As conversations about boardroom diversity in tech sector continue, it is worth noting that less than 1 percent of women, or minority-led startups, access venture capital funds.
Nevertheless, an increasing number of African American women investors are determined to change this mindset, and promote investments in companies that build diverse talent. Their main goal is to drive capital towards smart business opportunities that are usually discounted or underfunded because of their diverse founders. A study on diversity carried out at 71 leading venture capital companies, with assets worth more than $160 billion, showed that 92 percent of senior investment groups comprised of men, out of which less than 1 percent were black.
According to these investors, many diverse founders become victims of approaches used by established businesses. The approaches encourage financing accustomed products thus leaving no room for actual creativity and innovation.
Mandela Schumacher-Hodge, Kapor Capital’s director of portfolio services, said that the male ‘bro’ culture of white people has persisted in Silicon Valley. This has significantly influenced the kind of technology created in the region. The techs are also lacking diversity that reflects America’s true demographics.
There are several unexploited opportunities in the startup sector, whose products and services cater for about 80 percent of U.S. population comprising of a female, person of color, or both. These women are determined to have a market share of the buying power of U.S.’s multi-ethnic consumers, which is about $3.4 trillion, and is projected to continue increasing.
Diane Henry, an angel investor, emphasized the excessive pressure that diverse founders experience. In most cases, their minority startups are expected to be perfect. This denies them the privilege of learning the fundamentals of startup success: making frequent mistakes and taking risks so as to learn more and learn faster. Since the minority founders are taken as representatives of the “diversity thing”, any failure means they cannot access additional funding, and are also limiting any funding opportunity for upcoming minority startups.
Henry added that she normally focuses on the feasibility and scalability of a business, regardless of the founder’s race. She is more interested in business opportunities overlooked by other investors. She also noted that it is upon us to look for the female and minority founders instead of complaining that they are not available.
Stefanie Thomas, Impact America Fund’s senior associate of investments, said that there is no lack of diverse entrepreneurs. The problem is that most investors’ networks do not allow for a connection between VCs and the talented diverse entrepreneurs. For any diverse founder’s portfolio to be built, investors should stop focusing only on race when looking for investment opportunities. They need to consider the myriad of untapped talent in the industry.
For this investment culture to be changed, venture and angel capital industries need to be self-innovative, remain accountable on how and where they invest, in addition to increasing accessibility. By doing so, more diverse founders with exceptional business ideas will be found and supported.