrepresented emerging managers like Carta Venture Funds, Plexo Capital, First Close Partners, The Equity Alliance, Northwestern Mutual, Prudential, and Best Buy.
• There’s a plethora of organizations that provide support for minorities in the startup & VC ecosystems like All Raise, BLCK VC, LatinX VC, VC Familia, Founder Familia, HBCUvc, and more. They are doing phenomenal work and tangibly making a difference — we’re proud to join them in our shared missions.
• We’re seeing increased reporting around funding for women and people of color. Data is being collected and separated by race and gender to create reports that highlight the realities of today, like Stanford’s State of Latino Entrepreneurship, Crunchbase’s Diversity Report, Docsend’s Diversity Report, BLCK VC’s State of Venture, LatinX VC’s Annual Report, and All Raise’s Annual Report.
• VCs with Black & LatinX GPs are raising huge funds — like Base10 Ventures’s $460M fund, Harlem Capital’s $143M fund, Ulu Ventures’s $138M fund, L’Attitude Ventures’ $100M fund, Kapor Capital’s $126M fund, and Serena Ventures’ $111M fund. Many of these funds plan to pour capital back into Black and LatinX founders, and we’re seeing an uptick in VCs investing solely in Black and LatinX founders.
• Black & LatinX founders exist — and many defy every and all stereotype to raise hundreds of millions of dollars and become unicorns — Robert Reffkin’s Compass, Daniel Perez’s Hinge Health, Iman Abuzeid’s Incredible Health, Oliver & Alexander Kent-Braham’s Marshmallow, and Ham Serunjogi’s Chipper Cash to name a few.
• Accelerators for minority populations are growing. Some are equity-free (!) and all offer exceptional resources for founders. Equity-free examples include AWS’s Impact Accelerator and Google for Startups’ Black Founders Accelerator, Women’s Accelerator, and Latino Founder’s Fund. Others include Northwester Mutual & Gener8er’s Black Founder Accelerator and Morgan Stanley’s Multicultural Lab.

The Bad & The Ugly

• There remains a widely-held belief that “it’s a pipeline problem”. This is simply not true and deeply disheartening to hear. Adopting this belief enables folks to opt out of the diversity conversation and shirk responsibility for their lack of action. It’s not a pipeline problem — it’s an outreach and network problem.
• Inherent biases are rampant within venture funds — impacting both founders & aspiring investors of color. There remains an ideal “type” of founder & investor, and little appetite or appreciation for someone with different skills or life experiences. This makes it tougher for people of color — investors don’t see themselves in you or sponsor your company/candidacy in a way that’s needed. Much of VC works in this sponsorship model, and this continues to hold diverse folks back in the ecosystem.
• Even the folks who publicly say they support diversity don’t put their money where their mouth is. A very limited number of funds “walk the walk” when it comes to funding diverse startups or hiring diverse investors. And let’s not forget the Bain Capital Crypto team fund announcement of 7 men on International Women’s Day. VCs continue to be happy coaching & mentoring women/people of color vs funding or hiring them. Racial and gender equity is still seen as a secondary nice to have rather than a mission-critical mandate that boosts returns.
• Folks have complicated relationships with racial and gender equity — many support it because they feel they have to rather than truly understanding why it’s needed. Others take advantage of the brand that being a DEI champion brings — using it to build social clout but not following through when folks ask for support.

So, where do we go from here? We need you — all of you — to become a part of the conversation.

In uncertain economic times, it’s easy to put these conversations to the wayside. We hope you won’t — diverse teams increase performance and the kind of grit & resilience Black and Brown folks have are a huge asset in times like this.

Venture capital funds

• Be intentional about your portfolio construction. If you haven’t already, understand your current state. Look at the gender and racial breakdown of founders at every step: initial calls, diligencing, and funding (including how much you’re funding) to understand where your gaps may be.
• Incorporate bias checks into your process vs basing investment decisions off of your “gut” or “sense of fit”. This will help reduce the implicit bias that even the most well-intentioned folks run into.
• Intentionally target diverse communities when you source startups— and keep in mind that it’s not a pipeline issue.
• When you recruit for open roles — target communities like All Raise, BLCK VC, LatinX VC, VC Familia, HBCUvc and others (like us at VC Unleashed!) so your roles are reaching diverse talent.
• Join the Diversity Rider program to hold yourself accountable.

Founders

We know fundraising is an incredibly difficult journey and it’s a luxury to be picky about your investors.

• Target funds founded by or with women, Black, and/or LatinX GPs, or other underrepresented GPS. Create a racially diverse cap table so that your success doesn’t fund and perpetuate today’s current state funding gaps.
• Ask about funds’ approaches to equity and what their values are. Show them that if they want to win deals they need to be stronger in this space.
• Incorporate Soona’s Candor Clause into your fundraise to promote gender equity.
• If you’re looking for resources, here are a few: The Cap Table Coalition, VC Familia’s list of LatinX VCs, a list of Female Founded VCs, a list of Black Women in VC, and this list of e-pitch VCs.

Here’s to changing the VC space for the better 🥂
Tanvi & Michelle

Follow us on Twitter @michelleisvc @tlaltweets

Interested in joining VC Unleashed? Apply here!