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Black tech founders say venture capital needs to move past ‘diversity theater’

Washington Post | Nitasha Tiku  | June 10, 2020

Elliott Robinson a partner at Bessemer Venture Partners - Black tech founders say venture capital needs to move past ‘diversity theater’There’s a dearth of black investors in venture capital’s upper echelons and little investment in start-ups with black founders

SAN FRANCISCO — Twenty-four hours. That’s how long it took SoftBank, the largest tech investor in the world, to spin up a $100 million Opportunity Fund last week that will invest exclusively in black start-up founders and other entrepreneurs of color.

The size of the corporate fund, for which SoftBank will be the primary source of money, is tiny compared with the firm’s larger-than-life investments. For instance, SoftBank’s $100 billion Vision Fund sunk billions into big names such as WeWork and Uber.

But the fact that a nine-figure fund in which black investors have a vote came together in a day “suggests to me that the capital is there and the solution is in front of us, and what was missing was the will,”

said Kanyi Maqubela, a managing partner at Kindred Ventures, which invests in start-ups in their first round of financing.

“It’s not a lot, but it’s also more than anyone else has ever done,” said Sarah Kunst, a black investor and managing director of the firm Cleo Capital, an early-stage venture capital fund investing in female founders.

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A few hours after SoftBank’s announcement, the investment firm Andreessen Horowitz, an early Facebook investor with $14 billion under management, announced its own initiative — the Talent x Opportunity Fund, which started with $2.2 million in donations from the firm’s partners and will focus on offering training and seed capital to entrepreneurs who “lack the typical background and resources.”

Recent efforts mask years of underinvestment, particularly in black women. There is also a dearth of black investors in venture capital’s upper echelons — where leaders make investment decisions that shape the start-up landscape. Venture capitalists in tech dictate who gets funded, who gets rich and who is served by the technology that shapes people’s daily lives.

Yet only 1 percent of venture capital dollars went to black start-up founders in 2018, according to a study conducted by Silicon Valley Bank and others.

The number of black decision-makers in venture capital in 2018 dropped to 1 percent — representing just seven black people at the 102 largest venture capital firms in the United States, according to an annual survey by the Information, a tech-news outlet. The funds surveyed have at least $250 million under management, which does not include Kindred Ventures or Cleo Capital.

Despite their publicized efforts, Andreessen Horowitz does not have a general investment partner, which comes with check-writing privileges, who is black, according to its website. (Chris Lyons, a black investment partner at Andreessen Horowitz, leads its Cultural Leadership Fund, which links portfolio companies with black celebrities.) SoftBank’s Opportunity Fund will be co-led by Shu Nyatta, a black investor and founding member of SoftBank’s Vision Fund who left in 2019 to become managing partner of SoftBank Latin America Fund. But aside from Nyatta, none of SoftBank’s funds have a black investment partner.

Andreessen Horowitz did not respond to repeated requests for comment. SoftBank declined to comment.

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“Founders and entrepreneurs of color have so much potential, but they face unfair barriers that white founders don’t face,” SoftBank Chief Operating Officer Marcelo Claure wrote in a memo to employees about the new fund. “This is our opportunity remove those barriers for a new generation of founders. But we also know we need to do better internally.”

In recent weeks, however, as Black Lives Matter protests throughout the country have forced a reckoning with profound racial injustices, the venture capital industry is looking at its track record on race in a new light.

“The culmination of all of these macro events have turned into an explosion of conversation in very real time and in a very public way,” said Reggie James, founder of a new social network called Eternal, which raised funding from Precursor Ventures, an early-stage investment firm founded by well-known black investor Charles Hudson, as well as Bolt, Samsung Next, angel investors from Snap and Giphy, and others.

James argued last week in an essay called “The Myth of Blackness in Venture” that social media pressure to hire a black partner ignored the intricate structural factors that have kept venture so insulated. For instance, venture capital is a relations-based industry, and thus most general partners get to choose whom they invite into the fold.

“Make the hire, send the wire”

Five years ago, when tech giants were pressured into releasing reports on the gender and race breakdown of their workforce, venture firms were also challenged by the press and their limited partners, the institutional investors and pension funds that provide money to invest. Rather than making institutional changes, firms responded with title inflation, said Elliott Robinson, a general partner at Bessemer Venture Partners who calls such efforts “diversity theater.” Rather than hire and promote black people into leadership positions, associates were bumped up to partners, but without any change in their responsibilities, Robinson said.

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