The moment might be right for the venture capital industry to finally address its lack of racial diversity — but only if it learns the right lessons from the #MeToo movement, advocates say


BLM Black Lives Matter protest in San Francisco — A protester leads a crowd in a back and forth chant during a rally in support of George Floyd and against police brutality at Dolores Park in San Francisco, California on June 3, 2020. - Thousands of people gathered at Dolores Park and marched through the city in support of George Floyd and against police brutality. (Photo by Josh Edelson / AFP)

  • The ongoing protests over police brutality and systemic racism have led to scrutiny in Silicon Valley over its poor track record on racial diversity, particularly in the venture industry.
  • Many in and around the industry see parallels to the #MeToo movement and spotlight it shone on gender discrimination in the tech and venture businesses.
  • While many advocates for Black investors and founders think there are lessons to be learned from that movement but say the movement for racial equality in the Valley faces additional challenges and obstacles.
  • Still, many are optimistic that the present moment could spur real change.
  • Visit Business Insider’s homepage for more stories.

Three years ago, Susan Fowler reflected on her “very, very strange year at Uber” and helped spark a movement in Silicon Valley.

Fowler’s memo recounting the sexual harassment she endured at the San Francisco ride-hailing company helped prompt other women in the tech industry and its venture capital arm to speak out. Within months, numerous executives and venture partners were ousted; companies and firms promised to address gender discrimination and the longstanding exclusion of women in leadership, tech, founder, and investor roles; and women investors came together to form an organization to promote the hiring and funding of women within the venture industry.

Many inside and outside the tech and venture industries see an analogy between that moment three years ago and the present one. Nationwide protests over the killing of George Floyd have led to much broader discussions about systemic racism. The venture industry in particular is being pressured to address its poor record of hiring and funding Black people. And some see the movement to promote gender equality in the industry as a model for getting the venture world to address its racial problems.

“There are absolute parallels” between the two moments, said Pam Kostka, the CEO of All Raise, the organization founded by female investors to promote gender equality in the venture industry. There’s “an opportunity,” she continued, “for moving forward and finally addressing some of the systemic issues and obstacles.”

But while the movement for gender equality in tech and venture capital has achieved some notable successes, it could also be looked on as something of a cautionary tale. Despite the intense publicity and pressure that was brought to bear, the gains have been limited at best, particularly within the venture industry.

And, advocates say, there are important distinctions between the two movements. Black people face challenges and obstacles that white or even Asian women don’t have to overcome.

“Yes there’s lessons to be learned” from the movement for gender equality in the industry, said Brian Dixon, a partner with Kapor Capital. “But it’s not a carbon copy of — that movement is the exact same as this movement.”

Susan Fowler helped spark a change

At the time of Fowler’s memo, the venture industry wasn’t a particularly hospitable place for women. Few firms had even one woman partner. A small fraction of startups that got venture funding had a female founder. Sexual harassment was rampant at some firms, as was exposed later. And the most prominent airing of gender issues in the industry — Ellen Pao’s discrimination suit against Kleiner Perkins — ended in defeat for Pao little more than two years earlier.

But that started to change with the movement that Fowler helped spark. Numerous other women came forward and publicly accused prominent men in the industry of sexual harassment and discrimination and promoting toxic workplaces. Such accusations led to the resignations of venture investors including Binary Capital’s Justin Caldbeck,  Sherpa Capital’s Shervin Pishevar, 500 Startups’ Dave McClure, and Steve Jurvetson of Draper Fisher Jurvetson.

Precursor Ventures Managing Partner Charles Hudson

In response to the movement, the industry opened up opportunities for women with many firms adding female investors and partners to their staff. That reflected not just outside pressure, but a cultural shift, those in the industry say.

“Firms started to be held accountable for not having female investors on their team,” said Charles Hudson, the managing partner at Precursor Capital.

Although there are still firms that don’t have any women investors, “they’re uncomfortable about it,” Hudson continued. “They haven’t fixed it, but they know … it’s something you’re allowed to criticize someone about now.”

In its work to diversify the industry, All Raise has focused on helping women investors and entrepreneurs build their networks. The organization runs programs that help connect women working in different levels of the venture industry or at firms that specialize in funding startups of different maturity levels. It also helps pair up female founders with potential investors and women working in the lower ranks of the VC industry with senior partners.

All Raise has also made a big point of tracking and encouraging the industry to measure gender diversity.

“The numbers are are so important,” Kostka said. “We are big believers that you cannot fix or address what you don’t measure.”

The #MeToo movement offers some lessons

Those now pushing the industry to be more racially diverse see some definite lessons that can be learned from All Raise and the movement to promote gender diversity. Many see the opportunity to follow the #MeToo movement’s lead and use the attention and outrage sparked by the current moment to push for significant and lasting changes. Many are focused on measurement — getting the venture firms and the industry to systematically track how many Black people they employ, how many they fund, and how much money they’re putting into Black-founded startups.

And many think there’s a chance to change the culture of the industry.

“I hope we get to a point where it’s OK to say, ‘It’s not normal to have a venture fund that doesn’t have a person of color in a junior or senior role and that doesn’t have anybody in their portfolio,” Hudson said. “‘This is weird.'”

Sydney Sykes — cofounder of BLCK VC

But as much as the gender equality movement has achieved in the last three years and the lessons it can impart to those pushing for racial inclusion, the hard fact is that numerically speaking, the gains have been small. As of 2018, more than two-thirds of venture firms still didn’t have a female partner, the National Venture Capital Association and Deloitte reported in a study last year. Only 9% of venture-backed founders are female, according to a report last year from RateMyInvestor and Diversity VC.

Thus far this year, only about 22% of venture investments — and only 14% of the money invested in such deals — were made in companies with at least one female founder, according to PitchBook. Even as venture funding surged in the last two years, the portion going to startups launched by women actually declined from where it was in 2017, according to PitchBook’s data.

The progress has been “mixed, in all honesty,” Kostka said. The small share of money going to female-founded firms is “a huge fail by the industry,” she continued.

Black investors and founders face big obstacles

What’s more, the movement for racial equality faces a different and in some ways more daunting set of obstacles than does the corresponding push for gender equity, Black investors and advocates say.

The #MeToo moment in tech was spurred by Fowler’s experience and that of other women inside and outside the industry who spoke out publicly about sexual harassment and discrimination. In many ways, the movement was both spurred by and focused on the ways in which corporate America excluded women, said Sydney Sykes, a cofounder of BLCK VC, an organization that promotes diversity in the venture industry.

By contrast, the spark for the current moment was Floyd’s death and the outrage of police brutality. That’s led to a wider discussion about racism and exclusion in all kinds of systems, but it’s not as narrowly focused on the issue of inequality in business as the #MeToo moment was, Sykes said. The business world is just one of many areas in which Black people have experienced systemic racism and the venture industry is just one sector among many in corporate America where that’s taken place.

daryn dodson

“You can’t just focus on the business aspects of racism, because there are people dying,” said Sykes, a former analyst at venture firm New Enterprise Associates. “That’s one of the big differences that makes this a challenging conversation to have … There are so many different problems, that it’s hard to create a focus and attention on just one.”

Another big challenge for the racial inclusion movement compared to the gender equity one is the difference in networks. Every venture investor knows a woman, whether it’s their mother, wife, or daughter. Many could make a connection between the aspirations of the women in their lives and those of women who wanted to be founders or investors and empathize with what they faced, Hudson said. 

By contrast, there are few Black people in tech in general and in the venture industry in particular and exceedingly few that move in the same circles as venture investors.

“I think a lot of investors — they don’t have regular social or professional interactions with Black people,” Hudson said.

Intrinsic bias is a deep-seated problem

And Black investors face an even more deep-seated and onerous problem — intrinsic bias. A peer-reviewed study conducted at Stanford and published in the Proceedings of the National Academy of Sciences found that asset managers rated white investors higher than Black ones even when they had the exact same strong credentials and the only difference between them was their race.

That study indicates that even if advocates can convince venture firms to consider more Black candidates for jobs or funding, the firms will continue discriminating against them unless they are aware of and work to address that bias, said Daryn Dodson, managing director of Illumen Capital and a member of the research team behind the study.

“The higher a Black manager performs, the more likely they are to be overlooked by those allocating assets,” Dodson said. “People [are] pitching right in front of their faces, and [they’re] systematically discounting them, because of nothing other than the race of the people pitching them.”

In perhaps one example of that, even as the venture industry has moved to hire and fund more women, it has almost entirely overlooked Black and Latino women. Last year, a record number of women — 54 — were named partners at venture firms but only one was Black and only one was a Latina, said Kostka. Meanwhile, just 0.06% of all venture funding from 2009 to 2017 went to Black women founders, according to Project Diane.

“Those are appalling numbers,” Kostka said.

Advocates are still hopeful

Many in the industry recognize that addressing the racial disparities in the venture industry is likely going take years. And it’s likely going to have to start in small ways, many of them similar to what women in the industry have been doing — encouraging firms to make a concerted effort to broaden their networks of contacts; making a conscious effort to think about diversity; collecting data on inclusion.

But even with all the challenges, many are still hopeful that the present moment will spur meaningful change.

“We have to realize this is not going to be a sprint. It’s going to be a marathon,” Dixon said.

“I think the thing, though, that’s different now … is firms are publicly saying, ‘We want to see this change,'” he continued. “That is the difference, and that is the opportunity.”

Got a tip about the tech industry? Contact Troy Wolverton via email at, message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. You can also contact Business Insider securely via SecureDrop.

SEE ALSO: Silicon Valley billionaires are lining up to condemn racism. But the tech and VC industry has a shameful, decades-long history of ignoring and perpetuating inequality.

Join the conversation about this story »

NOW WATCH: A cleaning expert reveals her 3-step method for cleaning your entire home quickly