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Updated February 11, 2023Erika Brodnock is an award-winning serial entrepreneur and philanthropist. Following her MBA, she was Research Fellow at King’s College London, and is currently finishing a PhD at the London School of Economics and Political Science. Through her work at the intersection of technology and wellbeing, Erika specializes in building products and services that disrupt outdated systems. Erika is co-founder of Kinhub (formerly Kami), an employee wellbeing platform focused on enhancing equity and inclusion in the future of work. Erika also co-founded Extend Ventures, where she leads research efforts that aim to democratize access to venture finance for diverse entrepreneurs.
Johannes Lenhard is a researcher and writer based in London. Following his PhD at Cambridge, he spent three years during his postdoc researching the ethics of venture capital between Europe and the US. His first book, Making Better Lives—on homeless people’s survival in Paris—was published in 2022. He regularly contributes to journalistic outlets such as Prospect, TechCrunch, Vestoj, Aeon, Tribune, The Conversation, and Sifted. Most recently, he is the co-founder and co-director of VentureESG.
My research on the ethics of venture capital (VC) began in the fall of 2017. I started interviewing venture capital investors, first in Europe and then all over the world between Silicon Valley, New York, London, Berlin, Nairobi, Lima, Tokyo, and Paris. Over the past five years, during my post-doctoral research at Cambridge, I’ve spoken to more than 300 partners in venture capital funds across stages, geographies, and asset classes. Before I began this research, VC was a place to earn some money on the side for me; I started as a “student temp worker” for a corporate VC fund when I moved to London. Over the years, I have supported and consulted a number of VC investors in areas as varied as reporting, fundraising, and as a deal-flow generating “venture partner.”
At first, my interest in VC was abstract: I wanted to use my contacts to shed some light on what venture capitalists do, who they are, and why it matters. It seemed to me not enough scrutiny has been on these “kingmakers” of big tech. By 2019 I had already spoken to almost 100 VCs, but it wasn’t until I arrived in Silicon Valley that summer that my eyes were opened to the issue at the core of this book: the absurd lack of diversity, equity, and inclusion (DEI) in VC and the related homogeneity across the tech industry.
During my first conversations in Silicon Valley, I always asked about what problems people thought the industry was facing at the time; the biggest issue people pointed out to me (apart from already skyrocketing valuations) was DEI. I went back to my own sample of interviews. I was stunned: out of my first 100 or so interviews, five were with female VCs, and even fewer were with people of color. I had also met most of the VCs through “elite networks,” as my university and industry contacts provided warm introductions (referrals or endorsements). That was the time when I started to explicitly reach out, first to female VCs, and increasingly to a wider set of investors who weren’t either male or white or elite-educated. It was also then when I first started writing about my findings.
When I arrived back in the UK later in 2019, I was curious to compare the European ecosystem to Silicon Valley. I reached out to and asked for introductions to DEI champions. That’s how I met some of the people featured in this book, like Maren Bannon of January Ventures; Sophia Bendz, who is now at Cherry Ventures, but at the time was the first female partner at Atomico; and Check Warner, founder of Diversity VC and GP at Ada Ventures. One interview I’d scheduled was with Erika Brodnock, the founder of a company called Kami (and before that Karisma Kidz), to learn from her about intersectionality and racial disparity in the UK tech ecosystem. We connected immediately over the issues, straight away got to write our first piece together for Sifted. I was absolutely taken by Erika’s experiences—having raised five children, started two companies, and just embarked on the complicated journey of a PhD at the London School of Economics (LSE)—and had found my match to start working on this book.
And it was an absolutely necessary match, obviously: I am a white, privileged man with ten years at one of the best universities in the world under my belt. Unlike in many other contexts where “expertise” comes with the privilege to speak, in this particular case you might think: why listen to me on questions of gender, racial, and all kinds of other social justice and equality? What do I know about diversity, equity, and inclusion? The good news is that you won’t have to listen to my voice for too much of this volume. Not only does my co-author Erika Brodnock have all the experiences I am missing (more on that next), this book is first and foremost a book of interviews, the collection of an almost two-year long journey through the worlds of venture capital and tech between the US and EU. My privilege helped us to go on this journey—to get into many rooms, to listen, to ask questions, and to distill what we heard. I hope the result helps you, the reader, gain valuable perspectives and participate in positive change.
My background is incredibly different from Johannes’s; some might say it’s the polar opposite. I am a Black female, born and raised in Streatham Vale, South London. I was educated in comprehensive schools and, despite being advanced a year in secondary school for being gifted and talented, I stopped education at A-Levels due to circumstances. I went to university for the first time in 2017 to study for an EMBA at the University of Surrey. Having graduated within the top percentile of my class, I wrote my PhD proposal for the development and deployment of algorithms that would enable an analysis of the allocation of capital by the UK’s venture capital ecosystem as pertaining to the perceived gender, ethnicity, and educational background of venture-backed founders. I was offered places at several leading universities and eventually decided to read at the LSE, where I was awarded a fully funded studentship and have been privileged to work with Professor Grace Lordan in the Inclusion Initiative, and am supported by leading figures who are committed to creating tangible change in the venture capital and private equity industries.
Over the last decade, I have been able to co-create two for-profit enterprises as well as two non-profit organizations—one of those is Extend Ventures, where I am co-founder and head of research, alongside the incredible co-founders Tom Adeyoola, Patricia Hamzahee, and Kekeli Anthony. Our research outputs, including the Diversity Beyond Gender report, have succeeded in illuminating many of the stark disparities in access to funding, in ways that have not previously been possible. As a result, we have been able to partner with Atomico, Nasdaq Entrepreneurial Center, JP Morgan, and Innovate UK to support the global analysis of capital allocation to diverse founders. This research has been credited with being a catalyst for many new funds receiving funding that is specifically for diverse entrepreneurs.
Prior to Diversity Beyond Gender being released, I had not been able to raise capital for my entrepreneurial endeavors. Even in 2019 and early 2020, when my co-founders at Extend Ventures included an exited entrepreneur, an investment stalwart, and a Bain consultant with degrees from Oxford, Cambridge, and Columbia, while I was at the LSE, as an all-Black team, we needed to bootstrap the first research piece to “de-risk” our proposition. Going back further to 2015 and 2016 when I sought Series A investment for my first company, Karisma Kidz, it was similarly impossible to raise money.
Since the Diversity Beyond Gender report, things have improved. We tracked one UK Black female who had raised more than £1M in capital for her venture between 2009 and 2019. That number has risen to more than 16 Black women in the two years since the report was published, however, a significant proportion of the 16 have not been able to raise this money from venture capital funds, having instead to rely upon angel investors who are keen to expedite change.
When Johannes approached me with the opportunity to co-author this volume, I saw an incredible opportunity. This is an issue that goes far beyond just me or the other Black women who are struggling to raise money for industry-altering and immensely profitable ideas. This volume allows us to share the stories of people who bring more diverse experiences to the venture capital and tech industry, as well as spotlight those who promote the fair and equitable allocation of the capital and connections that entrepreneurs need to thrive.
The National Venture Capital Association’s (NVCA) 2020 VC Human Capital Survey sampled 2,500 investors in the US, and found that 3% of partners—those with decision-making and check-writing power—identified as Black (compared to 12.6% of the US population); 3% of partners identified as Hispanic or Latinx (16.9% of the US population); 14% of partners identified as women (52% of the US population). In the UK, figures based on a similar sample of around 2,100 venture capital investors mirrors this picture. For the UK, Diversity VC’s latest survey from 2019 reported that only 13% of partner roles are held by women (compared to 47% of the UK labor force overall), and 83% of all UK venture firms have no women in their decision-making bodies. Further, the number of women on investment committees has not improved since Diversity VC started reporting on these numbers in 2017. The study found that just 8% of all VCs in the UK are Black or of mixed heritage (versus 13% of the population in London, where most of the UK’s tech sector is based), while 12% are Asian. As we’ll discuss later, these numbers have remained stagnant since 2020, and some have shrunk to even smaller percentiles.
The disparities in other parts of the VC world are similarly pronounced: a 2022 report on the European ecosystem, “European Women in VC,” found that 85% of VC general partners in Europe are male, with the UK (87%), Southern European (90%), and Central European countries (90%) trending even above this average. Even more telling is the “fire power” that certain investor groups have, meaning the overall share of the money in VC; according to the same report, women in Europe control only 9% of capital (5% in the UK, 6% in the Nordics). Indicative numbers for Latin America and Canada tell a similar story. Class is a significant variable as well, and the numbers are staggering: in 2018, 40% of US VCs had degrees from Harvard or Stanford; in the UK, one in five VCs went to Oxford or Cambridge (compared to 1% of the UK population average). As this book will reveal, the closed networks of elite institutions play a large part in keeping the industry homogenous, with many people intentionally locked out.
For an industry which has for the last 80 years filtered which ideas and technologies reach the market and change the world, this is a disastrous picture. Not only is this group nowhere near representative of the population it makes decisions for, it has neglected to make the best investments to maximize financial outcomes. Increased diversity in investment teams has been shown to contribute positively to the performance of venture capital funds: an authoritative Harvard study based on over 20 years of quantitative data from the US VC industry, for instance, demonstrates the impact a lack of diversity in the investment committee of a VC fund can have. The more similar the investment partners in a fund are, the lower the success rate for acquisition or IPO. To the contrary, if a fund increased their share of female partners by 10%, they had on average a 1.5% higher overall fund return each year and 9.7% more profitable exits. McKinsey & Company have published several studies (“Why Diversity Matters”, “Delivering Through Diversity”, “Diversity Wins: How Inclusion Matters”) on diversity in more general corporate contexts, which conclusively find that having more women and people from diverse ethnic backgrounds as executives in companies leads to higher financial performance. According to McKinsey’s recent study, companies in the top 25% for gender diversity of executives were 25% more likely to report above-average profitability than companies in the bottom quartile. Similarly, companies in the top quartile for ethnically diverse executive teams have a 36% higher likelihood for above-average profitability.
The data and the business case are very clear but—in the converse of the 2020 NVCA report’s optimistic conclusions—very little progress has been made towards changing the numbers so far. This book looks both at the history and reasons we are in this position, and provides a first-of-its-kind overview of proven best practices to inspire action towards the change that is needed now.
There are four key reasons why the homogeneity of the VC industry matters:
VCs are the kingmakers of our digital age. They filter who gets money to build companies and bring ideas to market. Venture capitalists have enabled the success of the world’s most highly valued companies, from Amazon, Apple, and Facebook, to WeWork and Theranos. Who these people are and what kind of decisions they make matters to us all.
The problem that begins with VC investors invariably extends to the founders of the companies and startups receiving crucial venture capital funding. In 2021, both “European Women in VC” and the State of European Tech reported that all-female startup founding teams received less than 2% of funding (with both reporting approximately 9% went to mixed-gender teams).* As Wired reported in late 2021, “In a Banner Year for VC, Women Still Struggle to Get Funding.” The conclusion: women received less money in 2021 than on average across the previous five years. In the US, only 1.2% of VC funding went to Black entrepreneurs in the first half of 2021; just 0.34% went to Black women. The numbers are even more devastating in Britain, where not-for-profit Extend Ventures found that 0.24% of VC funding between 2011 and 2021 went to Black entrepreneurs.* The Extend Ventures report also identifies a significant socioeconomic class bias in UK VC funding, with 43% of seed funding going to teams with at least one member from Oxford, Cambridge, Harvard, or Stanford.
Representation, or lack thereof, filters through the fabric of the entire industry, as investors are more likely to invest in those who look like themselves. Richard Kerby writes that the illusion of meritocracy is in fact “mirrortocracy,” resulting in adverse effects for diverse startups founders. This is based on similarity bias in investment decision making and the reliance on gut feeling. Given the very limited pool of VC decision makers—mostly white men with Harvard and Stanford MBAs—women, people of color, and those without degrees from elite educational establishments are often left locked out and unable to access the support of venture capital firms.
This is particularly surprising given how clear the business case is for DEI in VC and startups. As PlanBeyond’s recent “Bias in US Venture Capital Funding Report” makes clear: more diverse teams are more likely to financially outperform their non-diverse counterparts and work on making society better with their companies. As these startups are scaling up to become the next wave of tech behemoths, the biases we see in venture capital and founding teams are filtered downstream and reflected as biases within venture-supported companies. Research from the Kauffman Fellows Research Center similarly shows that while only 20% of capital is invested in ethnically diverse founding teams, those teams achieve 30% higher returns than all-white teams. Boston Consulting Group found that female founders generated 10% more in cumulative revenue over five years, and startups with at least one female founder generated $0.78 in revenue for every dollar invested, compared to male-founded startups that generated less than half that ($0.31).
Diversity matters not only when it comes to the business case, but also as a matter of access and participation in shaping the future of economies. Having different kinds of people with unique experiences involved in, for instance, a company board is shown to ensure stronger checks and balances, more thoughtful oversight over company matters, and better performance in times of crisis (for example, when there was female involvement in boards during the financial crisis). When different kinds of people, with different academic backgrounds, different genders and races, from different age groups and geographies, come together, ethical decision-making also tends to be stronger (mitigating the likelihood, for example, of corruption). In contrast, strictly homogenous groups are more likely to show conforming behavior and, particularly for white men, more risky behavior. (The “white male effect” of risk insensitivity is often also connected to generational wealth, another determining factor for whether someone pursues entrepreneurship.)
Things are changing with awareness, albeit very slowly. Hire and Wire is a movement calling for firms to increase diversity in their workforce and write checks to a more diverse group of founders in tech. Rather than yet another mentorship program or office hours that lead to yet more posts on social media, founders who are not male or white need to simply receive more funding. Over the last years, more and more initiatives have been set up to challenge the uniformity in startup finance and tech.
With All Raise in the US, Diversity VC in the UK, the international Thirty Percent Coalition and the 30% Club, Black Founders, the Female Founders Alliance, and the Latinx Startup Alliance, organizations of investors and founders alike are pushing for more representation in general partner (GP), limited partner (LP), and board roles. At the same time, we are finally seeing a small but increasing number of new funds being raised by long-overlooked GPs, mostly led by women or, as in the case of Base10, Harlem Capital, and MaC Ventures among others, by Black GPs. Concrete solutions, tools, and techniques are being proposed, such as with the Diversity VC Standard.
More and more LPs, from university endowments and pension funds to foundations and family offices, are slowly pushing for change from the top, from the investors’ position, too, as we will discuss in our interviews. There is hope.
A catastrophic cocktail of the coronavirus pandemic, its resultant recession, and the advent of war in Eastern Europe has sent shockwaves through the global economy in a three-year onslaught that has shaken the world into a state of economic insecurity surpassing that of the Great Depression of the 1920s. The crisis has shone an often uncomfortable yet incandescent light on the systemic inequities embedded in the global economy. Those most affected by these inequities have consistently belonged to the most vulnerable communities: lower-income and ethnic households, and those with lower levels of formal education. Disparities in access to support, inadequate health care provision, and undue strain placed on mothers and caretakers have become too-common penalties for those without access to the wealth, education, and employment required to shield them from the downturn.
Securely sheltered from this economic insecurity are those nestled among the world’s ever-growing list of billionaires. According to the Forbes billionaire list, seven of the world’s top ten billionaires in 2022 are the founders of venture-backed technology companies. Musk, Bezos, Gates, Ellison, Page, Zuckerberg, and Brin are household names. They epitomize the archetypal white male entrepreneur the world has come to associate with world-changing innovation and outstanding venture success. These entrepreneurs create tremendous wealth of their own, which they in turn invest in other venture-backable businesses: the Silicon Valley flywheel. A significant number of the US’s 735 billionaires have amassed their fortunes through entrepreneurship and the creation of venture-backed companies.
Most businesses begin with an entrepreneur who holds a grand vision, invention, or idea. These ideas are shared with co-founders, team members, investors, and eventually the world when the idea materializes into a product or service offered to consumers at a price. It often requires external finance to fuel that growth as a business grows. To realize this capital, businesses create revenues from sales, borrow money from friends and family, and take loans from banks. These more traditional forms of capital are most suited for companies that will grow rapidly yet steadily in a linear fashion. They can break even within one to three years and provide steady profit and growth.
Venture-backed businesses tend to have a few additional components. They tend to be high-growth, high-risk, high-reward, and, more often than not, tech-enabled businesses that can demonstrate potential for massive scalability. Of the millions of companies that are started each year, only a fraction is considered to have the ability to disrupt industries and achieve the exponential growth required to create returns to investors that are equal to or in excess of the entire fund—often more than £100M—from which they were invested. There are a great many books that delve into the detail of how to create a venture-backable company; each provides overarching principles that determine there must be a robust initial team, a problem faced by a large and preferably ever-expanding market, and a “sticky” product that can solve that problem at a price point consumers are willing to pay, also known as product-market fit. With these components in place, many entrepreneurs create startups they deem to have the potential to achieve the billion-dollar valuations that will propel them onto the Forbes billionaire list.
However, ideas are just ideas without the critical component of capital. A sizable investment, often into the seven figures, is required to fuel early growth and is frequently provided through external funding. Given that these companies are high risk, more traditional forms of capital are out of the question. Startup entrepreneurs increasingly rely upon angel investors or venture capital to provide the boost they need onto the trajectory for exponential scale. Funds flow directly into the company as an equity investment rather than an interest-bearing loan. This is central for early-stage companies with limited track records and little income, for whom interest-bearing loans could be unobtainable, onerous, or even crippling.
While venture capital enables company expansion that is far less possible with other methods, there are many vehicles and strategies for funding an early-stage company, not least boot-strapping, which is the art of rapidly creating customer revenues that fuel the growth of the company. As we examine who can access venture capital in the modern era and look at those who are invariably excluded from the wealth that venture-backed businesses can create for entrepreneurs, their families, investors, and the communities these players belong to, we acknowledge just how skewed the industry is towards nurturing and perpetuating its existing flywheels. The consequences of these flywheels are explored in this book, along with the substantial returns available from historically overlooked market segments. Investors are missing opportunities for higher financial returns by undervaluing high-performing companies led by diverse groups or by overvaluing white-male-led firms. Moreover, capital allocators may well be infringing their fiduciary duty to generate the most significant possible returns for their investors by not investing in diverse companies that could produce returns as high or even higher than white-male-led companies they are most familiar with backing.
Venture capital (VC) is invested by general partners in venture capital firms, who use their domain expertise to allocate high-risk capital into entrepreneurial ventures to generate significant returns on behalf of limited partners, who are most commonly pension funds, university endowments, state funds, foundations, and insurance companies, who do not usually act as direct investors in startup companies. Venture capital firms are compensated in two ways: annual management fees (usually 2% of the capital pledged by limited partners) and “carried interest,” which is a percentage of the profits created by an investment fund (typically 20%). VC funds usually have a lifespan of seven to ten years, and the corporations that fund them frequently manage many funds simultaneously. In terms of payoffs, the venture capital model differs from other types of financing. Returns for venture capital investments do not often follow standard distribution curves but are skewed. The majority of the aggregate return is generated by a few exceptional investments, such as Tesla, Microsoft, Meta, Google, or Oracle.
Funding of this nature has proven pivotal for disrupting the way we work, produce, and live, as technology evolves and advances by investing in high-tech companies that promote the development of industries, support innovation, and drive economic growth. The benefits to society over the years have been described as immeasurable, while the casualties created by technological changes that disrupt labor markets and increase inequity are cited as necessary evils that are far outweighed by the essential innovation that leads to competitive advantage, productivity gains, and increased economic growth over the longer term. Yet, what are the long-term effects of capitalism at all costs? The cataclysmic impact on the environment, society, and governance structures over time are leading all too often towards climates in which wages are depressed as businesses compete on the price, over the quality, of goods; where unskilled workers are incentivized with punishments, over promotions; and where bubbles expand and eventually burst, usually to the detriment of those who are already the most vulnerable in society. Time and time again, these results demonstrate that existing models are not fit for purpose as inequality preponderates and poverty expands. Thus, were these premeditated, globalized, and impeccably organized models ever fit for purpose, or is a shift to a more sustainable modus operandi long overdue? Answering such a question effectively relies on accurate knowledge and examining the foundations upon which venture capital was built.
Contrary to popular belief, the earliest forms of venture capital can be found long before the whaling industry took off. Other popular maritime money spinners, more commonly known as the transoceanic spice, tea, and slave trades, were instrumental in the creation of several innovations that shaped both modern venture capital and the systems it is inherently reliant upon, such as insurance, productization, leveraging equity and debt, economies of scale, high-risk, high-reward financing, and many more.
Venture capital has been widely accepted as existing in one form or another since the earliest forms of commercialization. Scholars, such as Harvard historian Tom Nicholas in his VC: An American History, have accredited the first venture capital style investments to whaling, the transatlantic voyage of Christopher Columbus, and Georges Frédéric Doriot, who is seen as being the first venture capitalist to raise money from non-family sources—believing there was a strong business case for investing in entrepreneurs with the vision and acumen to create a future not yet imagined. Among each slightly varying narrative about how venture capital has evolved through the ages, from the financing of whaling ships that were to set sail on perilous waters, carrying precious cargo from one port to another and emblematic of Moby Dick; to the underwriting of risky expeditions leading to the discovery of new territories; and the founding of Doriot’s American Research and Development Corporation (ARD) in 1946, the belief in an entrepreneur to execute the completion of tasks in which there is a high probability of failure and the promise of outsized returns if successful is the golden thread running through a complex and intricate tapestry of events.
Most fascinating is that the invention of venture capital is often ascribed to Americans—despite Doriot being French—with much of the activity being focused on post-World War II exploits. The “VC is an all-American invention” narrative essentially negates the part that the Europeans, mainly the British, played in the formation of venture capital and sweepingly omits the transatlantic slave trade, which was the predecessor of the whaling industry and the foundation for the insurance and banking industries to which venture capital has been intrinsically linked and remains heavily reliant upon today.
Given the legacy of these financial industries, it is no wonder that the ethnic wealth gaps persist to the extent they do across the globe. The inequities that persist in society and the economy today can be redressed through the fairer distribution and allocation of venture capital and the potential for higher returns for the investors who choose to pursue the dividends that diversity offers.
This volume does not focus on the apportion of blame or reparations; that is a matter for a different forum. It seeks the commitment of those currently holding the purse strings, who have invariably profited off the backs of Black and Brown bodies, to make access to venture capital fair and inclusive going forward.
If and when, for instance, Black and Latinx people enter the venture capital market, and they are unable to progress beyond positions in which they have no decision making power or access to carry, are we recreating patterns where these groups work for the system without being able to profit from it? Black and Brown funds across the globe recount stories of being unable to close their funds. At the same time, their white male and, in more and more instances now, female counterparts regale in the successes of well-funded and well-supported ventures that provide returns.
How can we avoid repeating the same behavioral patterns unless we examine how they arose and are perpetuated?
In this collection of interviews, stories, and research, we use the momentum that has been building in recent years to expand the conversation about DEI, venture capital, and the startup ecosystem, and to inspire more concrete action.
In this book you’ll find 43 in-depth conversations with a diverse group of researchers, investors, and entrepreneurs, making it one of the most comprehensive and diverse sets of perspectives on the startup ecosystem ever assembled in one place.
Our intent is that our voices will provide enough guidance and commentary to make sense of what we have heard through these conversations—spanning Europe and the US, and involving more than 85 interview partners.
This is a large collection. We encourage you to read it sequentially, or if you prefer, use the table of contents to find and jump into the conversations you wish to engage with.
We want to thank, with all our hearts, everyone—over 80 entrepreneurs, investors, and researchers—who spoke to us so openly.
It was heartwarming that whomever we approached, they were willing to share their ideas and insights.* While coordinating calendars between up to six incredibly busy people across multiple time zones wasn’t always simple and took effort and goodwill, we made it work collectively. Thank you everyone for believing in the common cause and pushing forward.
A special thanks obviously goes to the team at Holloway; we went from what Johannes thought looked like a scam message on LinkedIn (there are lots of those in this world), to hours and hours spent talking to our phenomenal editors Rachel and Carolyn with lots of freedom, and input from Holloway CEO Josh. Without your support and belief in our unlikely coupling and project, this wouldn’t have been possible. Thank you from the bottom of our hearts—also for having such patience with us! A very special thank you also to Eana, who helped us with all the transcriptions forming the basis for the interviews—this book wouldn’t have been possible without you!
Lastly, we also want to say a big thank you to our families. For Erika, supporting five children, parents, and a house renovation while dealing with COVID-19, doing a PhD, and running a startup, this was likely one of the toughest periods in her life. For Johannes, Rebecca’s endless patience with late-night and weekend work, and loud interview calls over months (while building her own company) was quintessential—thank you! A lot of effort and love has gone into this project and we hope it can inspire at least some people to push for a more diverse, equitable, and profitable funding ecosystem.
In an examination of important historical texts relating to the transoceanic spice and tea trades, the transatlantic slave trade, and slave owner compensation payments and their uses, we have been able to piece together an evidence-based account that traces venture capital back to the transatlantic slave trade, while identifying direct links between the regimes and practices, methods, customs, and traditions developed by enslavers, ship captains, and their financiers and how the venture capital and high-growth entrepreneurial industries still operate today.
We’ve split this historical retrospective between two chapters, one on the East India Company, and one on slavery and America’s industrial rise. This included work from scholars such as Eric Williams and Joseph Inikori, the New York Times podcast series 1619, and discussions with Professor Nick Draper of the Centre for the Study of the Legacies of British Slavery established at University College London, and Professor Terry Irwin of the Transition Design Institute at Carnegie Mellon University.
important We do not profess to be historians. While corroborated through the academic literature, this data in no way claims to be a complete examination of the transatlantic slave trade, nor the many horrors within or following it. Dates are generalized by century rather than by decade in some cases, for example.
These first two chapters aim to debunk popularized myths that portray capitalism (including the banking and insurance industries), the 19th-century railroad (US) and railway (UK) era, or the 19th-century whaling industry as the foundation of venture capital. The earliest forms of venture capital existed long before that. From the early 1500s forward, the Portuguese, Spanish, English, French, Dutch, and others fought to control the resources of the emerging transatlantic world and worked together to enslave the Indigenous people of Africa and the Americas. The transatlantic slave trade began when the Portuguese initially kidnapped and packed no fewer than 400 people at a time on ships that sailed from the west coast of Africa, taking enslaved Africans back to Europe.* Pirates regularly captured ships, and these risk-ridden voyages often ended in high mortality or theft of the cargo.* The system was not primitive, as is often reported. It was premeditated, globalized, and impeccably organized. Traffickers shared information via written documents, including letters, lease agreements, bills of sale, logbooks, and passports. Everyone involved in a slaving venture paid close attention to the materials related to their business transactions. Often, maritime cargoes were owned communally through the distribution of individual shares. These collectively constructed legal partnerships opened early transoceanic trading opportunities to a diverse group of traders, colonists, and mariners. They created a decentralized mercantile trade that dispersed profits throughout communities engaged in the trade of enslaved people. The transatlantic slave trade and its associated industries created great wealth for many individuals, families, and countries in the West. It simultaneously wreaked devastation on the African diaspora, where economic and agricultural development and intergenerational wealth have trailed ever since.
Before Tesla, Microsoft, Meta, Google, or Oracle, there was the East India Company (EIC), a company formed in 1599 to establish a British presence in the lucrative Indian spice trade. The EIC rose to become a British colonial powerhouse. It traded and taxed, persuaded and extorted, enriched and looted, and was so profitable and powerful that it single-handedly dominated the majority of the Indian continent, owned an army twice the size of the British Army at the time, and monopolized a plethora of transoceanic trades. By the 19th century, the EIC had earned the title of the world’s most powerful business, with control of more than half of Britain’s trade.
However, due to years of misrule, malpractice, and the 1770 famine in Bengal, where the company had installed a military dictatorship in 1757, the company’s territory revenues plummeted, forcing it to apply for a £1.5M emergency loan from the British government in 1772 to avoid bankruptcy.* The EIC was among the earliest in a long line of companies considered “too big to fail.” Thus, it was bailed out by the British government. However, that was inevitably the beginning of the end for the company, as scrutiny following the bailout led the government to seek direct control of the EIC. Following a lengthy decline, the British government finally ended the company’s rule in India in 1858. By 1874, the company had been reduced to a skeleton of its former self and was dissolved.
By that point, the EIC had been involved in everything from cultivating opium in India and illegally exporting it to China in exchange for coveted Chinese goods, to the transatlantic slave trade (it conducted slaving expeditions, transported slaves, and used slave labor throughout the 17th and 18th centuries). Modern capitalism may have since eclipsed the EIC, but its legacy is still felt throughout the world.
The EIC is significant for three reasons.
The founding of the EIC at a meeting in September 1599 brought together a group of investors whose participation in risky new overseas ventures drove England’s commercial and imperial growth. The establishment of the EIC depended on the investors’ decision to entrust their wealth and reputation to a company with no track record, limited state support, and no presence in the Asian markets in which it would operate. Investing substantial sums in the EIC must have been a frightening and highly risky choice, especially for inexperienced investors.*
Despite the impact that the EIC would have on finance, investment, and empire over the next two centuries, we continue to treat the EIC as a homogeneous, monolithic enterprise rather than as an organization composed of and dependent upon what is today seen as venture capitalist and angel investor networks—a collective of investors who, either as individuals or collective groups, invest their money into high-risk, high-reward potential companies for an equity stake, which, in the case of the EIC, the company’s management team transformed into goods that were vendible or convertible into spices that could be sent back to Europe and sold there.
The EIC’s formulation occurred within an intensely interconnected environment that helped create an investing public before the financial revolution, demonstrating that early variants of venture capital-style investments were being made long before the maritime pursuit of whaling. The 1599 petition, which included “the names of such persons to undertake the voyage to the East Indies,” mentioned 101 contributions ranging from £100 to £3,000, and totaling £30,1336. There was a varied cross section of contributors, comprising both new and inexperienced investors and those with significant investment experience. The most common contribution was £200, with 58 investors (57.4%) pledging this sum. The average contribution size was slightly more than £298. Further analysis of the 101 investments reveals that several commitments were from pairs or small groups. Thirty-six of the total contributions (35.6%) were made in this way. Separating these grouped contributions reveals 136 named investors, although the total number of investors would have been slightly higher because some are not named and are merely listed as investing “in company” with another individual.*
Diverse types of relationships brought individuals together to invest, and novice investors were likely and able to follow the lead of more seasoned partners. Among the investors, 82 had never invested before, while 54 had participated in previous ventures. Through familial ties, livery company connections, and shared business experience, investors in early-modern London formed overlapping networks that supported the EIC. These networks enabled investors to discuss the trade with seasoned investors, spread their risk with reputable partners, and acquire the necessary expertise to engage in previously impossible ventures. Thus, also allowing the EIC to draw upon the expertise and financial resources of investors including some who had traded, raided, explored, settled, stolen, and fought across much of the globe. This methodology of following experienced lead investors who are able to conduct appropriate due diligence into the company requiring investment persists across venture deals today.
Composite investment strategies that relied on accumulating small parcels of goods and currency to establish commercially viable cargo financed early capital-intensive voyages. Cargoes were separated into shares to raise additional finance. Shipowners and merchants used several strategies to limit financial risks and make investments more attractive.
This became a popular way to fund voyages among multiple companies. Articles for the slave ship Sally, 1764, listing the names, duties, and wages of each crewman, confirm that Esek Hopkins, the brig’s master, was promised £50 per month, plus a “privilege”—a commission—of ten barrels of rum and ten enslaved Africans to sell on his own account. The crew included one “Negro boy,” Edward Abbie, understood to be Hopkins’s indentured servant.*
The EIC differed from other enterprises of its time by advancing from merely spending money (for the purchase of Indian goods) from which a profit was expected. Their “investments” put money and goods to another use. It is the transformational power of investment that changes one commodity into another commodity, then into a profit. This productive or “value-added” use of capital was used to drive profitability and provide a substantial return to the company’s investors.
According to Thomas Mun, a director of the EIC and author of texts including A Discourse of Trade from England unto the East-Indies and England’s Treasure by Forraign Trade, it was completely legitimate to procure produce from India at a low cost, transform those produce into English-owned goods, and then sell those “transformed” commodities in Europe at a significant profit to enrich the UK.
He wrote: “It is plain, that we make a far greater stock by gain upon these Indian Commodities, than those nations do where they grow, and to whom they properly appertain, being the natural wealth of their Countries. … Wares do not need to “properly appertain” (to belong as a possession) to England for them to represent (or “procure”) potential profits for England.”
Furthermore, he claimed that “neither is there less honor and judgment by growing rich (in this manner) upon the stock of other Nations, than by an industrious encrease of our own means.”
The EIC’s mixed-cargo slave trade was further distinctive in that not all of the slaves were purchased by the company; many were born into slavery at the company’s holdings and then moved to another fort. When EIC directors in London received a request for slaves from one of their agents, they would first look to the slaves they already owned and attempt to transfer them. The EIC’s slave trade strategy relied heavily on the transfer of slaves between holdings. According to the estimations of Richard Allen, as many as one-third of the slaves aboard EIC ships were transfers—a sizeable proportion given that transfer requests were consistently smaller than purchase requests. The company authorized at least 77 transfer voyages involving at least 1,040 slaves between 1639 and 1787.
Similar to the mixed-cargo slave trade, the company fused transfers onto its existing trading networks, making transfers both possible and efficient. If the directors deemed a transfer necessary, they would assign it to the next ship that would pass both ports, thereby reducing costs and voyage durations. The transfer of slaves rarely incurred any additional sunk costs, as the ships used needed to pass through both destinations to accomplish its primary objective. The only expense incurred by the company was the captain’s wages—typically four pounds per slave.
The EIC was able to reap additional benefits from the specialized skills and knowledge of English culture that its slaves acquired as a result of the reorganization of its non-free labor force that was made possible by slave transfers. At St. Helena, where the company frequently experimented with new crops and goods to maximize the island’s productivity and value, these reorganizations were particularly advantageous. During the first five years that the company possessed St. Helena, it sent multiple requests to its agents in Surat, requesting that they send indigo seeds and slaves who “knew how to sow it and then perfect it, and advised the Governor of St. Helena on the particulars.” Bencoolen, the company’s primary fort on the island of Sumatra, was a particularly dangerous location for EIC employees due to environmental and diplomatic factors, which increased the value of having experienced slaves.* The fort at Bencoolen is frequently described in company correspondence as a “sickly” and “fever-infested” location that sent Englishmen “to their eternal homes.” Despite the fact that slave transfers reduced the EIC’s overall trade volume, they demonstrate the crucial role slavery played in the company’s ability to control territory and maximize profits.
The South Sea Bubble describes a series of events surrounding the plan to convert a significant amount of British national debt into equity shares of the South Sea Company (SSC) in 1720. The rise and fall of the stock market during the South Sea Bubble is still one of the most heavily discussed events in history.
In 1711, the SSC was founded with a capital stock of more than £9M. It was established to purchase existing short-term government debt and help manage the national debt in a similar way to the Bank of England. The Company also intended to conduct business with the Spanish Empire.* Spanish America gained popularity as a more promising trading region than India and the Far East because the market was more accessible and traditional English exports like textile and iron items were more likely to be purchased. Following the conclusion of the Treaty of Utrecht (1712), the SSC was awarded exclusive rights to trade with Spanish America—the so-called South Seas—on behalf of the British government. The SSC also secured a 30-year contract as the sole supplier of slaves to the South Seas, known as the Asiento de Negros. Britain already had colonies in the Caribbean—and consequently, a significant share of the market for slave trading in the Western Hemisphere. The firm appeared to be well positioned in this lucrative new market.
In the autumn of 1719, however, a new war with Spain halted the SSC’s trade with the South Sea. Unlike the EIC with its robust Asian trade, the SSC had little room for maneuver. The company’s proposed solution to this dilemma was to again attempt to convert government debt into new equity shares. The scale of the proposed scheme was unprecedented, except insofar as it was inspired by the French legal system. By the end of 1719, John Law had successfully converted all French national debt into shares of the newly founded Compagnie des Indes, which monopolistically merged international trade, national banking, and tax collection. Some of Law’s system was evident in the SSC’s initial proposals, where the conversion of British national debt into South Sea shares was explored with the government, the EIC, and the Bank of England (BoE).* The EIC and the BoE, like the SSC, were both “big money” companies, meaning that both had made substantial loans to the government to justify their chartered existences. Exchanging all British national debt for South Sea shares would have posed an existential threat to these companies, so the plan evolved to excluding the debt already held by the EIC and the BoE and converting the remaining national debt into South Sea shares.
The EIC traded slaves between Madagascar and the Western Hemisphere, while the South Sea Company supplied the Royal African Company with slaves from West Africa.* The EIC directors were occupied with the outfitting of trading ships and the collection of multi-cargo loads, including bullion that would have to be transported to the Far East by these ships.
A fundamental belief that economic gain occurred at the expense of others lay at the heart of the EIC and encouraged the annihilation of competitors and the plundering of resources of foreign lands to attain economic supremacy. The company launched attacks and waged war due to the lucrative nature of victory. Officers received annuities and bribes from aligned ”leaders” installed on the thrones of formerly noncompliant rulers.
As wars grew more expensive, however, bribery, prize money, and plunder were insufficient to cover military expenses and a series of unresolved wars drained the EIC’s cash reserves. Consequently, the business took the next logical step: tax exploitation. Taxation slowed the export of bullion overseas, a significant benefit in mercantilist thought, and maintained a positive balance sheet. This money was also used to fund lobbying efforts to protect the company’s monopoly.
The Bengal famine of 1770, which killed ten million people, exacerbated dire financial conditions and heightened public concerns about corruption and despotism in India under British rule. The decision to increase taxes during the famine, in addition to earlier mandates to plant specific crops and regulations against hoarding, further exacerbated the situation and proved to be a step too far on the part of the EIC’s leadership. The company’s stock price plummeted as investors withdrew funds, and by 1772 the EIC was bankrupt, facing dissolution, and pleading for aid from Parliament.
The lobbyists’ response was an imperialist version of the phrase “too big to fail.” Insolvency meant the end of the hard-won British dominance in the subcontinent. The argument endured despite France overcoming the Royal Navy’s naval dominance to reclaim Indian possessions. The Regulating Act of 1773 stipulated a £1.5M loan and capped dividends. In addition, employees were banned from accepting bribes and illegal donations, and a governor general of Bengal was appointed to enforce the regulations.
Slave trading was a risky and perilous business. In addition to the dangers posed by the sea in the 18th century, there was always the possibility of a slave revolt. While insurance for suppressing rebellions at sea did not cover losses owing to deaths caused by suppressing the rebellion if fewer than 10% of the enslaved cargo were killed, the insurance industry was established to spread these risks.
Slavery is the most extreme manifestation of the insurance principle of placing a high value on human life. In 1790, the slave trade and the transportation of slave-grown produce from the West Indies accounted for at least one-third of the premiums collected by the London Assurance Company. In the 18th century, insurance flourished and developed its capital accumulation logic, playing a significant role in the rise of finance capitalism in London. The 1720 Act of Parliament, which permitted the formation of two joint-stock insurance companies heavily involved in insuring the slave trade, facilitated the formation of Royal Exchange Insurance, later the Guardian Royal Exchange, and now a subsidiary of AXA, and the London Insurance, which was subsequently merged with Royal and Sun Alliance. The most important business for Lloyd’s of London was the West Indian slave trade.*
The 1781 tragedy of the British slave ship Zong is conspicuously absent from histories of capitalism and venture capital. However, scholars have argued convincingly that the need to insure against losses in the slave trade was a crucial factor in the development of the modern insurance industry, which led to the establishment of the venture capital industry as we know it today.
From Liverpool’s docks, the Zong sailed to the African coast, where slaves were loaded and transported to Jamaica. The small Dutch ship was purchased by Richard Hanley for William Gregson and others. Gregson had long invested in slavery, and they purchased insurance to cover the shipment of their slaves. For a successful voyage, a capable and seasoned captain was required to manage the crew, cargo, and commercial activities. Luke Collingwood’s appointment as Zong captain marked the beginning of a series of poor choices. Collingwood had completed nine to ten Atlantic voyages, but never as captain.* When the surgeon-turned-captain assumed command in Africa, he assembled his crew and loaded slaves using unorthodox methods.
By the beginning of the Civil War in 1861, more millionaires per capita lived in the Mississippi Valley than in any other part of the United States. Cotton grown and picked by enslaved workers was America’s most valuable export. Slaves were worth more than all the country’s railways and industry put together. There were more financial institutions per square mile in New Orleans than in New York City. What made the cotton economy boom in the United States, and not in all the other far-flung parts of the world with climates and soil suitable to the crop, was a combination of the UK and America’s unflinching willingness to use violence on nonwhite people to exploit seemingly endless supplies of land and labor. Given a choice between modernity and barbarism, prosperity and poverty, lawfulness and cruelty, democracy and totalitarianism, America chose all of the above. By the eve of the Civil War, slave laborers, on average, picked 400% more cotton than their counterparts did 60 years earlier. Undeniably an incredible amount of productivity, the system was pulling as much out of its enslaved workforce as it possibly could.*
Enslavers expanded their operations aggressively to capitalize on economies of scale inherent to maximizing crops in America and the Caribbean, buying more enslaved workers, investing in better tools, and experimenting and iterating products to achieve optimal outputs. They established convoluted organizational structures, with a central office staffed by owners and lawyers in charge of resource allocation and long-term planning, and multiple divisional units accountable for different operations. Punishments rose and fell based on the demands of the market—the price of goods in the UK was directly correlated with the level of discipline inflicted on the enslaved to keep their work rates high.
To expand their operations and make more money, they needed more capital. So they took mortgages. The way in which mortgages work is a bank lends the money to buy a house, and against that loan, the asset (typically the house itself) is leveraged. If the loan is not paid in full, the house is seized by the creditor. The concept of mortgages is not new to either the UK or America, yet, the concept of bricks, mortar, or land being leveraged is not where mortgages started. The industry began with enslaved people. Plantation owners approached banks for loans to procure further land, resources, and slave labor, using the slaves they already owned as collateral.
A newly formed banking industry was used by enslavers to mortgage their slaves to finance the scaling of their operations. The bundling of these debts created bonds that are still used today, and investors were paid dividends from profits made on the mortgaged enslaved people. Today, this is called securitizing debt, and at the time, it ostensibly allowed global markets to invest into the business of slavery. State-chartered banks took slave-backed mortgages from plantation owners, bundled the collective debts into bonds, and sold those bonds to investors throughout the Western world. Thus, when owners made payments on their mortgages, investors received a return. Securitizing debt in this way became an incredibly efficient way of pumping global capital into the American slave economy at the time. Historians have shown that most of the credit powering the American slave economy came from the London money market.
Bonnie Martin argues in her recent work on slave mortgages that this financial practice was the “invisible engine” of slavery. By offering an enslaved person as collateral, men could acquire an enslaved person, a plot of land, or other plantation product without having the full purchase price in cash. In addition to increasing the number of potential borrowers and the acquisition rate of slaves, mortgages enabled slaveholders to maintain their workforce in the fields while also exploiting the same enslaved men and women financially. Without necessarily exploiting an enslaved person’s labor in the field or selling an enslaved person outright, slaveholders could still reap a tremendous financial benefit as human property owners. According to Martin’s analysis of more than 8,000 mortgages issued after the American Revolution, enslaved people served as collateral for 41% of the loans and generated 63% of the capital.*
The Consolidated Association of Louisiana Planters (CAPL) used slaves as collateral to establish a lending institution. The Louisiana state legislature established CAPL in 1827, using the European brokerage services of Baring Brothers of London. European investors purchased slave mortgage bonds from US state governments. This led to an increase in slaves. In 1836, New Orleans had the most bank capital. Following Alabama’s example, other states supported banks that offered slave-based bonds to Europe.
The price of cotton continued to rise, and more money flowed into the slave economy, with increasing numbers of individuals in the Western world continuing to invest.
This caused a speculative second slave-related bubble in the Southwest (following the earlier documented South Sea Bubble), which burst in 1839 due to the South’s excessive cotton production. Consumer demand exceeded supply and prices began to decline in 1834, resulting in a recession known as the Panic of 1837. Investors and creditors called in their debts, leaving plantation owners in significant debt. They could not sell their enslaved labor force or land to pay off debts because, as the price of cotton declined, so did the cost of enslaved labor, and land. The toxic debt caused the majority of state-sponsored banks to fail, but investors still wanted their funds.
Following the economic downturn, state governments could have raised taxes to redeem the bonds, but their constituents voted against it, and the governments listened. They could have taken possession of the plantations, effectively ending the cotton industry. However, because the cotton industry held everything together, foreclosing on it was equivalent to foreclosing on the entire economy. So they opted for inaction, largely because the cotton industry was “too big to fail.”
Eight states, including Florida, defaulted on their debts, and as a result, Southern planters became dependent on Northern credit despite having three million slaves as capital. Northern capital journeyed south to purchase cotton, thereby establishing a new system. The Lehman Brothers (bankrupt in 2008) began as “factors,” lending money to slave-owners for future crops and slave mortgages. The term factory has its origins in the Portuguese word feitoria, the term used from the 15th century to designate a trading post on the coast of Africa. In the context of the transatlantic slave trade of the 19th century, a factory commissioned a locale that “produced” enslaved people and was managed by a “factor.”
Brown Brothers, a London-based bank, extended credit to these factors. Numerous household names in the financial services industry began their existence in this manner. The significance of cotton grown by West Indian slaves to the Lancashire textile industry led to the emergence of Liverpool cotton brokers who later rose to prominence in the US cotton broking industry. Slavery was inextricably intertwined with cotton production and cotton trade, spawning numerous parallel business streams.*
In 2019, sociologist Matthew Desmond said that “the enslaved workforce in America was where the country’s wealth resided.”* He was speaking explicitly about the US, however the same was equally true of the UK.
Capitalism, and indeed the foundations of venture capitalism, began in brutality. Exploitation, plundering, and slavery enabled Britain and the fledgling US to become the powerhouses in the global economy they are today.
Slavery and industrialization fed each other. Many slave traders, planters, and merchants diversified into manufacturing, agriculture, and infrastructure, or kept their money in banks and finance houses that loaned to the developing capitalist economy. Some slave profits were spent on conspicuous consumption, yet, even this helped to boost the market economy. As the slave economy grew, credit, banking, and insurance became ever more important.*
As Robin Einhorn has argued, tax codes also reflected the exceptional wealth stored in enslaved people, with virtually every Southern legislature choosing to discount human property assessments that would otherwise dwarf all other taxable assets in value.* There are several other examples of how practices developed to systemize and maximize profitability during slavery have flowed through to modern venturing. When a CFO depreciates assets for tax purposes, and when work rates are tracked, recorded, and data analyzed for optimal performance rates, it may feel as though we are managing metrics for scale with forward-thinking management approaches, when in fact, many of these operations were developed by enslavers to optimize their plantations. Andrew Carnegie, founder of a company that eventually became part of U.S. Steel, is famed for embodying similar rationality. Carnegie was particularly famous for his industrial activities’ “vertical integration.” By investing in iron ore and coal mines and railroads to transport the ore and coal to his steel mills, he dramatically reduced the cost of the final product and won market share from competitors.*
Though both historians and economists long-contested this point, a broad consensus has emerged over the last several decades that plantation slave labor was a highly efficient system of labor exploitation.* Slaves labored under drivers in gangs that gained significant momentum. Between 1800 and 1860, modern “human resources” tactics such as speed-up and measured task working, enforced by the whip and other forms of torture, drove a 400% rise in cotton-picking output in the United States. Industrialization did not reduce the workload of slaves; rather, it increased it as slaves were pushed harder to keep up with the steam-powered processing of harvested cane. A slave picked 200 pounds of cotton a day in 1850; in the 1930s, despite technological advances, a “free” laborer picked just 120 pounds.*
Terry Irwin (Transition Design Institute, Carnegie Mellon University)
Terry Irwin is a designer, academic professor, and former head of the School of Design at Carnegie Mellon University. She has been instrumental in developing transition design—an area of design practice and research focused on design-led societal transitions away from “wicked problems” and toward more sustainable futures. Terry facilitated the development of systems maps that include the historical foundations of venture capital on behalf of the Nasdaq Entrepreneurial Center’s Venture Equity Project. We discussed her work on this project, how her insights connect to the history of venture capital, and how improving diversity in VC going forward needs to be a systemic solution.
Interviewed October 2021
Nick Draper (University College London)
Existing literature on the history of VC as an enabler of entrepreneurship is centered on the US—Tom Nicholas’s VC: An American History denotes venture capital as an American invention with whaling as its precursor—resulting in a sustained elision of both slavery and European influences. We sat down with acclaimed historian and co-creator of the Legacies of British Slavery files at UCL, Nick Draper, to understand the influence of European slavery and its multiple mechanisms, not least “carried interest” and “mobilizing pools of investors,” on today’s venture capital industry.
Interviewed August 2021
Anne Glover (Amadeus Capital Partners)
Bindi Karia (Molten Ventures, formerly Silicon Valley Bank)
Diana Noble (Kirkos Partners, formerly CDC Group)
Theresia Gouw (Acrew Capital, formerly Accel)
Sonja Perkins (Project Glimmer, Broadway Angels)
Nancy Pfund (DBL Partners)
Diversity has been talked about in business circles for decades, at least since the 1980s. As early as the 1990s, we started to explore the “business case” for diversity. However, what is mostly addressed when people use the word diversity, even today, are only two categories of it, and they are the ones that are only “skin deep”: gender and ethnicity. Most VC coverage, in both reports and journalistic outlets, is limited to these two kinds of diversity, and often just to gender diversity. The excuses for this blatant lack of complexity are often simple: we are either not allowed to collect certain kinds of data (such as data on ethnicity in Germany and France) or the data isn’t easily obtainable (plus people may be hesitant to declare personal data such as sexual orientation or ethnicity). The results are devastating: in many ways, what isn’t measured (or at least talked about) doesn’t count, so anyone who isn’t a woman or a person of color is underrepresented in conversations about diversity, including in venture capital. Not only is this a blatant issue of social justice in and of itself (and one that is easily attacked by critics, such as the Woke, Inc author) but we are also missing out on many of the important possible benefits of diversity: without radically broadening our definition of diversity and especially without taking intersectionality into account, we might be “coloring” VCs and board rooms, but we aren’t really making them truly accessible or diverse in opinions, expertise, and background.
In this part of Better Venture, we want to consequently open up the meaning of diversity, not with quantitative data and numbers but with personal histories and narratives from different people in the VC and startup ecosystems. These conversations touch on numerous dimensions of diversity, and help us think about barriers beyond gender and ethnicity.
We start exploring diverse perspectives by acknowledging the documented underrepresentation of women and people of color among VCs and founders. In our conversation with two Silicon Valley natives, Claire Díaz-Ortiz and Maren Bannon, we trace what it means to be women in the tech world, spanning their various roles, including founder and investor, from the West Coast to Europe. The second chapter adds another facet to this picture: what does it specifically mean to be a female founder? What are the challenges faced when fundraising or working with a founding team? Nandini Jammi and “Maria” (another fantastic female founder whose identity we are protecting given her experiences) were willing to add some color to that conversation. Maria explains the end of her first venture (she has since successfully started another company!) with the following devastating words:
I was very much in an environment where my co-founder had his vision for the company and saw me as an extra pair of hands to execute that vision. I did not actually really have a say in where things were going. That became more and more clear the larger we grew. The way things ended with that venture was that I had talked to my co-founder and said, “You know, this equity compensation isn’t fair, and this environment isn’t feeling like one I can flourish in.”
Claire Díaz-Ortiz (VC3 DAO, angel investor)
Maren Bannon (January Ventures)
Claire Díaz-Ortiz and Maren Bannon are true tech veterans. Both have been working in the technology sector—from high-caliber operator roles at Genentech and Twitter to recently becoming investors themselves—for the better part of the last two decades. We talked to them about their experience “growing up female” in the tech world during these years, about investing in diverse founders and the importance of opening doors, and about male VCs who say they want to widen their pipeline but don’t want to put in the work.
Nandini Jammi (Check My Ads, formerly Sleeping Giants)
Maria (name changed for anonymity)
We spoke with two female founders—Nandini Jammi and Maria, whose name we changed for anonymity reasons—about their experiences. While the range of different stories and experiences is endless, we take what Nadini and Maria tell us about co-founder betrayal, bias, and dishonesty as exemplary—and possibly one of the biggest barriers—of bad role models keeping others from even considering joining the ecosystem.
June Angelides (Samos Investments)
June Angelides, MBE, started Mums in Tech back in 2015, while on her second maternity leave working for Silicon Valley Bank. June has since become a venture capital investor herself, at Samos Investments, and received an MBE for services to women in technology. Together we explored her experiences as a parent in tech and the considerations the industry needs to make to become more family-friendly.
Interviewed October 2020
Jolina Hukemann (Student)
Jolina Hukemann is one of the youngest founders we encountered—she entered her first startup competition when she was 13. We talked to her about her experiences learning about entrepreneurship at such a young age, the impact of her gender on her experience, and how complicated it was to find a co-founder in her early teens.
Interviewed August 2020
Emma Lawton (More Human)
Emma Lawton is the co-founder of More Human, a startup to help community leaders scale their communities. Emma has pink hair and one of the most outgoing personalities we encountered during the research for this book. She also has Parkinson’s, a brain condition that affects her movement. We spoke to her about her experiences founding and running a tech company while managing her disability, the ups and downs, and the superpower she’s made of it.
Interviewed January 2021
Gary Stewart (Techstars, FounderTribes)
Lorenzo Thione (Gaingels, StartOut)
Gary Stewart, the founder of FounderTribes, and Lorenzo Thione, co-founder of StartOut and now managing director of Gaingels, spoke to us about their experience being gay in the world of tech and investing. The bottom line: it really matters where you are (the UK is less networked than Spain or the US) and whether you find your safe group that allows you to be yourself at all times. Holding together really helps—and will eventually allow you to spread the privileges you and your group have achieved.
Suranga Chandratillake (Balderton Capital)
Ian Connatty (British Patient Capital)
Social mobility and class are topics not talked about enough in DEI conversations. We discuss both with Suranga Chandratillake (GP at Balderton) and Ian Connatty (LP at British Patient Capital), two key people in the UK ecosystem who are passionate about social mobility, class, and inclusive practice in venture. Together they bring to the table a multi-faceted view, from the perspectives of founder, GP, and LP. Chandratillake started, scaled, IPOed, and exited his company Blinkx in 2014. He then became a GP at Balderton. From the LP perspective, Connatty has been with the British Business Bank and British Patient Capital, two of the most important UK LPs, since 2010. Given their own backgrounds—both went to state schools in the UK—they are extremely passionate about social mobility and class, which is why we brought them together in this panel.
Matthew De Jesus (Talis Capital)
Kristina Barger (Cognitive and behavioral psychologist and coach)
Øyvind Henriksen (Checkfirst, formerly Poq)
When we started the research for this book, our goal was not to put together a critical and theoretically inspired book that practitioners would be unable to use. Instead, we wanted to unearth concrete ideas on how to change behavior, in a book that would not only inspire, but that would also be full of practical and tangible advice that could be easily applied. So, who else to ask but the people who are already doing things differently? Part III: Best Practices, which turned out to be the most substantive, is hence all about presenting the voices of investors and people within the ecosystem who have decided to practice what everyone else is preaching. We sought people who have already proven to be change makers—both in a small or systemic way, as a founder, funder, or funder-of-funds—to inspire change. Conversations range from learnings from VC and founder education programs and the influence of data and journalistic writing, to elaborate “how to” tutorials on increasing inclusion in a fund or running an angel investor program with a diversity focus.
The first section of conversations covers VCs who are doing things differently, looking at established players in the ecosystem and their decisions to tweak the traditional VC approach. We set the scene with a story of two VCs that have over recent years become famous in their own right. Mac Conwell, or “Mac the VC,” raised his first fund, RareBreed Ventures, completely on Twitter, and publicly documented the process, which involved thousands of calls with potential LPs. Mac was joined by Thea Messel, one half of Unconventional Ventures, a Scandinavian early-stage fund that has been fighting for more diversity in the Nordics for years. With Unconventional Ventures (UV), Thea has raised money to invest in “tech for good” startups with underrepresented founders; UV is also raising awareness and transparency in the Nordics ecosystem with their annual Startup Funding Report. In our conversation, Mac and Thea shared openly about the ordeal that fundraising is (or at least can be) if you are not a white male with a “strong network.”
In the next interview, we focus on an American story (with parallel stories in some European countries like France or the UK) about where investment money flows: predominantly to Silicon Valley, New York City, and Boston. Mucker Capital’s William Hsu and Monique Villa, alongside one of their portfolio founders, Allan Jones of Bambee, talked to us about their explicit focus on investing outside of Silicon Valley. At the latest, since AOL founder Steve Case has been making this point (including with actual investment dollars), we have been seeing a slight diversification.
Elizabeth Yin, co-founder and GP at Hustle Fund in San Francisco, recounts her trials starting her own business and her journey to partnership at accelerator 500 Startups (now 500 Global) in 2014. At Hustle Fund, Elizabeth not only writes VC checks differently (earlier, quicker, to a wider pool of people, without warm introductions), she is on a mission to democratize wealth through entrepreneurship and furthers this with her fantastic Twitter threads explaining the world of VC to the public.
Mckeever “Mac” Conwell (RareBreed Ventures)
Thea Messel (Unconventional Ventures)
Mac Conwell and Thea Messel have both achieved the monumental task of being able to close a first-time fund in an ecosystem that has historically said no to people from their backgrounds. Mac and Thea shared with us a little of their grit, determination, and work ethic in using everything at their disposal—including powerful tools such as data, research, and social media—to galvanize investors into their funds and begin investing in overlooked entrepreneurs.
William Hsu (Mucker Capital)
Monique Villa (Launch Tennessee, formerly Mucker Capital)
Allan Jones (Bambee)
Elizabeth Yin (Hustle Fund)
We caught up with Elizabeth Yin, co-founder and GP at Hustle Fund, about her experiences growing up in Silicon Valley. From working in big tech and starting her own company, to becoming a partner at 500 Startups and raising her own fund, Elizabeth has really seen it all. With Hustle Fund, she’s now on a mission to democratize wealth by investing differently (earlier, quicker, and to a wider pool of people). Together we explored how, as an Asian woman, she has been able to navigate the culture in Silicon Valley and, in spite of all the assumptions and stereotypes she regularly comes up against, she has attained investor positions where she can “try to change the system.”
Interviewed November 2020
Mitch Kapor (Kapor Capital, Kapor Center)
Freada Kapor Klein (Level Playing Field Institute)
This conversation features a power couple that truly deserves the name: Mitch Kapor and Freada Kapor Klein have been leading the charge of VCs investing in companies that close the gap to access in low-income communities and communities of color for several decades. Mitch tells us how after founding and leaving Lotus—the Microsoft of its day—and meeting Freada, the two decided to dedicate their time, influence, and money to funding people and startups for underrepresented groups. Kapor Capital has done so, and has not only been incredibly financially successful, but has also inspired a whole social movement.
Charles Hudson (Precursor Ventures)
Eghosa Omoigui (EchoVC Partners)
Paula Groves (Impact X Capital)
Sophia Bendz (Cherry Ventures, formerly Atomico)
Sophia Bendz already became famous as the chief marketing officer at Spotify and one of tech’s first female big-name executives; she started using her power at the latest since joining Atomico as a partner in 2018. It was at Atomico where she rolled out the Angel Programme, which is the focus of the conversation here and also something she is looking at repeating at her new fund, Cherry Ventures, where she joined as GP in 2020.
Interviewed November 2020
Roxanne Varza (Station F, Sequoia Capital)
Roxanne Varza is the director of Station F, the world’s largest startup campus, which gathers more than 30 incubators in one campus in Paris. Based in the 13th arrondissement of the city, it opened its doors in 2017. One of her core goals with Station F is to make the startup world a more inclusive space. We talked to her about Station F’s Fighters Program for underprivileged founders and were lucky enough to include two of the Fighters—Dinal Kurukulasooriya (founder of Autochatic) and Brian Thielly (founder of LinesDude)—in the conversation.
Interviewed November 2020
Check Warner (Ada Ventures, formerly Diversity VC)
Check Warner is one of the co-founders of Diversity VC, an organization that was started in late 2015. Check raised a fund in 2020, as general partner at Ada Ventures, focused on overlooked founders and markets. In this conversation with her, we talk about organizational and structural efforts, with a particular focus on the venture ecosystem in Europe, to change the lack of diversity and inclusion, including the power of statistics, internships programs (such as Future VC), and Diversity VC’s new Diversity Standard.
Interviewed October 2020
Pam Kostka (formerly All Raise)
We caught up with Pam Kostka while she was CEO of US venture diversifier All Raise for her take on how and why All Raise came about, and how to build a more prosperous, equitable, and sustainable future for all.
Interviewed October 2020
John Lynn (Cela)
Camilla Sievers (Qi Health, Female Founders)
Kevin Liu (Techstars)
Ann Miura-Ko (Floodgate)
Chuck Eesley (Stanford University)
We chatted with Chuck Eesley (professor in engineering at Stanford) and Ann Miura-Ko (GP at Floodgate but also a teacher at her alma mater, Stanford, in Chuck’s department) about the role of education for DEI in tech. We touch on issues such as how to achieve fair representation both for faculty and students, the right teaching materials, and diversifying the educational experience as such. The bottom line: schools like Stanford absolutely have a responsibility to drive this effort—and they are standing up for it; the difference they are pushing for now will take a while to pay out in tech, but then will hopefully help us achieve a sea-change that does away with the often cited “pipeline problem.”
Jeff Harbach (Kauffmann Fellows)
Lisa Shu (formerly Newton Venture Program)
The default pattern-matching that skews the venture capital industry in favor of elite, white, male founders can as easily be ascribed to a lack of investor education, acumen, and skill as it can a lack of worthy pipeline or ability to source diverse deals. The apparent issue the industry has with the former is that it places the buck in the court of the LPs and GPs who are overlooking diverse talent, rather than on the diverse talent themselves, as has historically been the case. We were delighted to sit down with Jeff Harbach and Lisa Shu to learn how the Kauffman Fellows and Newton Venture Program plan to disrupt the venture capital ecosystem by training the next wave of GPs to be more inclusive than those who have gone before them.
Tom Wehmeier (Atomico)
Gené Teare (Crunchbase)
Tom Wehmeier, partner and head of research at Atomico, and responsible for the annual State of European Tech report, and Gené Teare, Crunchbase senior data journalist, discuss the role of data in improving diversity in the tech and venture landscape. Taking the call for “more data” among many investors seriously, we go into the details of what we already know and how data can indeed drive change.
Amy Lewin (Sifted)
Steve O’Hear (Zapp, formerly TechCrunch)
Media and journalism have always played an important role in agitating and facilitating the narratives, conversations, and movements that lead to change. Where DEI is concerned, we need to create systemic change at a variety of levels. This will only be achievable with sustained storytelling. Smart, sophisticated, strategic communication skills are essential for presenting a narrative in which systems are seen as open to change, controllable, and redesignable. We chatted with the tech journalists Amy Lewin (Sifted) and Steve O’Hear (formerly TechCrunch) to learn more broadly about diversity in journalism, as well as the perceived responsibilities of journalism in creating greater levels of diversity in the venture capital industry.
Monica Spencer (formerly Mellon Foundation)
Darya Henig Shaked (WeAct Ventures)
Savitri Tan (Isomer Capital)
Suzanne Gauron (Goldman Sachs)
Anna Skoglund (Goldman Sachs)
Change in the venture capital industry is happening at a glacial pace. We sat down with Suzanne Gauron and Anna Skoglund of financial industry veteran Goldman Sachs to explore what they are doing to support the wider industry in acknowledging the well-researched divides, but more importantly, what they are doing to funnel money into the gaps in access to capital for diverse entrepreneurs. We discussed Black Womenomics, One Million Black Women, Launch with GS, and much more.
Kat Borlongan (Contentsquare, formerly La French Tech)
Gurpreet Manku (British Private Equity & Venture Capital Association)
Gesa Miczaika (Auxxo Female Catalyst Fund, German Startups Association)
We had originally planned to write a book of the three parts you’ve seen so far: an introduction and outline of the history of VC, the experiences of investors and operators past and present, and best practices that could be used to inspire systemic change henceforth. By the time we concluded the last set of interviews and compared what was being said by the capital allocators with those who continue to fruitlessly seek capital as underrepresented GPs, innovators, and entrepreneurs, we instinctively knew that we weren’t done.
Harking back to our original mission—to create a practical guide on how to change the venture capital industry—we needed to cast our net further afield and reach out to people who we originally thought may not have the power to fundamentally change the tech industry, because they were working either outside or alongside the traditional power structures. In hindsight, it appears that the tech industry as it is may well serve the existing power structures a little too well for it to be radically changed from within. Change by insiders is limited in terms of the scope of what they can achieve without being cut down and out. A clear example is that Black-led funds are emerging across the globe, yet there are less than a handful that have closed more than $30M for their first funds, with much of the investments in charitable or impact funding buckets. By comparison, the average first-time VC fund size in 2021 was $85M in North America and $110M in Europe; in their recent report, BLCK VC concluded that Black GPs on average raise funds that are 46% smaller than this average. We are far away from a level playing field. What we heard were often excuses: we want to do things differently, but change will and must take time to actualize.
The conversations in Part IV: New Ideas represent what we term the “radically different”; they moved us on from diversity to inclusion, from capitalism at all costs to sustainable growth, and from “mirrortocracy” to fair advocacy and allyship, while renewing in us a sense of hope for the future. We speak to academics, non-profits, founders, bankers, and big tech companies. What we have to conclude: it is very likely that this “radically different” future for VC will rest outside of the existing confines of the “as is” venture capital ecosystem.
The first section in this part of the book looks at the often neglected “I” in DEI: inclusion. In the first conversation in this section, we bring together people fighting for more inclusion in a variety of ways across ecosystems. Grace Lordan, professor at the London School of Economics and Political Science (LSE), has more than a decade of inclusion research under her belt, and is the founder of LSE’s Inclusion Initiative. She outlines her work for the next ten years—providing evidence-based research to ensure that people are hired, promoted, and rewarded based on their skills, talent, and ability rather than their networks. Kate Pljaskovova and Bibi Groot founded and work at Fair HQ, a London-based inclusion consultancy that aims to put research into best practice via a tool that enables employers to assess their level of inclusivity and take steps towards continually improving. Having worked with countless investors and, most importantly, founders of startups, the two share some very practical insights of how to move from “skin deep diversity” to true inclusion. Lolita Taub details how she defied all expectations of a Latina from a lower socioeconomic background, while adding insights from her experiences as a Latinx operator, investor, and newly minted GP on the US West Coast. Her new fund, Ganas Ventures, turns the VC model upside down by starting and ending with historically overlooked communities on the investor and decision maker side, as well as on the side of the founders they back.
Grace Lordan (London School of Economics, The Inclusion Initiative)
Kate Pljaskovova (Fair HQ)
Bibi Groot (Fair HQ)
Lolita Taub (Ganas Ventures, Operator Collective)
Katja Toropainen (Inklusiiv)
We spoke with Katja Toropainen, founder of Inklusiiv and former chief program curator at Europe’s biggest tech conference, Helsinki-based Slush, about tech and VCs embracing inclusion. Katja provides best practices, examples, and case studies for both tech and VCs focusing on diversity and inclusion in company culture. She highlights how embracing continuous learning and development and setting strong targets with good metrics are a key starting point on this journey. This is one of the most applied conversations in the volume—worth diving into for anyone who wants to take inclusion seriously.
Interviewed January 2021
Laura Huang (Harvard Business School)
Laura Huang is a professor at Harvard Business School and has been researching topics right at the heart of DEI in venture capital and technology companies her entire academic career. She has published widely on how female and male founders are treated differently when pitching to VCs and the role that gut feeling plays in the investment process, among other things. We talked about implicit bias among VCs, what needs to change to overcome it, and the disparity of education in the tech ecosystem, which is reproducing another kind of elite.
Interviewed via email March 2021
Bianca St. Louis (Black Innovation Alliance)
Heather Matranga (Village Capital)
Ben Younkman (Village Capital)
Dahlia Joseph (Village Capital)
Hadiyah Mujhid (HBCUvc)
Hadiyah Mujhid is the founder and CEO of HBCUvc, a non-profit mobilizing the next generation of venture capital leaders to increase access to capital for communities historically overlooked. In our conversation, Hadiyah shares how HBCUvc is developing, connecting, and mobilizing the next generation of venture capital leaders in communities where entrepreneurs face barriers: they run (educational) programs, build inclusive networks with existing communities, and help VCs jump over “wealth barriers” with their own pool of capital. All of these initiatives empower a new generation of Black, Latinx, and Indigenous VCs to take HBCU culture into VC.
Interviewed February 2021
Leslie Feinzaig (Graham & Walker, Female Founders Alliance)
Leslie Feinzaig started one of the biggest communities of female founders, the Female Founders Alliance. At its core is a simple principle: you are stronger together. Over the last few years, it has developed from a mentoring and sharing community to running an accelerator and a VC fund, Graham & Walker, all with a focus on female entrepreneurs. Leslie is hopeful and is seeing the fruits of her and others’ hard work, but she worries about the increase in women leaving the workforce and the lack of support when it comes to childcare and parental leave policies.
Interviewed February 2021
Mara Zepeda (Zebras Unite)
Astrid Scholz (Armillaria, Zebras Unite)
Central to the need for change in venture capital is the need to think more holistically about the impact of companies, including their footprints on the environment and influences on the societies they have been designed to serve. Historically, this has tended to be more of an afterthought, rather than purposefully built into the creation of venture-backed companies that strive for hockey stick growth at all costs. We caught up with Mara Zepeda and Astrid Scholz, two of the founders of the Zebras Unite movement, to explore the possibilities of another way. We learned how they have built a founder-led, cooperatively owned movement of 6,000 founders across six continents, who are creating the culture, capital, and community for the next economy.
Evgeni Kouris (New Mittelstand)
Ines Schiller (Vyld)
Evgeni Kouris and Ines Schiller believe there is huge potential to build a new, sustainable economic backbone in European economies, in the form of medium-sized (or family) businesses: New Mittelstand. We sat with them to explore this approach and the New Mittelstand vision, which is focused on combining the best traditions of medium-sized companies with the agility and futuristic redesign principles of startups.
Manan Mehta (Unshackled Ventures)
Kesava Kirupa Dinakaran (Luminai)
Unshackled Ventures is working to support immigrant entrepreneurs in the US. Immigrants, historically and across geographies, have started and grown businesses that build enormous opportunities for employment; yet, immigrants face many challenges, particularly in the US, when it comes to their ability to work. Visa hurdles on top of everyday discrimination, as well as potential language and cultural barriers, make it far too difficult to start new businesses without assistance. We spoke to Unshackled’s founder Manan Mehta and one of his portfolio-company founders, Kesava Kirupa Dinakaran, who came to the US at 19 and started Luminai (formerly DigitalBrain), a customer-service automation platform, in 2020. Kesava’s story, intimately intertwined with Unshackled’s mission, is the perfect example of how important it is to help immigrant founders overcome the administrative barriers they face.
Aunnie Patton Power (Impact Finance Pro, University of Oxford)
Not all startups need or should seek venture capital funding; instead, the majority of businesses shouldn’t buy into the fast-scaling and exit-focused VC rhythm. In her research and writing, Aunnie Patton Power has focused on all the alternatives out there, many of which can further enable diversity in the ecosystem. From venture debt to equity-based finance, Aunnie shares concrete ideas of what other sources of funding startups can resort to in a detailed sneak peek of her recent book, Adventure Finance.
Interviewed July 2021
Dalana Brand (formerly Twitter)
Peter Lenke (Twitter)
Big tech companies are not usually renowned for their DEI perspectives, and are even less known for driving radical change in this or any other space that could backfire and harm advertising revenues. Twitter has been trying to do things differently not just when it comes to their AI team but also to their DEI efforts, including by directly funding VCs led by overlooked GPs. We spoke in 2021 with two of the people responsible for pushing these efforts at the tech giant, Twitter’s Chief People and Diversity Officer Dalana Brand and Peter Lenke, director of corporate development and strategy, responsible for Twitter’s investments in VCs.
Maya Ackerman (WaveAI, Santa Clara University)
Maya Ackerman is at first sight an unlikely activist in the space of DEI in startups; AI professor at Santa Clara and founder of a music-generating AI startup herself, she turned to investigate how bad the lack of diversity really was some years ago based on her own experience as a founder trying to fundraise. Very quickly, she started poking well-researched holes in the bad data we keep citing, and has maintained a steady production of powerful weapons with more precise data and insights ever since.
Interviewed June 2021
Nicola Corzine (Nasdaq Entrepreneurial Center)
Nicola Corzine, the executive director of the Nasdaq Entrepreneurial Center, has been leading the Center’s activities since its inception in 2015. She is leading the Center’s strong focus on equitable entrepreneurship and shares in this conversation what can be done with research, teaching programs, and community to create improvements on both sides of the Atlantic.
Interviewed February 2021
Ed Zimmerman (Lowenstein Sandler, First Close Partners)
Mitch Kapor (Kapor Capital and Kapor Center)
Eddie Kim (Gusto)
Maya Horgan Famodu (Ingressive Capital)
Since we met and started this project in 2019, it feels like the world has fundamentally changed. The impact of COVID-19 is still not fully decipherable; the markets, including venture capital funding, reached record heights in 2021 and then dipped drastically in 2022. Russia’s invasion of Ukraine continues to have far-reaching impacts on the global economy, as has the rise of central bank interest rates. A cost-of-living crisis has taken a stranglehold on those least wealthy in society, as everything from energy, to food, and fuel have risen in cost exponentially. Cryptocurrencies and the associated technologies of decentralization, or “Web3,” have moved from a fringe interest to a mainstream phenomenon, and environment, social, and governance (ESG) principles have begun to make waves in startup fundraising and VC.
What does all this mean for the aim of this volume, to increase diversity, equity, and inclusion (DEI) in venture capital and startups? The unfortunate truth is that the numbers of diverse entrepreneurs accessing capital have receded in the last two years. The overall share of female VC partners is stagnant at around 15% (in Europe and in the US), while women manage an even smaller share of money than these numbers would suggest (5% in Europe). We still don’t have a good overview of how much money is being managed by Black GPs globally, though we do know that Black-led funds in the US represent around 3% of total funds,* and that Black fund managers are raising significantly smaller funds (46% smaller) than the industry average; we know even less about any other overlooked group mentioned in this book. What is clear, however, is that we are a long way off—even further away than before COVID—from approaching equity!
While funding for mixed-gender teams has grown to over 15% of total funding in 2021 (up from just 7% 10 years before), funding to all-female teams has shrunk to 2% (down from 2.4% in 2011), while 2021 happened to be a record-setting year for VC funding overall. The funding allocated to Black entrepreneurs has also fallen dramatically in 2022 so far (by at least 25% in the US, for instance) at 1.2% of total VC dollars (as of June 2022).
Two explanations for this lack of improvement are systemic: on the one hand, women were more likely to step back during the work-from-home times of COVID and take the lead on caregiving responsibilities. On the other hand, much of the funding boom of 2021 has been deployed to later-stage funds, which are still much more likely to be managed by white men. To inspire some hope, the longer-term trend is slightly better: the number of rounds of funding received by female-only teams has risen slowly but steadily over the last decade according to Pitchbook data, from only 3.7% of deals in 2011 to 6.5% in 2021, the highest percentage reached so far. Similarly, the deal count percentage for mixed-gender teams has risen in parallel, from 10.9% in 2011 to 18.8% in 2021.
We began this project in 2019 with a rush of hope and exhilarating energy amid what was supposed to be our “real work”—Erika was running her startup Kinhub (then Kami) and Johannes was writing an academic book on VCs. We saw a big opportunity to combine our knowledge and networks to raise awareness, elevate voices, and finally define the agenda for concrete action. The first interviews, focused on broadening the definition of diversity, were eye-opening for us. The problem was even bigger than we had thought, and so much of it was hidden behind the industry’s closed doors.
After the initial push, things began to slow down as interviewees were sourced and scheduled, and the pandemic brought new concerns and changes to the industry. A new series of wins were the wind behind our sails that we needed to make it through the dip; we were able to connect with people we thought would be out of reach, like Mitch Kapor, who we reached via Twitter, and who was incredibly kind and giving. Success usually reproduces itself, and the next phase of interviews flew by, propelling us through the VC world.
The second phase of interviews focused on people who had launched initiatives and taken action within the system’s predefined parameters. We heard from many of the people on the VC, LP, and operator sides, learning that much of what we thought had revolutionary potential from the outside turned out to be localized, small-scale, or merely cosmetic. To complete the interview series and meet the promise we had set out with—to create a handbook on how to fundamentally change an industry—we decided to cast a wider net. We reached out to people who we thought had less power and influence because of their position outside of the “power centers” of tech. We connected with people like the founders of Zebras Unite and the New Mittelstand; we spoke to investing organizations embedded within companies; accelerators who aren’t copying Y Combinator, such as Village Capital; and individuals who thought (and acted) fundamentally differently about what needed to be done, like Ed Zimmerman and Nicola Corzine. Looking back at these conversations, we believe that in the long run, they hold the biggest promise. Building new flywheels—being true disruptors and contrarians—holds a lot of hope. How quickly and in what way exactly this hope will materialize into systemic change remains to be seen.