Leading as VCs, educators, and employees

VCs, educators, and employees also have an obligation to drive diversity and inclusion in tech. As we recognize that diversity and inclusion contribute to better outcomes, we send a call to action to everyone to help lead the change. While we focus on CEOs, who have the greatest effect on diversity and inclusion in companies, because they lead the bulk of the people in the tech industry, VCs, educators, and employees all have the power to influence and accelerate solutions.

What are our recommendations

VCs can have a huge effect on diversity and inclusion

We believe VC firms should take the lead in tech diversity and inclusion, holding their portfolio companies accountable by adding comprehensive diversity metrics to their quarterly reporting and implementing our recommendations in their own firms. Taking the lead to make their teams diverse and inclusive will give them the credibility and experience to be better advisers to tech startups  —  and better investors making better decisions and driving better returns.

VCs can have a huge influence on a startup. The first critical step they take is to decide whose plans to consider and which companies to fund. They have a strong influence on the selection and placement of board members, since CEOs and founders may look to the VC’s network for candidates and usually require VC approval. VCs also interview and select the senior management team, and sometimes replace CEOs, at the startup phase and over the lifetime of the portfolio company as founders and other leaders are replaced.

Almost all VC firms do not have diverse or inclusive teams internally, ¹ so their ability to directly help their portfolio companies build diversity and inclusion into their cultures and teams is limited. The 2015 Future List survey found that 92 percent of the senior investment teams were male and 78 percent were white; it also counted a total of only four Black VCs and seven Hispanic VCs (demographic breakdowns for Latinx VCs were not provided) out of 552 senior VC investors. ²

Recently, we have seen a few women added to investing teams, but often as the only ones. We see little to no racial and age diversity, few disabled people, limited numbers of veterans, and little religious diversity. Caregivers, remote workers, and people from nontraditional backgrounds are also poorly represented. The limited amount of investment in founders from underrepresented groups is disappointing, and VCs have work to do to overcome their biases. ³

Until recently, firms did not track or share information on diversity and inclusion on their own teams, much less among the founders they funded, or the teams those founders built. Adding the metrics we suggest to portfolio reports allows VC firms committed to inclusivity to track progress at their current and potential investments. They should be looking for diversity in their portfolio companies based on research showing that companies with diverse leadership and boards have better financial performance. ⁴

Recently, several companies announced costly product changes to counter racism on their platforms. These changes might have been avoided had diverse and inclusive teams had been part of the product development process in the first place to anticipate and prevent obvious abuses of their services.

D&I work is complicated, takes time, and requires tradeoffs. VCs should recognize the hard work and value of preventing problems before they become too difficult to manage internally. As board members and advisors, they should reward efforts to build better, happier teams that make better decisions and ultimately drive a 35 percent likelihood of better financial performance. ⁵ They should already understand how much work and money it takes to clean up a culture and change behavior.

VC firms should require their portfolio companies to commit to set and achieve diversity targets.

They are uniquely positioned to encourage founders to address diversity and inclusion during the particularly crucial early stages of a startup  —  which will avoid the harder work of solving problems later. They can help by expanding their own recruiting networks to provide more diverse leadership candidates for their startups. Similarly, VC firms could employ coaches and mentors to help founders create open, empathetic, and inclusive cultures. Additionally, they should consider adding a scouting program for sourcing potential investments with diverse founders.

Universities can lead successfully

For universities, improving the pipeline should be a priority. Harvey Mudd College president Maria Klawe set the tone for achievement on the university level, bringing, for example, women’s enrollment in engineering classes up to 40 percent from 10 percent in five years, ⁶ and 55 percent of its undergraduate computer science majors are women. ⁷ Klawe has been a vocal advocate and activist, and her recent conversations in the press and at conferences have been encouraging for others at universities and in the tech industry.

She listed the five ways she worked to change culture at Harvey Mudd: ⁸

• Remove the macho effect. HMC split introductory courses into two groups, new coders and experienced coders, to lessen intimidation factors.

• Provide role models. HMC sends a group of women to a women’s coding conference to meet a variety of senior, successful role models.

• Create early research opportunities. Faculty created research projects to help deepen interest in computer science.

• Share what works. HMC is helping other universities make similar changes and has made its curriculum publicly available.

• Demystify success. Clarify pathways so students with smaller networks have the same information as others.

Employees need to speak up

One of the most helpful actions is speaking up for other employees who may not be in a position to speak up for themselves. Many recommendations for employees looking for ways to help can be found in ally skills workshops. Learn about others’ experiences by reading about them in the resources we have listed here, and the many other sources available online. Having empathy and knowledge as well as ally skills can make a difference.

Resources

We share these helpful references as starting points and encourage you to continue exploring.

• “Dear Investors: So You Want to Take Diversity Seriously (Part 1)” (Mitch and Freada Kapor)

• Research on diversity at VC firms: The Future List (Social Capital and The Information)

  • The actual data

• “How We’re Thinking About Diversity At Homebrew: Start by Measuring It” (Hunter Walk)

• How to Create Diversity at Your Startup

• The CS Gender 3000: Women in Senior Management (Credit Suisse)

• “When Talking About Bias Backfires: Adam Grant and Sheryl Sandberg on Discrimination at Work” (Adam Grant and Sheryl Sandberg in The New York Times)

• Focus on Allies (Valerie Aurora)

• Ally Skills Workshop (Frame Shift)

• CMU’s Proportion of Undergraduate Women in Computer Science and Engineering Soars Above National Averages (Carnegie Mellon University)

• The Color of Entrepreneurship: Why the Racial Gap Among Firms Costs the U.S. Billions

• Beautiful visualizations: Diversity In Tech

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