One percent is a rounding error. It is a penny on the dollar. It is also the percent of venture funding to date for Black founders.
Will the protests that began as a response to the death of George Floyd and escalated into a sustained nationwide cry for racial equality serve as the accelerant for more inclusion in technology, and for investments into Black and minority-founded tech businesses?
Step one is to recognize how complicit the tech industry is in continuing the longstanding tradition of white guys doing business. The most recent statistics for Google parent company Alphabet, for example, show that only 2.8% of U.S. employees are Black, according to USA Today. It’s not much better at Facebook. The same article notes that according to the most recent U.S. government data, only 3% of employees at the top 75 tech firms in Silicon Valley are Black. For that matter, the most recent data, from 2019, shows that at Google less than 32% of employees globally are women.
Venture capital has been very much of a guy’s club. It’s exclusive, and predominantly white. During the height of the #MeToo movement some traditional VC firms stepped up their gender game by hiring a few high-profile woman managers. Investing in women founders garnered lots of headlines, but according to Pitchbook, funding for women founders still remains low at only 2.2% of the money invested from all funds.
In the two weeks since the protests began, we’ve seen a daily flurry of pronouncements from high-profile tech and investing companies vowing to do better. A few days into the protests, Andreessen Horowitz (A16z.com) announced a $2.2 million fund called The Talent x Opportunity (TxO) to be invested with founders from underserved populations. Ritesh Patel, chief digital officer at Ogilvy Consulting, is the person who drew my attention to this announcement, so I gave him a zoom call. He told me that while he “applauded the sentiment, $2.2 million was little more than lunch money” (or their own rounding error) for a company that manages $12 billion dollars in funds.
The following day SoftBank launched its $100 million opportunity growth fund to invest in founders of color. SoftBank’s Chief Operating Officer Marcelo Claure‘s widely-circulated note addressed how the fund would serve people of color. League of Legends publisher Riot Games will invest $10 million in founders who are underrepresented minorities and women in the video game community.
Other tech companies stepped up, not to fund or to hire, but to generously donate millions of dollars to bolster the efforts of activist groups at the forefront of racial issues.
In one of the most extraordinary announcements, Reddit’s founder Alex Ohanian resigned from his post on the Reddit board and urged the company to fill his seat with a Black candidate. In addition he pledged one million dollars to Colin Kaepernick’s Know Your Rights Camp. In his Twitter post ,Ohanian declared “resignation is a form of leadership”.
IBM announced that it would no longer sell facial recognition software, because of the technology’s potential use in racial profiling and surveillance. In a letter to a group of Democrats in Congress, IBM CEO Arvind Krishna offered to assist in the responsible use of technology and police reform.
The reactions of well-known tech firms are laudable. Collectively they will move the dial in the right direction. But I am guessing that true systemic change will come from new forms of investment and community activism that might truly spur the reapportionment of wealth. Why? Because traditional funds don’t know where to start or how to look.
Joel Reyes is a Black entrepreneur who lives in Harlem. He had to shutter his last business because he couldn’t raise the necessary funds. “VC firms have little room for flexibility,” he says. “They need to play it safe.” Reyes said what he lacked was not a great idea. What he lacked was savvy about making scintillating presentations and knowing about things like sales pipelines and financial models. “For early stage, first time founders like me, funds alone are going to be insufficient. There’s a need to inject confidence in us. The hyper focus on returns can’t come at the expense of the social impact a founder can have on their community.”
New accelerator and investment firms grounded in community activism might seize the moment. Ajit Verghase and Harry Alford at Humble.vc see themselves as matchmakers between enterprises and the minority startup community. “It makes financial sense for enterprise to have more Black and Brown people creating product,” said Harry, “because you’ll grow your customer base to reflect those startups.” Others like Republic VC rely on a crowdfunded model where everyone is an investor. Harlem Capital, Backstage Capital and Cleo Capital are relatively new funds with their eyes set squarely on underfunded, but also undiscovered, women and minorities.
Meanwhile, fed up Black investors and technologists have begun using the slogan “Make the Hire, Send the Wire” to urge VCs and companies to stop talking and act.
The road to rectify the tech community’s “whiteness” problem is going go fork in all sorts of directions. The good news is that it is no longer news that there are consumers of color with disposable income. More good news is that there’s no talent shortage. The tech companies and investors that find, hire, fund and shepherd this untapped talent will thrive.
