editione1.0.2
Updated February 11, 2023Terry 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
Interviewer’s note: Terry started by giving me an overview of the project process, in which she and her team researched and mapped the VC ecosystem and its history from stakeholder experiences. According to the project site, the “systems maps” are visual representations of the participating stakeholders’ understanding of “the lack of funding for entrepreneurs of color in the US and UK.” The stakeholder groups that participated were Black entrepreneurs, capital allocators, community organizers, and researchers. The maps themselves are highly visual and can be explored further through the summary videos on the project site, as well as the systems maps themselves, which are hosted on Miro, a visual collaboration software.
Figure: Historical Evolution Map. (A high-resolution PDF is also available.) Credit: Irwin, Kossof, and the Nasdaq Entrepreneurial Center Venture Equity Project, 2021.
Terry Irwin (TI): The map is not simply a historical bid. We’ve processed everything, trying to retain the stakeholder voices. Statements from stakeholders are front and center. So much research on problems like this strips away what the stakeholders said. I think that gathering these statements together in one place speaks more eloquently than any researcher synthesis could. So we’ve tried to make it incredibly visual and nonlinear. We created a demonstration to show how stakeholder ideas can be used to create systemic interventions.
We would like anyone who accesses the data to encounter it as a systems map, so that they get an overview of how complex the problem is and they interact with the stakeholder voices, which have been anonymized.
Key issues are mapped on the left,* including things like the history of slavery and the systemic racism that has existed for centuries in the US. Also included is the rise of social media, the internet, and e-commerce, each of which has pros and cons. Then there are policies against immigrants, the unequal distribution of and access to educational resources, along with threads like Black self-determination during the Harlem Renaissance.
Another significant threat, of course, is the history of discriminatory practices in the financial system. But I will say apropos of that, discriminatory lending and financing practices and hiring and metrics is a theme that ran through practically every single map, and it’s very articulately presented in the problem map and the stakeholder relation maps.
We created analysis and insights that look at high-level timeline themes. So some of the themes that run throughout are enslavement, labor, education, land and property, the financial system itself, and then world views, which, as we know, are the root of all of it. Another theme that emerged recurrently was data, transparency of data, lack of data, and skewed data.
Early themes from stakeholder responses were also documented. Some of those include slavery, history, and systemic issues. Some examples are how traditional routes of funding for businesses are not readily found in institutions used by founders of color, the unequal distribution of access to education, war and forgotten Black veterans, private equity, and VC history itself. We also have some citations from that historical research, because the thing to remember about these historical evolution maps is, ideally they are built by several types of experts. So the stakeholders themselves, but also experts from all sectors like historians, economists, etc.
Erika Brodnock (EB): Were there any findings around the banking system and the history of venture capital in particular?
TI: We found that some of the most pernicious issues have to do with data. Some with an acknowledged implicit bias, and some with mirroring and pattern matching. The search for unicorns instead of camels came up as a repeated theme.
Overall, we found that denying funding to minority entrepreneurs does not just affect their business or their ability to launch a new idea that could create an impact in the world, but adversely affects communities that already have a history of being marginalized. What came up again and again was that if you fund Black entrepreneurs, that’s a window into strengthening entire communities, lifestyles, and neighborhoods.
EB: Where did the problem start? And how did the problem start? Understanding the history of venture capital, I believe, holds the key to creating some of the change, because if venture capital came about via the banking and insurance industries that came about via slavery, and the proceeds of slavery were the first funds used to create venture capital, is it happenstance that the descendants of slaves ended up being locked out of venture capital?
TI: The birth of capitalism and the much older enslavement economy arose out of systemic oppression. We tend to think of it more in terms of the large, wicked problems that are clustering. Then it shoots down to a particular area like the one we’re looking at. It’s one manifestation of these large landscape forces. And money and enslavement just went together.
It’s a bit problematic to try and identify the origins of venture capitalism because it’s like looking at a river with different currents running through it. We are focusing on trying to show all the different currents intertwining so that everyone who comes to this problem begins to educate themselves about its complexities and different narratives emerge.
TI: It is important to involve all of the stakeholders, but getting to all of them at once is virtually impossible, so we need to engage champions. Make a start with the low-hanging fruit. The capital allocators we engaged with through our research have a clear handle on the problem. They completely understand it. So how do we enlist those folks to help create change?
One of the most powerful leverage points for change is to create new narratives and create new networks of help and new sources of funding. Each of these solutions needs to be employed at more or less the same time at different levels of scale, alongside finding champions within each of these sectors who are interested in helping to shift the narrative.
Another thing that we need is to speak to the capital allocators who are invested in not seeing the industry change to understand how much of that is about systemic racism, how much of it is about risk aversion, and how much is about money and power.
EB: I wholeheartedly believe that, because without capital allocators being involved, things will only ever change at such a glacial pace.
TI: We only have one or two statements from capital allocators that were very direct and honest. And one was, “I’m afraid, if my firm or I fund minority entrepreneurs, I’m going to get branded as a firm that only does that.”
EB: Every piece of data I’ve seen says that it’s less risky to invest in this way than it is to invest in the status quo. Are investors leaving money on the table for fear of being pigeonholed?
TI: Some statements did bubble up from stakeholders who were worried that the lived experience of older generations was being put upon the younger generations and [that it has] perpetuated.
TI: What also emerged is that two areas for very positive interventions are in data. One is about how we make investment practices more transparent, but that must go hand in hand with interventions about shifting narratives, creating role models, and putting new stories out into the world. Then the other thing is addressing this idea of otherness.
EB: Could one way be to stop using words like minority, sub, or anything that means less than?
TI: Yes, coming up with new strategies for terminology. That’s all part of shifting the narrative, getting high-profile stories out into the world, creating media platforms.
If we make a concerted effort to make diversity the norm, it will simultaneously solve so many problems, like the one that’s manifesting in VC. We’ve tried to show that solutions in these categories can address more than one issue. This is the very definition of systemic solutions—or an ecology of solutions. If each solution could be connected, we will simultaneously begin to address many issues, and it’s precisely the opposite of how solutions are usually conceived.
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
Erika Brodnock (EB): I believe that venture capital plays a significant role in creating the products and wealth shaping the present and the future, yet the past is rarely analyzed. I’m keen to learn more about your research and the findings that traced slave-owner compensation payments through to London today.
Nick Draper (ND): There are two distinct aspects of the slave economy that appear especially relevant to the development of the modern financial system, including venture capital: the first is financial innovation driven by the slave trade, and the second is the capital generated by slave ownership. Slave traders and slave owners were generally separate groups within the British and colonial economies. I will come back to the slave trade, but the work that other colleagues and I have done over the past 10–15 years focused and continues to focus to a large extent on slave ownership. So my knowledge of slave ownership is much deeper and broader than my knowledge of the slave trade.
The work on slave ownership began by looking at the payments made to slave owners in the 1830s, and the compensation payments were looked at for two reasons.
One, it’s a very, very vivid expression of the relationship between Britain, the state, slavery, money, and slave ownership. It’s just an extraordinary thing to see these payments being made and the circumstances under which they were made. The enslaved people were being cast off into freedom, but with no endowment of anything, no resources, no land, no money, no literacy, nothing. It was as if they were born naked into a new world and had to negotiate and navigate from a zero base, in a world where we know that the ownership of assets tends (as Thomas Piketty showed), over generations, to multiply the disparities that exist.
The second thing is that the records for the compensation process were extraordinary, and they still are. They’re in the National Archives at Kew, they comprise an immensely long list of people. You can determine which individuals were connected as owners or mortgagees or annuitants with particular estates and, therefore, which enslaved people were attached to them. The records give complete visibility into the end of slavery and who was holding the bag when the music stopped.
As I have continued to work on slave ownership over the years, I have come to see, however, that the moment of compensation, significant though it is, is in the end just a coda to a story that lasts over 200 years. The money transferred in the 1830s is about a decade’s worth of earnings for slave owners from slavery, which had taken place every decade for the previous 20 decades. So we are looking at huge amounts of money in totality. In comparison, while the compensation payments are very visible and very charged, they are still only a small part of the whole story.
Originally the mission was to try and trace, to the extent that we could, the compensation payments and how they flowed into other areas of British life, not just business but also into the cultural fabric of Britain, governance, philanthropic institutions, things that people value highly in Britain today, and we can see that a part of that endowment comes from slavery—there’s no question.
We’ve accumulated thousands of examples, each of them representing micro-histories and, in turn, thousands of specific legacies, and the whole thing seems to me to take on a new life and goes straight back to Eric Williams’s Capitalism and Slavery, a text that was in the 1960s taken up and discarded very quickly. The view was that he was wrong on so many counts that there was no point in engaging with him. I think that the work we’ve done, and the work that other scholars are doing, will reinstate Williams in terms of economic and financial significance.
What we did for slave ownership, a new group of scholars in the UK are now trying to do for slave traders, looking at some of the same questions, which are: where did their capital come from? Where did it go to? Sometimes it was destroyed in business losses, but in other cases, it wasn’t, and it was multiplied. Then the question remains, where did it go?
In that context, it is clear to me that the whaling industry is a relatively brief explosion of mobile, entrepreneurial capital and overlaps with the slave trade, as it overlaps too with East India ship owning—there is no doubt. There is a lot of interest in the Venn diagram, which has whaling in a circle. Slave trading is undoubtedly one of those other circles. The same names come up in the intersection. The question is, how significant is that as a whole?
Our work focuses on Britain, and my work focuses on the City of London. It sounds as though there is a thesis in the United States that is relevant to Britain—namely, the connections between the whaling industry and all of these other forms of shipping and ship owning that were going on. It also embraces marine insurance, and I’ve been trying to think and quantify and get my head around the significance of slavery to marine insurance in the 18th century in Britain.
There seems to be an evidence-based consensus that between a third and 40% of marine insurance in Britain relates to slavery, not only the slave trade but in particular, to the movement of commodities in ships. Originally, of course, these formed a literal triangular trade. The same ships sailing from England to Africa, taking captive Africans across the Atlantic, bring back slave-grown produce. Yet later, the system tends to get differentiated, with people specializing in just bilateral trade between Britain and the Caribbean, and that’s where the significant amounts of marine insurance are. That’s a very, very important part of the growth of marine insurance and, therefore, obviously connects with [insurance company] Lloyd’s. However, it isn’t simply a bilateral trade, slavery underpins it all.
I’ve never considered this nexus in the context of your specific interest in the venture capital industry. I’m just thinking now about this. The techniques of finance, for the British, are relatively prosaic. They’re relatively simple. The Dutch were far more sophisticated. They had created mortgage securities in relation to Berbice, Demerara, and Suriname [then Dutch colonies in South America]. In the 18th century, there were what you would now call general partners in Amsterdam. They were mobilizing pools of investors, buying up packages of securities, and financing the expansion of the slave system. And that Dutch sophistication doesn’t appear to be replicated in the case of the British, the British are much more bilateral. A merchant in London, who is a consignee, would advance credit to the slave owner in the Caribbean and will allow that slave owner to run up, often, very substantial debts, the capital being drawn by the merchant in turn from banks and investors in the UK.
EB: Did the financier in Britain have significant returns? And from those returns, pay carried interest?
ND: The West Indian merchants in London became bankers for the slave owner. They advanced money to educate their children if they were sent to Britain. They would then pay attorneys in Jamaica and Barbados to manage the estates on behalf of the owners, and those agents were paid, but not in the way of so much carried interest. It appears that in many cases, they were paid a percentage of the value of their crop. So maybe that is indeed analogous to what you describe.
EB: Carried interest in VC is the payment of a percentage of the value the general partner and company can create.
ND: Some of the attorney’s pay was a fixed salary, and the rest was a percentage. Of course, the consequence is that you incentivized your attorney to focus on this year and next year. He is not interested in the 20, 30, and 40-year perspectives. He just wants to maximize production, which means that he may not be as careful with the lives of enslaved people. He is not concerned about whether the population is healthy and reproduces itself. He just wants to ensure that this and next year’s crop is as big as it can be.
EB: To maximize his returns?
ND: Yes, there is an incentive that is generated from those percentages.
EB: What then are the systemic impacts of the slave economy?
ND: Out of the work on slave ownership, I’ve come to recognize, firstly, that the compensation payments are only part of the story. And secondly, these West Indian merchants in London and, to an extent, Liverpool and Bristol, are the center of the system. It is not the slave trader. It’s not the slave owner. It’s this mercantile capital in Britain which is the focal point of it. So the question is: A) what returns do they make and B) what do they do with their money?
It’s a risky business, and it’s clear that a large number of them go bust. Some have spectacular collapses at various points, but others don’t. Others create long-term wealth for their families and do with it what British families tend to do. It becomes landed. Often, in that curious blend of both landed money and mercantile money, they’ll split it amongst their children. Once that starts, it doesn’t evaporate, but it becomes far less spectacular because it’s divided between many different families over time.
We have traced some of the money into some companies, railways, and investments across the whole spectrum of Britain. There is no single number to measure how material this cumulative money is, not just from compensation but from the payments and profits made earlier. We came up early on with the suggestion at least 5–10% of the British elites are in the slave compensation records. In many cases, the money flowed away.
In terms of institutional development, we can see that all the big banks in Britain today grew up by consolidating provincial banks and whole networks of smaller banks. If those smaller banks were in Liverpool, Lancaster, Bristol, or London, there’s no question they would have done business with slave traders, have done business with slave owners. In some cases, they would have been mortgagees directly on enslaved people. We can generate many examples, and the question again is, how material and how significant is this?
It is clear to me that in the case of Royal Bank of Scotland (NatWest as it is now), many, many of their precursor firms were implicated in this involvement, this entanglement, in slavery. It is a complex tapestry. If, for example, you were a banker in Birmingham, you weren’t necessarily involved in trading and enslaving people or owning them. Still, you were financing the manufacturer of guns used in the slave trade. The connections run backwards and forwards like this right across industry.
Joseph Inikori wrote a book 20 years ago, Africans and the Industrial Revolution. It is a very important book. At least as important as Eric Williams, yet, it passed more or less unnoticed in Britain. Oddly, you can still pick up literature about slavery and Britain’s economy and not see references to Inikori. And others have read Inikori but pushed it to one side. He did an extraordinary amount of work to get to this question of significance by looking into different sectors. There’s a lot of important primary research in there. We are working in the shadow of not only Williams but also of Inikori.
EB: There’s enough to link how venture capital today is structured to how the slave industry was structured. Based on the evidence I have reviewed, I do not doubt that the wealth generated from slavery, both in the US and the UK, has trickled down to create the backbone of venture capital. If we think about the early investors in UK venture capital, it was people who had made money from banking, insurance, etc. There is a lot of old money in the venture capital system. Many people who can angel invest have accumulated wealth that has been passed intergenerationally to them. Indeed, they are not just angel investing, they are sometimes limited partners in funds. Limited partners are often companies, such as J.P. Morgan, or NatWest, who you mentioned earlier, often invest in pension funds, private equity, and venture capital. With this, you can begin to see the clear links between the history of capital markets, the history of slavery, and the VC market that we have today.
ND: To your point, if you wanted to do business with the City of Chicago in the mid-2000s, you needed to file an affidavit about all kinds of things, including, at the insistence of the city council there, a disclosure about involvement in slavery. Banks did, therefore, commission research into their histories. It was found that Chase Manhattan, which merged with J.P. Morgan, was active in the south and mortgaged enslaved African people in Louisiana. Morgan, in response to that, did set up a small trust fund, I think $5M in Louisiana. There were other banks, at the same time, faced with the same thing. RBS Royal Bank of Scotland also did work at that point. That’s one reason why there’s more transparency into their lending against, and ownership of, enslaved people than other firms because they laid out some of their histories at that time. Nevertheless, the original RBS reports tended to minimize their involvement—even based on our data at that stage, we knew they were undercounting their involvement.
EB: The profit that was made from the railway industry, then all marine insurance, but then also the insurance and mortgage of slaves, plus the slave owner compensations, did you follow that money right into the city?
ND: Yes, but it’s not a systematic piece of work, Erika. It’s a series of anecdotal, specific mini-case studies. We haven’t been able to do systematic economic work as of yet.
As far as I can see, British insurance companies did not write life insurance for enslaved Africans on plantations or estates. That did happen in the US in the 1840s and 1850s. But I think that mass life insurance was developed relatively late, after the end of British colonial slavery. So I think that we found no examples of insurance companies insuring the lives of enslaved people in the Caribbean, although they insured the lives of the slave owners, and they insured the cargoes of captive Africans. The kind of life insurance policies written in the Deep South hadn’t been seen in Britain. Fire insurance in Britain, however, is related to sugar refineries. And that is a product of enslaved people’s appropriated labor. But the main connections between insurance and slavery are not with life insurance, per se, but with marine insurance and fire insurance.
EB: What, if anything, are your thoughts on what needs to happen next to right some of the historical wrongs?
ND: I think that there are several dimensions to it. As far as Britain is concerned, at least, we’re stuck in a series of culture wars. One of them is about Britain’s relationship with slavery, and it’s a very bitter conflict. Ten years ago, most people didn’t care. They would say, “But it was a long time ago.” However, because of the cumulative weight of work by us and many others, the dial has been shifted enough to frighten people who, up until now, have been able to say, “Let’s not worry about this. What about the white working class?” “Didn’t Africans sell Africans?” Those responses I’ve had repeatedly, and I’m sure you’d have had, in every public engagement meeting that you’ve ever been to. But things have moved significantly in the last two or three years, and that’s brought a backlash that causes individuals now a difficult time professionally and personally because they are the subject of hate campaigns that social media and mainstream media are capable of launching. The bitterness of that struggle tells me that things are changing a bit.
EB: So what happens next?
ND: Ultimately, there needs to be a national commission that acknowledges the many different views but lets us collectively examine the evidence. What does it support? And what does it not support? Until we have more agreement about what the basic history and background were, we’re not going to be able to move this from a political conflict into a substantive movement forward.
Only then will Britain be able to articulate a response to the CARICOM reparations movement. Only then will it be able to articulate a response to the British people who’ve been working for reparations, not on a government-to-government basis, but to say, look, this is not only about Britain and the Caribbean. This is about British society, the structure and the inequalities we have here, and how they’ve been reproduced over 200 years because of the background of slavery.
Until that point, independent institutions, without doubt, are going to do what they have to do, not what they want to do, but what they have to do, because they are subject to growing internal and external pressures. Take Lloyd’s of London and the National Gallery as examples of institutions trying to get their heads around this, to get ahead of the challenge from the public and staff who say, “You haven’t even done the work to pretend to tell us about this history of your connections to slavery.” In Oxford, All Souls College, famously the site of the Codrington Library, now has a stone outside which says, for the first time, this represents the labor of enslaved Africans in the Caribbean. All Souls also put some money into a scholarship and made a grant to Codrington College in Barbados. Who’s to say that is the right and exhaustive thing to do? Not me, but I think there ought to be someone arbitrating this. There needs to be some check on institutions, so they don’t just get to do the bit they want and think they’ve done it all.
EB: Just before the issuance of slave owner compensation payments, there was propaganda as to why slavery should continue initially and then why people should be compensated. What are your opinions on the literature used to describe the people that were enslaved? One of the key reasons that venture capital isn’t invested in Black people is the perceived risk and a presumption of deficiency. I believe that this started to be propagated through slavery and has then passed down through the ages. What are your thoughts?
ND: Williams said that racism was a consequence, not a cause, of slavery.
To justify a system of racialized slavery, of course, the slavers had to reconstitute the enslaved people as being less, in whatever way they could. They did this for two centuries and established the basis of all the tropes of racial superiority and inferiority that we see today. But by the 1820s and 1830s, there were relatively few people who would justify slavery by that stage as being a positive good. The view was that this system is not great, but it’s here, and there’s nothing we can do about it, so we have to live with it. The common sense, by then, was that everybody was potentially equal. It was just that the enslaved people have been held back by slavery itself, and maybe one day, enslaved people could reach the same level of civilization, as you know, the white British.
It’s emancipation that shifts that because, by the 1860s, the abolitionists are beginning to wag their finger at the formerly enslaved and say, “You haven’t done what you were supposed to do. You were supposed to become wage labor on the estates. What you’re doing instead is becoming a proto peasantry; you’re supporting your family, and you’re not engaging with the modern commodity world.” That then feeds into the much harder racism you describe, which is that it’s not about stages of development, i.e., Africa is down here, but maybe one day it will develop with our help and support. Instead, it becomes something more fundamental, which is that it will never happen. The “gap” can never be closed. So I think that maybe racism was not entirely the consequence of slavery; it was the consequence of slavery and abolition. After abolition, the abolitionists began to move toward that fundamentally racist view to say, “No, there’s an inherent difference here that isn’t working in the way we expected it to, and it is the fault of the ‘Negro.’”
EB: Suppose you take books away from a people for 200 years and provide them with only Bibles. How do you expect them to be at the same level as those who have had resources for 200 years within a couple of years, especially when you allowed an additional 12 years of free (indentured) labor?
ND: I’m absolutely with you. As I said, this is the whole Thomas Piketty theory, which speaks to your work. If you don’t have an asset endowment at the beginning, you’ll never catch up because the return on assets is greater than the wage increase over time. If you have nothing, and you’re invited to join a race with people who started 100 yards down the course, you’re not likely to catch up. In the States, work has been done to quantify the systematic differences in wealth from generation to generation. It’s a fact that with zero resource endowment, you can never close that gap as a complete collective.
Anne Glover (Amadeus Capital Partners)
Bindi Karia (Molten Ventures, formerly Silicon Valley Bank)
Diana Noble (Kirkos Partners, formerly CDC Group)
What happened in the tech and VC ecosystem in Europe and the UK in the last three decades? We spoke with three of the most senior investors in the space: Anne Glover of Amadeus Capital; Bindi Karia, currently venture partner at Molten Ventures; and Diana Noble, a PE and VC veteran, about the evolution of European venture capital and their experiences as females in the ecosystem. One of the core learnings: you needed to behave like the men (be confident, like sports) to get ahead; while this is slowly changing, deep-seated structural issues, including in-fighting among women, are not truly behind us, even today.
Interviewed February 2021
Johannes Lenhard (JL): How has it been coming up in the UK’s tech world?
Anne Glover (AG): I started in venture capital in ’89, when I moved back from the States. I had been working there in consulting to small tech companies for a little while. A fundamental difference was there were not a lot of tech investors in the UK at that time. I did all kinds of deals, from retail to leisure to technology. I found that I was much more in my own milieu, because I was talking to people about products and things that I understood, and they understood and could explain to me. I then gravitated back to tech from general business, because I could establish my credentials and my legitimacy more easily.
Eventually, I joined and was COO of one of my companies for a couple of years, when it was listed on the London Stock Exchange. Sometimes, when I was sitting next to a guy, whoever the guy was, all the questions would be directed to him, even if I was the right person to answer them. When I set up my own firm, those kinds of things improved. Then people needed to converse with me. That was 23 years ago. Overall, I found that tech is actually more welcoming than general business.
Bindi Karia (BK): I have been part of the UK ecosystem since about 2000, working alongside venture or partnering with venture since then. Have I felt barriers as an Asian female? I have. But do I let that stop me? I tend not to. Bruce Lee said this and I did a talk on this about four years ago: “I am like water.” If I hit a brick wall, I find a way in, through, around, and over it. That has gained me decent amounts of respect with the men I have worked with. Even to this day, I find that in the network I have, I am getting pretty powerful men approaching me to work alongside them.
I think that partially is because of the culture. I learned working at Microsoft, which was super male-dominated. I was working initially in the sales team, before I joined the startup and ventures team. The guys there were really alpha and very macho, and you had to act a bit like them in order to fit in. I was working in financial services, then tech sales. As long as you proved you could do it and demonstrated you were capable, what I found is I gained their respect. To this day, I continue to get calls to do work.
I see a lot of female entrepreneurs getting funded at pre-seed, seed, and Series A, and I observe that deal flow is definitely increasing. Having said that, I see fewer female founders that are getting Series B and onwards funding. I know that there is a massive pipeline coming from pre-seed to seed and now popping into Series A. But I still see some barriers when you get to the growth stage. With a lot of the growth stage investing, you are looking at the metrics and the scaling possibilities of the business. The challenge is how do you get to that level of metrics that are required at a certain stage of investing in the business.
Diana Noble (DN): The themes that we are talking about here are our ability to gain credibility and respect, and as a result, have influence on our audience. That is largely about two things. It is about the competence you have, and obviously that changes over your career. It also changes based on the knowledge that you bring. It also depends on the person or group of people you are dealing with and whether they have bias against females.
I will quickly contrast the period that I was in private equity, from 1987 to 1999, and then tech VC, which is a relatively short period from 1999 to 2005. During that first period, my confidence per se was low and when I look back I realize I was trying to form judgments beyond my experience and training. I was assessing industries, such as engineering, that I had no real empathy with. All of this created a large credibility gap, both in my own head and also in reality.
Funnily enough, my issue was not with my colleagues at the time. There were actually three female partners out of nine partners, which was very unusual. That ratio would also be unusual today; we have not moved forward that much. And so it did not feel like an intimidating environment internally at all. That’s not to say that there weren’t the occasional individuals with whom you just felt, as a young woman, it was difficult to have influence. It wasn’t about anything explicit, just those subtle inferences that make you feel rather small.
When I moved into VC, with EVentures Softbank, and then Reed Elsevier Ventures, it was different. I was CEO. And so you do start with that credibility with investee teams. You walk into the room and it is your agenda. You are not fighting for credibility. Also, the people I was dealing with were pretty young, West Coast tech entrepreneurs. That generation did not care whether I was female or not, the question was simply, “Do you understand what I am trying to do? Can you speak my language?”
Erika Brodnock (EB): Is the world of tech and VC really as bad as it is perceived to be? Why aren’t there more women in tech and venture? Are women not trying hard enough? Is that why they are not there?
AG: If we only go back to what is happening in our careers, we are missing the point. I ended up studying sciences, because my parents were scientists, and I loved it. They made it exciting for me and they treated me as an equal with my brother, who was also an engineer. When I get asked this question by audiences, and I frequently do, I usually say, “How many of you have daughters? What are you encouraging them to study and do when they are nine?” Some of them think about it, and some of them just shuffle in their seats and look awkward.
Your proclivity for tech as a field of interest happens very early. It is down to schools and parents. There are female engineers and they are brilliant, as well as female scientists and mathematicians, but the pool is always smaller. We have to work within the school system to get women more interested in STEM subjects and to get them to realize that these careers can be creative, exciting, and compatible with having a family life. When you look at VCs, it is the compatibility with a family life that is the later problem, but the tech problem happens early.
BK: In career management 101, you are taught, go for a job that is 80% stretch and 20% of what you have done. For women, from my personal experience, I see the standards assigned to us is 80% of what you’ve done and 20% stretch. Men are more likely to get jobs where it is 80% stretch, because we just have to look at these first-time fund managers who come from the right family and the right background, and they can raise £80M for a first time fund with zero track record. Then, if I went out to raise a fund myself, I would never be able to raise that money, not without someone by my side who has also had that track record.
It is also a confidence thing. I may come across this confident, but I always have imposter syndrome and confidence issues. We are all good at wearing the mask. I am just a venture partner and I am not full-time there. There are times I am in the deal room and I think, “I am not sure if I belong here.” It stops me from speaking out and asking questions, even though my own questions are valid and viable, based on 20 solid years of operator experience.
The other thing—and this is controversial—is that I find some of my biggest detractors have been other women, not men. One of my favorite mantras is that sisterhood is not a zero-sum game, there is room for all of us! For a certain generation (mine!), when you get to a certain level, we have been taught that there is only room for one of you at the top. It is the establishment at the top that has historically generated this attitude, and this needs to change. At least, this has been my own personal experience.
But I would also say that is an old-school attitude, and I observe that this is definitely changing (I hope!). Based on the calls I am getting from headhunters and the advent of ESG (environmental, social, and governance) thinking everywhere, I am hopeful that this mindset is at last beginning to shift. That being said, we still have a very long way to go! You just have to look at the recent Diversity VC/BBB/BVCA study to realize this.
DN: This is multi-layered. To answer your question about what has changed is, the very obvious misogynistic, individual behavior is largely gone. In a way, that is easier to identify and easier to get rid of. What remains is a culture of guys feeling comfortable with guys, if I can put it like that. When it comes to who makes partner, who really climbs the tree, there can still exist this inherent bias, which hides behind phrases like “fit.” Fit can be used as, “You are like me, I like to have a beer with you. We can talk about football or rugby.” That is what starts to exclude and that is going to take a lot longer to break down. It is not necessarily even intentional; it is human to want to surround yourself with people like you because it is comfortable.
BK: I 100% agree with your comment about “fit.” If you look at client entertainment, for previous roles I have held we mainly attended sports events. I would go to rugby, I would go to cricket with male clients all day long, or we would take them to tennis or Formula One. We would mainly have the male VC partners in attendance, as this was a form of client entertainment that catered to their tastes. But I would rarely see the female VCs in attendance, as their comments to me were along the lines of, “I cannot go, I have family priorities that come first.” Why do we not do something that is more in line with what that audience wants and is slightly more inclusive?
AG: The 80/20 point that Bindi made is exactly right. I ticked every box; I ran teams of people, I did strategic consulting and small company startups before I got into venture capital. Nobody was going to say I had not done it. That is not the path that most guys take—they take the opportunity that a mate of theirs offers them as soon as they can, because they have better networks and people are more willing to take risks on them.
JL: We heard quite a few people say, instead of trying to make it through the ranks of existing institutions and pushing in there, why not start something else?
BK: I sit on the board of the European Innovation Council (EIC) where I am also co-chair of the Diversity and Inclusion working group, so we are exploring this quite closely. For example, the EIF (European Investment Fund) is one of the biggest LPs in Europe. Anecdotally speaking, the number of female-founded funds that have been turned down for EIF funding is eye-opening. Someone wrote me recently, “You have to have the first name Alex to be a fund manager from Germany and you have to have the first name Peter to be a fund manager from CEE [Central and Eastern Europe].” Then she sent me the names of all the general partners of all the funds in Germany and CEE, and the majority of the names are Alex or Peter, I am serious! We are trying to make the point that actually the LPs have got to start thinking about diversity when they invest as well. This is about the entire value chain of investing, from LP to investor to founder. It has got to start from LPs where you ask, can you trust first-time female fund managers because of their other life experience, which means they are going to get this across the line? It is interesting food for thought, and all I know is that things need to change.
DN: That is the phrase that gets to all of this: “Take a risk.” Why is it a risk when looked at objectively?
BK: One hundred percent true that they are not a risk. My observation is that there can sometimes be a self-belief that we are a risk (and that can be both internally and externally reinforced). From the internal perspective, this stems back to the confidence thing. We are not a risk; we get things done. We have the right instincts and insights to pick the right investments, and we can get it across the line. Why do we have to spend the time convincing LPs and others of the 80% of what we have done? In tandem, we also have to get rid of that self-belief that we are a risk as well!
AG: I would not have been able to raise a fund had I not partnered with Hermann Hauser, who is a very well-known technology entrepreneur. That was a deliberate choice by him and by me, because all successful enterprises need a team. I am extremely clear about that and so is he. In that sense, the partnership worked. We both needed each other. That is how we got things started.
EB: If you spoke to your 25-year-old or 18-year-old self, what would you say about your biggest learnings and experiences growing up as a female in the tech world?
BK: Be bolder. Have more confidence in yourself; that has held me back constantly.
DN: At 18, that is the time to say to someone, build your substantial knowledge in what you want to do. If you want to be a VC, go out and understand what building businesses is all about, go and work in companies. If you want to work in a tech company, then go and start at the beginning and move around. Learn a function, learn how it works, go and get an MBA. I hate having to say this, but you win by substance, and you win by confidence. This overcomes the barriers, which are still there.
AG: It is certainly belief in yourself. Then frankly, do what you enjoy, if you are going to work hard in this life, just do what you enjoy. Some people are driven by status and money, but I actually think it is better advice to choose what you enjoy.
DN: I would slightly disagree with “do what you enjoy.” I tend to say to people, when you are 18 to 24, it does not actually matter what you do. It is who you are working for. Choose organizations that have really high standards, because these standards will stick with you for your whole career and you can apply them again and again. Secondly, make sure you work for people who actually care about you and your learning experience and are generous with sharing their knowledge and input into your career path. You will then get a huge amount out of those early years.
Theresia Gouw (Acrew Capital, formerly Accel)
Sonja Perkins (Project Glimmer, Broadway Angels)
Nancy Pfund (DBL Partners)
In early 2021, we met three of the most successful, seasoned, and well-known female American venture capital investors to discuss how they forged careers in the venture world over the last three decades. Theresia Gouw was a managing partner at Accel for 15 years and has since run her own firm, Acrew Capital; Sonja Perkins started investing 30 years ago and is the founder of the famous female angel collective Broadway Angels; Nancy Pfund is the founder of DBL Partners, a firm she has led for the last 13 years. All three of them were very happy to share anecdotes—some of them of annoying experiences, some outright offensive—and their biggest learnings.
Interviewed January 2021
Erika Brodnock (EB): Each of you spent the last 30 years in VC and tech, and I am keen to understand how it has been for you as women in a historically male industry.
Nancy Pfund (NP): I was always the token humanities and social science person in the room; I took a different path. I did not know what a venture capitalist was when I was in college—it was not something I dreamed of being and I just evolved to a place where it was what I wanted to do. Bob Noyce, one of the founders of Intel, whom I worked for, needed people that could reach out to broader constituencies in terms of the role and significance of electronics. That is one of the first jobs in tech I had; I started early and there were no women anywhere.
I did depend on the men that were my bosses or leaders of organizations that saw the need for a different point of view and a different talent set. Clearly, I was not an engineer, and while I felt very comfortable understanding science and engineering, I did not come from that culture. That was liberating, because it allowed me to focus on what I was interested in. But if I had not had the support of people like Bob Noyce; Bill Hambrecht, the founder of Hambrecht & Quist; or Dan Case, the eventual CEO of Hambrecht & Quist, I would not be here today.
Every career, of course, has its highs and lows, but I did really push the specific angle that I brought to bear, which was, how does technology affect society? How do you turn that into a force for good? It has always underpinned my perspective on the industry. I was lucky to find folks who also thought that was important, long before it became popular. The message is that, in the early days, it took a lot of very senior, well-rounded renaissance men to allow someone like me to flourish.
Theresia Gouw (TG): I have an interesting contrast to Nancy. I did take an engineering undergraduate degree, at a time when we were about 10% female at the undergraduate level. No one in my family is from the business world. They are all in medicine, because that was what you did when you were a first-generation immigrant from Asia, at least in my family. That was the path that was expected of you. That was not in the cards for me, but engineering was acceptable to my parents for a college degree, and it was great, because it turns out I love technology.
During my studies, I had some summer internships in traditional industries. I did my first summer internship at a research facility for one of the General Motors parts manufacturing businesses. There were a thousand full-time engineers there, two of whom were women.
While I love technology, I saw that what I wanted was to be the product manager or the business manager for a technology company. [The people who had these jobs I wanted all seemed to have gone to business school, so I decided to get a job after graduating that would help me get into business school.] I went into consulting, which was about 25% female. I was fortunate enough to get into business school, and that brought me to Silicon Valley and out to Stanford. That was where my eyes opened up to the world of startups.
I have always tried to focus on the positive aspects of being different and being the only person who looks like me in the room. Especially early in your venture career, when you are expected to go to these big tech conferences, and to try to meet interesting entrepreneurs and find new companies. I split my time between security and infrastructure, as Sonja does, as well as the more consumer-oriented things that all three of us do.
I went to this technical security conference and I realized very quickly that if they are meeting 25 or 50 VCs a day, it is likely that I am the only one who looks like me. If I can ask a smart question or make an insightful comment about their product or company, and then later when I email them and say, “Hey, I met you at so and so conference,” my first name happens to be very clearly female, then the chances that they will remember me is much higher compared to somebody who is emailing them with the first name Jim or John.
At my firm, I worked with more people named Jim or Peter than I worked with females. Early on, I said, “This is going to be something that you can choose to focus on the challenges, or instead choose to focus on your unique potential advantage in being somebody who will be easier to reconnect with, or easier to remember in a meeting or in a larger context.”
Sonja Hoel Perkins (SHP): I would say that my experience in venture has been a great one. I also fell into it, like Theresia. I do not have the typical venture capital background. The only operating experience I have is from Symantec (now NortonLifeLock) while also studying at Harvard Business School. I was first hired as an investment analyst at TA Associates in the late 1980s. I was the only woman based in Boston, although there was a female partner, Jacqui Morby, who is famous in the industry. She lived in Pittsburgh.
I was really good at sales because I had to be. I would look for companies that were growing really fast. While at TA, I ended up investing in three companies and all of them went public—all before I was 24 years old. One of them was McAfee Associates. McAfee had just agreed to sell to Symantec for $20 million. I convinced John McAfee, the founder, to sell part of the company and let the rest ride. Today, McAfee is worth over $10 billion.
As a woman in VC, some of my strengths include kindness, compassion, fairness, and just being nice. I like it when everyone wins. People remember me, which has given me a great platform to invest in some amazing companies. I am willing to take risks on people who do not fit the mold. Not all of my entrepreneurs are from “central casting,” where they have an MBA, an engineering degree, or experience as a CEO. I love backing the scrappy guy who has a great product who everyone else turned down.
My favorite companies are the ones who do well despite themselves. Having huge growth with an unpolished management team shows me there is a real market. Maybe this comes from being in VC since the 1980s. All entrepreneurs were scrappy then. The founders of F5 and Priority Call Management both had a hard time raising VC, but built multi-billion-dollar companies.
Maybe because I am a woman, I have a different perspective. All the women I know in VC are great at winning deals. It is important to identify markets and to find the best companies in those markets, but the most important thing is to win the deal.
Johannes Lenhard (JL): The industry has come quite a long way, but we would love to hear whether being a woman has been challenging. Is there any anecdote or situation you want to share?
SHP: The problem with being women in our industry is that there are so few of us. If there are any women at all, there is usually just one per firm. Nancy and Theresia’s current firms are the exceptions. Theresia and I were the only women in our original Silicon Valley firms (Accel and Menlo Ventures). We did not have networks that truly helped us with our careers.
We would occasionally go have a drink or go out to dinner with each other, but we did not share deals or due diligence. Men network very, very well—they have fun and help each other out with their careers. One of my former partners used to say, “No one is ever going to show you a good deal. You have to find it yourself.” I had to work a lot harder because almost no one ever showed me a good deal.
To remedy that, 11 years ago, Broadway Angels was founded. Broadway Angels is a group of the top women VCs, and we share deals and due diligence. Together we have invested in some amazing companies such as The RealReal, 128 Technology, Hint Water, Owlet, and so many more. The RealReal went public and many of us did very well. The CEO was only one of 20 female founders to go public, ever. She had more female investors than men, and many of her investors were Broadway Angels.
Investing in The RealReal showed me how important networks are. I wish I had learned that lesson much earlier in life. In addition to Broadway Angels, All Raise and other groups are working to build strong female networks. These efforts are relatively new but are making strong headway.
TG: That is true, and it is not a surprise for those who study other industries and ecosystems. It’s the challenge of the tyranny of one; even when you are a managing partner at a firm, if you are the only person who is in the minority, it creates challenges for deal flow. Whether or not it is an industry that you are interested in and have prior experience in, when you are the only woman in the room, sometimes all eyes turn to you to look at that deal.
Another positive trend, in addition to the creation of these all-female networks, is there are many male allies who want to be part of it. If you just look at things such as the Founders Pledge, this generation of entrepreneurs understands that having diversity of thought—however you want to define that—in your cap table and on your board is actually a competitive advantage.
We see this trend at Broadway Angels, and I see this at my own firm. There are a lot of women, such as Nancy, who was one of the first, and now me and several others, who have gone off and started their own venture funds. Our partnerships look like our networks. At my firm, we are almost 90% women and people of color on the investing team, which is almost a mirror opposite of the average venture capital firm. It was not by design, but because of who me, my partner Lauren, and the co-founders are. What is natural is you end up recruiting and hiring people who either you know or are referred to you by somebody you trust. That is why we look the way we do, and we see it as a huge advantage.
Increasingly, more and more companies are thinking about that advantage. As they think about growing the company management team or increasing their advisory board, they want us to be part of it, because we are going to be additive. Our networks are clearly different from the networks of their other investors on the cap table. It started out being challenging, but now it has actually turned into a competitive advantage in many ways.
NP: Absolutely, it has been wonderful to see the transition and the next generation of professionals that really do appreciate what we do. We can be role models, which is not something that was on our agenda earlier in our career. That is uplifting.
What is shocking is that I was on a panel with two male venture capitalists and a male moderator. They are not huge names in venture capital, but they are accomplished colleagues. It was all very friendly and upbeat. At the end, the moderator asked the question,“What is your one secret sauce? What makes you successful as an investor?”
The two men went first. The first panelist said, “I am a super seed, early stage investor. I help the entrepreneur really get through both the day-to-day aspects of starting a company, but also the psychology of it, and I am really good at that.” The second VC said, “I am very good at helping our companies to connect with strategic partners and business development, and I understand the psyche of corporations. I knit those worlds together.”
Saving me for last, the moderator then turned to me and said, “Nancy, what is your secret sauce? Is it luck?” He did not say that to anyone else. I was taken aback, but I decided not to say anything and just answered the question, “We have this double bottom line approach that helps entrepreneurs to build great companies and make the world a better place at the same time.”
When everyone had gone home, I said, “Do you realize what you did there? You diminished me by saying everything good that has happened to me is just luck. And yet, you were interested in the substance of the two answers from the other two panelists without pre-judging them.” His face just went pale, and it was obviously an unconscious bias. He apologized, but then the funny thing was that he said, “I went home and told my wife what happened, and she was furious with me.” It was a teachable moment for him. I find it humorous now, but it was a bit of a shock that such an old double standard would still exist so far into our careers.
TG: I was only a few years behind you both coming into the industry, but I was not surprised. This is partially because of personal experiences earlier in my career, but also because I had heard from several of my female entrepreneurs.
NP: I was not that surprised. What is different now is that people talk about it. MeToo made that acceptable and has played a huge role in the evolution of getting to the point where diversity is a huge value add.
EB: Looking back at the last three decades, what has changed the most, and would you say that it has been for better or for worse?
TG: The biggest positive change has been about the understanding of the economic value of diversity—not just the societal value, which as humans and citizens in the world, hopefully we all see, but the economic value of having diversity, as measured by all the things that one can measure outwardly, in your investor group, management team, and on your board, is pretty clear. Thirty years ago, I am not sure if people were studying and measuring it. Even ten years ago, the data was out there but people did not just intuitively believe it. Perhaps people thought that it was the right thing to do, but they did not necessarily think it was the right thing to do for their shareholders. I have seen a light bulb change. I would say it has probably happened within the last five years, in a very meaningful way.
Alongside that, with the rise of more people starting their own venture funds or angel investing, such as Broadway Angels, we have also seen more diversity at early-stage funding. You start to see the beginning of a virtuous cycle: someone who has a different set of networks becomes successful as an entrepreneur, they become an angel investor, maybe they join Broadway Angels so that they can have a network to do that, and they invest in their networks. This starts to create the virtuous cycle of different networks and types of people both having access to venture funding, and being funders of startups. It really is one ecosystem.
NP: I would point to the Harvard study that was done after MeToo, that showed that where there are 10% more female partners in firms, there was an almost 10% increase in profitable exits and a 1.5% spike in overall fund returns each year. It is fabulous to have that data, which we never had in the beginning.
Our awakening came in our double bottom line practice back in 2006. We were a pioneer in measuring various social dimensions, including the diversity of our workforce and our management teams. We were sitting around a table and going through our annual report draft, and I said, “We have a lot of female CEOs or founders. How many do we have? What is the national average?”
It took a month to find one study from Babson College that said that 2% of venture-backed companies had women in their founding or C-suite teams. You cannot believe how hard it was for us to find something on that. Our percentage of women was 26% at the time and I said, “Wow, we are really doing better than the national average, but that national average is pathetic.” That began an odyssey of measuring, which we still do to this day.
Now, we are always around 50%. We were focused on other metrics, as well, but it popped off the page that there was something different about our portfolio. The rigor of measurement and the license to talk about it acts as a megaphone for these changes that need to be made. It is all happening, and happening in ways we could not have predicted.
SHP: The advent of the iPhone really changed the industry tremendously. Now billions and billions of people had a computer in their hands, and the market for VC-funded companies grew tremendously. The billion-dollar valuations and billionaire venture capitalists attracted a different kind of person. Profits have become more important than good.
I only invest in “people and companies that matter.” I ask myself: If the company went away, would the world miss it? VC has attracted a different person—one who is a lot more profit and greed-oriented.
JL: Growing up female in this world over the last three decades, what have you learned that you wish you would have known in the beginning and that you can now share with the next generation?
NP: It is okay to be you. It is okay to be different. Be smart about it, do not walk into a room and make it obvious how different you are, but use it as a tool of distinction that adds to your effectiveness. If you stay true to what you really care about, and are able to be friendly, upfront, and cooperative, you are going to be able to open doors that you never knew existed.
SHP: Networks matter. It took me a while in my career to cultivate meaningful networks, especially with women. I wish I had started earlier. The other is, live your values. Do not do the deal just because it is going to be profitable. Don’t invest in a company if you would not let your kids use the product. Live your values at work and at home.
TG: What I would say to my younger self is, at the right time, do not be afraid to bet on yourself.
NP: So true. That first phrase is important: at the right time. You do not have to do it the day you graduate from college!
TG: Part of what gives you confidence in those moments is when you can look at other people before you—that you can relate to for whatever reason—and say, “I can do that.” I agree with Nancy, and I am certainly not thinking right out of college. For myself and a lot of other women of my generation, we have done the opposite.
I saw a sociological study that was based on MIT cohort data, which looked at what percentage of MIT graduates started their own companies 10, 20, and 30 years out. The difference was dramatic in the percentages of female graduates versus the percentages of male graduates. In general, women were waiting 10–20 years longer before making those changes. I hope that the next generation of entrepreneurs and VCs closes that gap.
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: