Diversity

From talk to action: Investors weigh in on ways to increase diversity in VC

November 12, 2020 View comments (2)
For years, venture capitalists have faced mounting pressure to diversify their portfolio companies and investment teams with people of color and women. Over the summer, diversity, inclusion and equality regained attention as protests erupted across the US in response to the police killings of several Black Americans.

As venture capitalists continue to grapple with these issues across the ecosystem, PitchBook News hosted a panel discussion on Thursday with professionals from various parts of the private markets on the evolving role that investors play in addressing these issues. 

Accessibility to venture capitalists and their capital and networks, supposed unqualified diverse talent pipelines and having equitable representation across the ecosystem were among the major themes discussed during the panel:


For Barry Eggers, founding partner at Menlo Park-based Lightspeed, adding more people of color and women to the firm's investment team is something that he sees as an opportunity to reach more entrepreneurs.

“We don't do that with a team of white men, we do that with a diverse team, a team that reflects the population so that's what we're striving to do," Eggers said. And reaching more of that talent pool will lead to more deals, he added.

Since Lightspeed's inception in the 1990s, its team has gone from being mostly white men to now including 10 female investors and three black investors, Eggers said. 

In the VC world, there's often a perception that diverse candidates may not be the best qualified for positions at investment firms. But there was a consensus among the panelists that wasn't the case at all. 

"What we need to do is stop debating about 'is there talent,' and just go out and start talking to different people and break that pattern recognition as it relates to old networks," said Angela Matheny, who sources diverse asset managers at New York-based Crewcial Partners. She said she's been able to find the talent that many people say isn't out there by taking active steps to network and make connections. 

And sometimes, firms just need to be deliberate in their quests for diverse talent and working with underrepresented founders, said Lisa Lambert, president and founder of National Grid Partners and former head of Intel Capital's diversity fund. 

Lambert said one barrier to diversity in the industry is that many people of color and women don't think that the door is open for them. "When you let them know that the door is open for them, when you pursue them, you will find more than you can imagine," she said.

Lambert noted that when she launched Intel Capital's diversity fund in 2015, it was essential to make clear the fund's target—people of color and women. She said the fund got over 600 business plans from these groups in the first two months after the launch.  

Lightspeed, meanwhile, revamped its scout program this year to focus entirely on supporting underrepresented racial backgrounds. The firm initially sought to have 25 scouts for its class, but ended up with 42 after receiving interest from 350 people, Eggers said.  

Cynthia Muller, director of mission-driven investments at W.K. Kellogg Foundation, said that GPs need to make sure that they're not tokenizing diverse investors, but rather prioritizing the value they bring.

"It's about a sense of belonging, making sure that you retain these people in these industries and in these funds," Muller said. "It's not just giving them the room, it's making sure that they feel valued, seen."

Limited and general partners also need to hold each other accountable when it comes to addressing diversity issues, Lambert said. 

LPs should push venture capitalists to add investors from different backgrounds to their firms, Eggers said. Matheny added that hiring one black investor to the team to check a box does not really help solve diversity issues at all.

In her 20-plus years in the VC industry, there's been more talk about adding racial diversity than actually doing something about it, Lambert said. Now, she hopes that a combination of hiring diverse talent and launching targeted funds focused on underrepresented founders will help change the dynamic. 

"If you bring in diverse talent, you are going to get diverse portfolios and if you support diverse communities, you are going to have businesses that can thrive in those communities," she said. "And so let us go about doing it."

Featured image panelists, from left: Matheny, Eggers, Muller, Lambert
News & Analysis image via Prostock-Studio/Getty Images Plus

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