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September 10, 2021

Beyond Virtue Signaling: Are Investors Feeling the Heat to Diversify?

For the third panel in our Black History Month Speaker Series, we brought together investors with collective access to $100 billion in funding to discuss how they are diversifying their portfolios and supporting overlooked founders.

FounderTribes CEO Gary Stewart set the scene with the troubling statistics that Black people only receive one percent of venture capital funding in the United States, despite making up around 14 percent of the population. Similarly, in the UK, Black people only get about 0.24 percent of funding, despite making up four to five percent of the population.

The panel was moderated by co-founder of OtherTech Fredua Akosa and featured Dami Osunsanya from SoftBank, Chris Tottman from Notion Capital, Rustin Brown of Kirkland & Ellis LLP, Paul Murphy of Northzone, Eghosa Omoigui from EchoVC, Jamie Broderick from UBS, and Jean de Fougerolles from Ascension Ventures.

Black women are more disproportionately affected in raising capital than any other group. The panelists ascribed much of this discrepancy to Black founders rarely having access to the networks and information they need to get funded.  

“It always ends up being Black founders not being inside the circle,” Omoigui said. “Once you get into the circle, you realize very quickly what the rules are, and how things work.”

Osunsanya, is the head of the SoftBank Emerge Accelerator and Head of Value Creation for the company’s Opportunity Fund, two programs which have pledged financial support and mentorship to underrepresented founders. The Opportunity Fund alone has pledged $100 million for Black and Latinx founders in the United States.

The speakers also emphasized that striving for diversity wasn’t a “distraction” and could also lead to profit, on top of creating a more equitable ecosystem for entrepreneurs of all backgrounds.

“We can be as capitalistic as we want to, and have that be the driver for getting more diverse founders,” Murphy said.

de Fougerolles, who is a managing partner and founder of Ascension Capital, said that the firm runs many thesis-driven impact funds in part because of the economic opportunity it provides.

“A lot of female founders or Black founders are often more purpose-driven. So I think the opportunity to back those founders that are trying to solve the world’s biggest problems is there,” he said.

A common issue that prevents minority founders from being funded is a lack of access, the panelists agreed. Many of the investors said that they have tried to increase access for those who may have been historically ignored by venture capital firms.

“We’ll take a meeting with anyone that contacts us. And if it’s clearly not a fit, we will not only tell them, it’s not a fit, but we’ll try to point people in the right direction,” said Murphy, who is a partner at Northzone.

Another theme was increasing diversity not only for funding, but also within the VC firms themselves. “A generation of underrepresented founders need to exit businesses, and they can start VCs,” de Fougerolles said. In other words, funding diverse founders and creating more diverse VC networks are opposite sides of the same coin.

Overall, the panelists expressed optimism in a more equitable VC ecosystem, so long as firms  put in the work to support and create funding opportunities for diverse founders.

“It takes commitment, and it takes a sense of purpose to change individual companies and then an industry,” Tottman said. “I really do believe that, and I think I will continue to try and do my piece and work with great people like those on the call.”

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