The Underrepresentation of Black and Latinx People in Venture Capital is An American Problem
“HBCUvc is solving for the lack of racial and ethnic diversity in Venture Capital (VC) to create inclusive and equitable economies.”
That’s my formal pitch when I meet people at industry events. I admit it contains a lot of buzzwords.
Depending on who’s in my audience, I will alter my pitch and say:
“We’re creating Black and Latinx venture capital investors so that more entrepreneurs of color will receive funding, and ultimately create job and wealth opportunities for communities of color.”
In response to either version of this pitch, the curious audiences will ask me follow-up questions about our programming. They’ll engage. They’ll invest in a conversation that isn’t just about HBCUvc, but the future of tech and how we can have a hand in shaping it for the better.
But then there are the incurious listeners. Their eyes glaze over. They respond with “Interesting,” allowing my pitch to trail off into oblivion. They change the subject. What’s worse, some will offer to introduce me to their one Black friend. As though that’s some compensation for their complete lack of interest.
If I’m only being self-critical when I reflect on these moments, I know that what’s missing from my pitch is the why; why should non-Black and non-Latinx people care about HBCUvc’s mission of achieving racial diversity in venture capital. The answer is a question of economics and impact.
The Role of Venture Capital In Our Economy
In October this year, we hosted the HBCUvc Fellows Summit in San Francisco. Venture capitalist Eric Woo was one of our featured faculty and taught a session titled, “The Structure of the Venture Capital Industry.” He presented a slide that contained 200 logos representing various industries, from media to consumer electronics to healthcare. He then posed a question to our fellows:
“How many times a day do you ‘touch’ a VC backed company?”
The question was asked to demonstrate how significant a role venture capital plays in our everyday lives. As Eric explained to our newest class of HBCUvc Fellows, the magnitude of venture capital’s impact is greater than most people think:
- The majority of products the average consumer uses are sold by companies that raised venture capital. Meaning, the company that makes the product received financial investment at some point from a VC.
- Venture capitalists make decisions on which companies receive funding. Hence, they play a significant role in deciding which products go to market.
- 85% of venture capitalists are White. Less than 1% are Black or Hispanic. For context — non-Hispanic Whites make up 60% of the United States; non-Hispanic Blacks — 13%; and Hispanic — 18%*
Talent Is Equally Distributed, But Opportunity is not.
Most Americans would agree that we want the best people in the room creating technological advances or solving critical problems that affect Americans. And optimistically speaking, most would agree that talent is equally distributed, but access and opportunity isn’t. The current racial and ethnic demographics of venture capital shows us that we have not provided adequate access and opportunity for Black and Latinx people. In fact, the industry has done everything but provide access — enough research and anecdotes have proven that Black and Latinx people have systematically been barred from access. Thus, how can we claim to have the most talented Americans at the decision-making table if the people there aren’t representative of every corner of our society?
The lack of racial and ethnic diversity in venture capital not only limits the innovation of products and technology that we use — it also limits and stalls the creation of high growth firms and employment opportunities in the United States. For those concerned about economic growth and the labor market, I ask: shouldn’t we also be concerned about the role of venture capital and how its lack of racial and ethnic diversity limits growth?
When I return to my pitch and the uninterested people I encounter, I think of these issues. I think of the Black and Latinx thinkers who could be the next game-changer in business. And I think of how, when those incurious people hear my pitch, they’re just a symptom of a phenomenon. Of course, they could be personally biased. Or my pitch could also just be unattractive to their business interests. However, when you look at the data and the reality of things, it’s clear that one thing is true: the lack of racial diversity in venture capital — isn’t just a problem for Black and Latinx people. It’s an economic problem, and an American problem too.
Originally posted here