Since the killing of George Floyd at the hands of four police officers heightened awareness about racial justice, the experiences of Black people in tech — and the industry’s lack of racial diversity — are getting new attention.
In the tech ecosystem at large, the industry is still predominantly white and male, and venture capital is no different. Just 3% of investment partners are Black, according to a 2018 survey from by the National Venture Capital Association and Deloitte. Meanwhile, more than 80% of VC firms don’t have a single Black investor and just 1% of venture-backed startups have a Black founder, according to BLCK VC.
“Venture capital certainly plays a role,” GV Principal Terri Burns told TechCrunch about the overall lack of diversity in tech. “VC is a tool that can enable businesses to scale greatly and quickly, and historically, this tool hasn’t been equally distributed. For example, VC has traditionally focused on founders from a small number of institutions and pedigrees that are not particularly diverse (in 2016 we learned from Richard Kerby, general partner at Equal Ventures, that 40% of VCs went to either Harvard or Stanford). With more equal distribution of funds across backgrounds, underrepresented people will have a greater chance at success.”
Burns shared the above and more as part of our survey of a handful of Black VCs in tech. Burns, and others, described what they’re looking for in their next investment, identified overlooked opportunities that are ripe for innovation and offered advice for founders navigating COVID-19 amid this racial justice uprising.
“Both COVID-19 and the racial justice uprising have had really profound impacts on our society and the tech ecosystem,” Precursor Ventures Managing Partner Charles Hudson told TechCrunch. “For me, the main takeaway from COVID-19 is that planning in an uncertain environment is extremely stressful for founders. Advice that made sense in March and April might not apply in May and June. We went from a world where it felt like we might shelter-in-place through the fall to an attempted reopening of the economy. I think the racial justice uprising is a different thing. It’s bigger than technology, it’s about our society coming to grips with some really important, structural issues.
“While I think everyone is really struggling with the impacts of COVID-19, I think employees and founders of color are being particularly impacted by the racial justice issue and it is weighing heavily on the minds and hearts of many who are trying to process what’s happening while also trying to be productive and engaged at work. I think it’s important to be aware of that and do what you can to support folks who are struggling under the weight of this.”
Below, we’ve gathered insights from:
- Arlan Hamilton, managing partner, Backstage Capital
- Lo Toney, founding managing partner, Plexo Capital
- Sydney Sykes, co-founder, BLCK VC
- Henri Pierre-Jacques, managing partner, Harlem Capital
- Terri Burns, principal, GV
- Brian Brackeen, general partner, Lightship Capital
- Sarah Kunst, managing director, Cleo Capital
- Charles Hudson, managing partner, Precursor Ventures
Arlan Hamilton, managing partner, Backstage Capital
What are the industries you’re most interested in right now?
I am into things that promote sustainability, that are clever. I like the senior care industry, but also pushing that a little further into senior activity and thriving entrepreneurship, et cetera. And media. I think media has a really interesting, exciting opportunity right now because of the way representation is so important, has always been, but it’s even more now. I’m seeing more and more interesting and unique media options rather than the status quo.
What are you looking for in your next investment?
I’m looking for people who can break down barriers within their industries, who can offer something exciting, and new, and innovative to their end user, and someone who is daring, and risk-taking, and not afraid to go against the grain. That’s really the main thing I’m looking for.
What are some overlooked opportunities that are ripe for innovation?
Again, I think senior care is something a lot of people are thinking about, thankfully. At the same time, we don’t spend a lot of time thinking about what value seniors can bring to the ecosystem, to even tech. I think you have millions and millions of people who have a gained experience that no one else has, that’s their junior, and you have all this technology at their fingertips. I’ve noticed that a lot of seniors I know have some sort of… it’s intuitive, some of this tech, like voice. They’re used to having to track down their children, and so they’re used to yelling out in the middle of an empty room, to be honest. I think that’s part of where it comes from.
They don’t have the same vanities that a lot of younger people have, and so they’re willing to take more risk when it comes to trying something new. It’s not necessarily something they want to be dangerous about because they are, by and large, taking care of themselves and caring about damage to their bodies, but they’re not afraid to look silly or to sound silly when they’re trying out a new device. I think that’s something that we can really tap into, because a lot of these people who are 70, 75, 80 years old, there’s still 20 years purchasing power there, at the least, and it’s just important that we don’t discard them and forget about them.
What’s diversity like at your firm?
Backstage has always been interested in diversity, of course, with our investments. From day one, it’s been important that we had diversity of race, background, talents, gender orientation, et cetera. I think over the years, our diversity has been remarkable, and I’ve been very proud of it, and it was very intentional.
We just kept our eyes open, we challenged each other. I think you see that in our team. Any time I felt something was lacking, or something was overrepresented, or someone was underrepresented, I tried to at least have a review process for those to see if we could bring them in, including gay Black women like myself. I can’t be the only one, and so it’s important that we always strive to be better and to do better.
What do you think about the role of venture capital and the lack of diversity in tech?
I think venture is so sought after and it’s so lauded that it has a potential to influence tech in such a strong and a powerful way, that just in the culture alone, and the messaging, and the signaling alone, it’s important. It’s important that venture capital is used as a powerful and positive sword and arrow. I think that as long as you have homogeneous groups investing in the same old, same old, you’re going to have the same old, same old issues pop up. May not happen immediately, but it will happen. So here’s a chance for us to be better. Here’s a chance for us to be better.
How can VCs help foster diversity and inclusion in tech?
I’m not a huge fan of pledges, to be honest. I don’t think that pledges are very effective, even though they come from a very earnest place. I wouldn’t say they shouldn’t be in existence. There just should be some sort of blueprint, but I have not seen pledges actually work. I think it’s more about in your action, and in who you invest in, and who you hire, and who you give check-writing abilities, and where you go looking for your investments. You can’t do the same if the same wasn’t working. You have to get to the present to get to the future. There are still a lot of people who are stuck in the past, and venture capitalists have a lot of power, a lot of power because they hold a lot of the purse strings. They can, if they want, they can be part of this revolution.
What is your advice to founders who are navigating COVID-19 amid a racial justice uprising?
My advice to founders is what it always has been, which is to remain authentic in yourself, and in your priorities, and in your ideals, and to keep forging forward, working on that. And of course, take time to reflect and to understand what you want to be doing with the years in your life. Where do you want to be in a few years? What do you want to have accomplished? What do you want your name to have been attached to in these coming months and years? Are you working on the thing right now that is going to make you, and your ancestors, and your offspring proud? That’s kind of where I am with this. It’s like, “We’re in the now. We are making history right now, and you can have your name etched in stone. What do you want your name to be representative of?”
How optimistic are you that recent heightened attention on Black Lives Matter will lead to meaningful change in the industry?
I happen to be on the more optimistic side of things. I’m not at a hundred percent optimistic, but I’m close to that. I think that there’s an undeniable unflinching resolve right now. I think that if we were to go back to status quo, I would be incredibly surprised. I guess I would not be shocked, unfortunately, but I would be surprised. It would give me pause about the effectiveness of any of the work that we do if this moment fizzles out and doesn’t create change. I do think that there is going to be a shift. I can already feel it. I know that more people who are representative of this country are going to be writing checks, whether through being hired, or taken through the ranks, or starting their own funds, and our own funds. I think there’s more and more capital that’s going to flow to underrepresented founders. That alone, I think, will be a huge shift.
Any other thoughts you’d like to share with TechCrunch’s readers?
I would just like to say, if you’re reading this and you are what you consider an ally, act like it, be it. You have so much power yourself. You don’t have to move mountains to create change. You can kick a pebble down the street, and I’ll tell you what, it all adds up. That means speaking up for others. That means writing more checks to Black and brown founders. That means letting more people be represented. It means thinking through and reflecting and really taking in what role you play maybe not in history, but in the future.
Lo Toney, founding managing partner, Plexo Capital
What are the industries you’re most interested in right now?
Plexo Capital is most interested in enterprise (dev ops/tools, security, infrastructure, data + cloud), marketplaces and technology-enabled consumer products + services. You can see our LP commitments and investments into companies here.
What are you looking for in your next investment?
On the LP side, we are looking to invest into GPs building the next great franchise in venture capital.
On the direct side, we are looking for ambitious entrepreneurs building products that are paradigm-shifting, companies that can build an expandable platform that can take over a market and serve needs that are severe pain points (and sometimes unknown opportunities for customers), and enthusiastic teams that have a clear understanding and a detailed vision of what they want to build.
What are some overlooked opportunities that are ripe for innovation?
Plexo Capital is an institutional investor allocating capital globally to the full stack of investing opportunities in the startup ecosystem. Our belief is the normal LP model has a lot of room for innovation. We have focused our efforts to deliver alpha while having the effect of increasing diversity + inclusion.
What’s diversity like at your firm?
Diversity is ingrained in our firm. Plexo Capital was incubated inside of GV, to scale the strategy GV successfully used to access additional deal flow. GV’s strategy was to make LP investments into seed-stage VCs led by a woman or a person of color, to gain access to new networks and increase the size of the consideration set of deals.
What do you think about the role of venture capital in the lack of diversity in tech?
We see diversity as a positive for us. It has been part of our investment thesis since day one. We believe that diversity is an unrealized source of differentiation in early-stage venture capital that creates a powerful network effect. Our thesis is that GPs who are women and people of color inherently have differentiated networks and a different lens to evaluate deals + entrepreneurs. They are able to pursue deals that require an intimate understanding of a problem or market opportunity in the absence of an abundance of data, which is important at the seed stage. Women and people of color bring this to the table.
We are not about diversity for diversity’s sake. It’s an alpha strategy. In the investing world, alpha is an upside specific to an investment manager and their strategy. We leverage diversity in pursuit of alpha, to provide superior returns and to create opportunities that others do not have access to pursue.
How can VCs help foster diversity and inclusion in tech?
Let’s start with make the hire and send the wire. Promote and hire Black employees and invest in their companies.
Beyond that first step, we are looking at this through a different lens. We are seeing bigger opportunities through many initiatives. These include:
- Create a YC for underrepresented GPs.
- Move past being an ally but promote that you are anti-racist. Step up when you see moments of racism.
- Hire Black scouts.
- Add more diverse voices to the cap table and the board.
You can read more in TechCrunch.
What is your advice to founders who are navigating COVID-19 amid a racial justice uprising?
The advice for founders to bring about change within their own companies during this time are:
- Implement a strategy and employee handbook that shows your values around diversity.
- Control your own destiny. Seize the opportunity to make a change. Take a stand.
- Look at the cap table and investors brought into the table, make sure your values are aligned across the board.
- Expand your network to tap into groups that have access to Black + Brown candidates.
How optimistic are you that recent, heightened attention on Black Lives Matter will lead to meaningful change in the industry?
I am pragmatically optimistic. There have been a lot of initiatives and announcements, but those need to be of substance and authenticity. We need Black founders to have checks written to their companies. As Monique Woodward notes, “Black founders are over mentored and underfunded.”
I wrote about actionable plans for the industry to take in, “I’m A VC But Still A Black Man In America.” This article was well-received, and in the past month, our inbounds for how to elevate activism in the startup ecosystem and media attention have been incredible.
We cannot stop. We have to change the momentum into a movement that can provide transformative and sustainable change.
Sydney Sykes, co-founder, BLCK VC
What are the industries you’re most interested in right now?
B2B2C — businesses that help consumer startups get up and running (Shopify, Mailchimp, etc.), unique employee retention tools (platforms for paying off student loans, donating dollars on behalf of employees, etc.), digital/mobile coaching and counseling, fintech-focused on the underserved.
What are you looking for in your next investment?
Companies that adjust quickly to COVID and make it an opportunity, companies that are able to focus on several specific customers rather than one-broad-audience companies.
What are some overlooked opportunities that are ripe for innovation?
Credit cards and creditworthiness,
What’s diversity like at your firm?
I’m not currently at a firm, but my previous firm has no Black investors but decent gender representation.
What do you think about the role of venture capital in the lack of diversity in tech?
Firms must provide their startups with the best advice to help them succeed and that means having diverse leadership, employees and board members. VC firms need to push their existing portfolios to implement these important values and to evaluate potential investments based on their team’s experiences, values and backgrounds. VC firms cannot advise companies in this way without practicing these values as well. Firms without adequate representation and diversity are missing opportunities, perspectives and deals.
What is your advice to founders who are navigating COVID-19 amid a racial justice uprising?
Focus on doing the right and smart thing for your business and getting the advice and guidance of as many different perspectives as possible. Make decisions based on your company’s mission and values.
How optimistic are you that recent, heightened attention on Black Lives Matter will lead to meaningful change in the industry?
I’m optimistic, but the real test will be if the venture firms’ (and tech companies’) demographics change. At the end of the day, this is the only way to create long, lasting change. If they’re not looking at their hiring, promotion and retention strategies relating to Black employees, nothing else they do will result in change. I’m optimistic that this will happen though.
Henri Pierre-Jacques, managing partner, Harlem Capital
What are the industries you’re most interested in right now?
E-commerce platforms and marketplaces that help brands better understand their customers. Brands don’t own much anymore so they are searching for more ways to control the narrative.
What are you looking for in your next investment?
Diverse or women founders that have early traction and are raising a $1 million+ seed round. We are very agnostic, having invested in 10 industries and 11 cities.
What’s diversity like at your firm?
Our team is three Black men, one Black woman and one white woman. Our Fund I portfolio is 87% Black, Latino or women, 47% women, 47% Black or Latino.
What do you think about the role of venture capital in the lack of diversity in tech?
It is cyclical. LPs don’t fund diverse GPs. Non-diverse GPs back non-diverse founders. Non-diverse founders hire non-diverse talent. Post-exit, those non-diverse founders become new LPs or GPs. Cycle continues.
How can VCs help foster diversity and inclusion in tech?
- Enable Black individuals and institutions to be LPs.
- Hire POC as investors and PROMOTE.
- Analyze your sourcing and conversion before just searching for Black founders. Look at your internal processes first.
What is your advice to founders who are navigating COVID-19 amid a racial justice uprising?
DO NOT underestimate the impact of a double inflection point from a pandemic and racial protest. The past will not be the present and the present will not be the future. Think through what you previously thought was impossible.
How optimistic are you that recent, heightened attention on Black Lives Matter will lead to meaningful change in the industry?
I have had more conversations with non-Blacks about Black topics in the past few weeks than my entire life. The changes are happening at an accelerated level. Last week saw announcements from Black GPs of Base10 ($250 million), Carmichael Roberts ($200 million), LeBron ($100 million) and Lightship ($50 million).
Large funds like SoftBank, PayPal and a16z have diversity funds now. Coca-Cola, P&G and many other brands have pulled from Facebook, IG and Twitter. Reddit, Medium, Shake Shack and others are promoting Black board members.
Terri Burns, principal, GV
What are the industries you’re most interested in right now?
Early consumer companies (and in particular, social) will always be an interest of mine despite the consumer landscape changing rapidly. Enterprise collaboration tools also stand out right now: This moment, which will last a while, will continue to unlock a lot of innovations around how enterprises enable communication and productivity.
What are you looking for in your next investment?
We’re a generalist firm, and as such are happy to look across industries and sectors for great companies. The most important common denominator for me are smart, product-oriented teams that are building quickly and thoughtfully.
What are some overlooked opportunities that are ripe for innovation?
We’ve spent some time thinking about the future of cities, and the many ways that the private sector is uniquely positioned to drive urban innovation. In particular, there are a ton of inefficiencies around housing, transportation, food and security, which leave me super excited to learn about innovative startups that are broadly looking to innovate in these spaces.
What’s diversity like at your firm?
Tyson Clark and I are both Black investors on the investing team at GV (80% of VC firms have no Black investors), and the team is looking to diversify in a number of different ways. We recently hired Candice Morgan as Equity, Diversity and Inclusion Partner focused on creating inclusive strategies for GV and its portfolio companies, and helping the firm expand diversity across the entrepreneurs it funds.
What do you think about the role of venture capital in the lack of diversity in tech?
Venture capital certainly plays a role. VC is a tool that can enable businesses to scale greatly and quickly, and historically, this tool hasn’t been equally distributed. For example, VC has traditionally focused on founders from a small number of institutions and pedigrees that are not particularly diverse (in 2016 we learned from Richard Kerby, general partner at Equal Ventures, that 40% of VCs went to either Harvard or Stanford). With more equal distribution of funds across backgrounds, underrepresented people will have a greater chance at success.
How can VCs help foster diversity and inclusion in tech?
The simple answer is to invest in and hire underrepresented talent. The way to do this will look different for every firm, but some options include: actively sourcing new entrepreneurs outside of traditional networks, partnering with funds that focus on diversity, supporting portfolio companies in developing DEI programs and policies early on, diversifying board of directors, etc.
What is your advice to founders who are navigating COVID-19 amid a racial justice uprising?
Take care of yourself and your community! That’s always of the utmost importance. From a venture/pitching standpoint, my advice would be to explicitly acknowledge how macro these events are impacting your team and business, and how you are responding. Everyone and every company is being impacted in some way. It’s more helpful to address that head-on.
How optimistic are you that recent, heightened attention on Black Lives Matter will lead to meaningful change in the industry?
I choose to remain hopeful; it’s the optimist in me. It’s too early to tell just how meaningful any of this change will ultimately be, but I think we’re off to a solid start.
Brian Brackeen, general partner, Lightship Capital
What are the industries you’re most interested in right now?
CPG, healthcare, E-COM, sustainability, AI.
What are you looking for in your next investment?
Rockstar founders, underrepresented, from the Midwest or South.
What are some overlooked opportunities that are ripe for innovation?
Well, it’s the founders for us. They are the overlooked opportunities.
What’s diversity like at your firm?
100% Black, 67% Black women.
What do you think about the role of venture capital in the lack of diversity in tech?
VC has been the problem, not the solution. Valley VC is like Alabama in 1963.
How can VCs help foster diversity and inclusion in tech?
In the Valley or everywhere else… I think the rest of us are making great strides forward.
What is your advice to founders who are navigating COVID-19 amid a racial justice uprising?
I honestly think that’s old news, they have since iterated and pivoted to the future.
How optimistic are you that recent, heightened attention on Black Lives Matter will lead to meaningful change in the industry?
It already has… we set out to raise a minority focused fund of $20 million, and we sit here now at $45 million. We will hit our $50 million hard cap. That could only be done in this time.
Any other thoughts you’d like to share with TechCrunch’s readers?
Please have them apply for investment at Lightship Capital.
Sarah Kunst, managing director, Cleo Capital
What are the industries you’re most interested in right now?
I’m focused on complicated consumer — areas of life that are hard to manage like taxes, debt, estate planning, mental health, etc. I also am focused on the future of income — how people will have money to cover basic life expenses, especially as fewer people work full time.
What are you looking for in your next investment?
I’m looking for founders who are deeply aware of their industry and customer and who are obsessively focused on building a massively scaled company.
What are some overlooked opportunities that are ripe for innovation?
Mental health is one of the most overlooked areas, particularly as it impacts relationships. Couples and family therapy, group therapy and executive coaching are all areas that are ripe for scaled disruption.
What’s diversity like at your firm?
As one of the very few Black women running a venture capital fund, diversity is inherent in my fund and a guiding principle of our business. We know diverse teams perform better and our scouts are an incredibly diverse group of women. We’ve invested in pretty much every gender and race imaginable. We’re living proof that there is an abundance of amazing diverse people to hire and invest in.
What do you think about the role of venture capital in the lack of diversity in tech?
Founders decide what the future will look like, but VCs decide which version of the future will be turbo charged. We know that VCs tend to invest in people who are similar to them, so the more diverse check writers we have, the more diverse tech industry.
How can VCs help foster diversity and inclusion in tech?
VCs need to be vocal and helpful about making sure their portfolio companies are finding diverse candidates for all roles, especially senior hires. The best way to do that is for VCs to purposefully diversify their own networks, making sure their events, affinity groups, office hours and other social vectors are diverse so when it’s time for them to fund and hire, they aren’t starting from scratch. Perhaps most importantly, VCs need the moral courage to pass on deals with founders who’ve demonstrated an inability to value diversity.
What is your advice to founders who are navigating COVID-19 amid a racial justice uprising?
The stress of the past few months has been virtually unprecedented. The good news is that once this is past, we should be pandemic free for another 50-100 years. The bad news is that racial justice is slow, hard work with frequent backslides. So know this moment will pass, but the work of ensuring a just world for all will not.
How optimistic are you that recent, heightened attention on Black Lives Matter will lead to meaningful change in the industry?
Much like the post #metoo moment that brought a wave of hirings and funding and attention for women in tech, I hope this moment will drive awareness of the talent in our industry that has been overlooked and underfunded. I also hope our industry’s nascent commitment to diversity will result in real, lasting change and that in five years, we will see population parity in senior leadership roles at both companies and funds.
Charles Hudson, managing partner, Precursor Ventures
What are the industries you’re most interested in right now?
We are a really generalist firm that focuses on investing in pre-seed companies, so we are not really thematic when it comes to choosing companies. That being said, we have made investments in a number of consumer companies, insurtech companies and marketplaces.
What are you looking for in your next investment?
We continue to focus on pre-launch, pre-traction startups where the founders have a unique insight on the problem they are looking to solve. We typically base 75% of our analysis on the founder(s) and their vision and 25% on the market they’re pursuing.
What are some overlooked opportunities that are ripe for innovation?
Core consumer applications are ripe for innovation in my opinion, I’m seeing lots of interesting work happening here.
What’s diversity like at your firm?
We are an all-Black firm. One Black male GP (me), one Black female Sr. Associate, one Black female analyst.
What do you think about the role of venture capital in the lack of diversity in tech?
I think most venture firms are not themselves diverse and many of the people who invest on behalf of those firms do not have social and professional networks that include Black and brown folks. Many firms also don’t have any Black and brown investment professionals on their teams, so I think the companies that get backed largely reflect the makeup of the teams who make investments. I think we have some early data that hiring and empowering female investors has increased female founders’ access to capital and brought more female founder talent into the ecosystem. We have a long way to go on that front, but I do feel that we are seeing some positive movement on that front as firms diversify their partnership by gender.
How can VCs help foster diversity and inclusion in tech?
I think the first step is for VC firms to look at their own internal efforts at their own firms. Do they have an investing team that includes women and people of color? Are they investing in founders of color and women? It is hard to push portfolio companies, or the larger tech ecosystem, if your own firm doesn’t reflect the values that you are encouraging your portfolio companies to adopt. It’s okay to admit that your current state of affairs are not reflective of where you’d like to be as a firm, but it’s important to have a real plan on how you plan to improve if that’s the case.
What is your advice to founders who are navigating COVID-19 amid a racial justice uprising?
Both COVID-19 and the racial justice uprising have had really profound impacts on our society and the tech ecosystem. For me, the main takeaway from COVID-19 is that planning in an uncertain environment is extremely stressful for founders. Advice that made sense in March and April might not apply in May and June. We went from a world where it felt like we might shelter-in-place through the fall to an attempted reopening of the economy.
I think the racial justice uprising is a different thing. It’s bigger than technology, it’s about our society coming to grips with some really important, structural issues. While I think everyone is really struggling with the impacts of COVID-19, I think employees and founders of color are being particularly impacted by the racial justice issue and it is weighing heavily on the minds and hearts of many who are trying to process what’s happening while also trying to be productive and engaged at work. I think it’s important to be aware of that and do what you can to support folks who are struggling under the weight of this.
How optimistic are you that recent, heightened attention on Black Lives Matter will lead to meaningful change in the industry?
I am hopeful but not yet optimistic — we have a lot of work to do to address the harmful impacts of structural racism on our society.
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