In the past few weeks, several venture capital firms have published different variations of the same pledge: we’ll do a better job supporting the Black community.
My timeline, and I’m assuming yours too, has been filled with statements from non-Black venture capitalists saying that they will rethink how to be more inclusive with their hiring and wiring.
There is no need to applaud firms for taking long overdue steps to treat others equally. What is more important is how we’re going to hold these firms accountable going forward, after a history of inaction.
In a memo published on Friday, Matchstick Ventures outlined a series of commitments to fight racism and underrepresentation. The firm, which manages nearly $37 million dollars and is led by Ryan Broshar and Natty Zola, turned to Black entrepreneur Clarence Bethea for advice on how to proceed.
The pledge stood out for two firm reasons: It is more robust than most promises we have seen by high-profile firms, and it has actual numbers and a deadline, which are key to benchmarking progress.
Disclose your current diversity statistics
Matchstick says 7% of the companies it has invested in have Black founders or founding team members, which is seven times the industry average. Portfolio diversity data needs to be more largely released by the VC community because it’s the only way to determine if progress is being made. So far, beyond Matchstick, we’ve only seen Initialized Capital release diversity metrics. Union Square Ventures said that of more than 100 investments, only a few have been in self-identified Black founders.
3/4 pic.twitter.com/WadWLzmnfV
— Initialized Capital (@Initialized) June 1, 2020
As my colleague Megan Rose Dickey said, venture capitalists need to report the demographics of the founders they invest in, because you can’t improve what you don’t measure.
Give yourself a deadline
Matchstick promised to increase the number of Black founders in its investment pipeline before June 1, 2021, roughly one year from now. The firm has invested through 40% of its second fund, which is a $30.5 million investment vehicle, partner Natty Zola told me. It means that it has 60% of that capital, and one year from now, to invest in some Black entrepreneurs.
The deadline is useful for accountability purposes. I have a calendar event to remind me.
A hiring freeze doesn’t let you off the hook
As the pandemic continues to spread and dramatic unemployment numbers persist, many companies and firms are enacting hiring freezes. This, naturally, would hurt any plans to hire a more diverse workforce.
Matchstick, for example, is led by partners Zola and Broshar and doesn’t plan to hire anytime soon. In its blog post, the firm says it is looking to add a Black advisor to its advisory board, who will have voting rights and a legal tie to the fund.
“This group is our most important advisors who help review and shape our fund strategy. We are a small fund and don’t have plans to hire directly into Matchstick anytime soon but if or when we do, we will be very intentional about building a diverse pipeline of candidates,” the post reads.
Don’t overcomplicate
More investors need to hire more Black people and wire money to more Black founders. Do not overcomplicate it: Before you can solve a a problem that has been ignored for decades, you need to commit resources.
There are two bits of required reading that give you a good place to start:
Tiffani Ashley Bell, who coined the term “make the hire or send the wire,” wrote a Medium blog about dealing with white supremacy within tech:
Now, let’s talk about investors. Venture capitalists are in the business of intelligently managing risk while guiding capital to life-changing, fund-returning returns. So, why do so many VC firms behave as if investing in Black entrepreneurs is a risk they can neither manage nor take? When an entire asset class overlooks a possible source of returns, what does that say about its real desire for performance? Commit to investing in more Black entrepreneurs―both men and women. Along those lines, will you commit to not relying solely on warm introductions? If you’re an angel investor, are you willing to work harder to be the first check in for Black entrepreneurs?
Reggie James wrote a Substack post about the myth of Blackness in venture:
I have always said that to really change things, Black founders need to return the fund.
However, carve-out vehicles and charity funds, remove us from direct relationship to the performance of fund managers.
This is intentional and says — again — that they do not hold our potential as equals, within the overall construction of their portfolio. We cannot continue to celebrate these initiatives, that divorce us from the performance of the primary fund. Where they place a Black person in charge, to deal with the Black half of the investments.
It is for this same reason, that I struggle to support funds who’s primary thesis is that of diversity. Too often it serves as a vehicle for high net-worth LP’s — typically fund managers elsewhere — to point to their contribution as their action towards equality, with little structural change to their own fund.
Bottom line
Matchstick Ventures can be a snapshot into tech’s diversity problem: The firm was founded by two white males with startup exits, it has no Black limited partners and has never invested in a Black woman. Does admitting that in a blog post following racial violence change that fact? No. Silicon Valley has had a history of inaction in regards to investing in more diverse founders and a well-strategized blog post does not change that.
But data transparency is useful to hold them accountable six months, and a year from now. And if the tech industry is serious about offering more than lip service, accountability should be a loud and clear bullet point.
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