It’s not a secret that the world of technology is struggling with diversity. Women, African Americans and Latinos make up 33%, 8% and 7% of the total tech workforce, respectively, and only 20%, 5% and 5% of its leaders, despite evidence of a correlation between diversity and success.
As an industry, tech has succeeded in normalizing the topic of workforce diversity, and while the results are slow in coming, there is momentum, and it’s worth acknowledging.
But there are other ways we should be thinking about increasing diversity in technology, and that’s on the caps table. The secret is that it’s not really hard to do, but it’s still not the norm. We’ve done this at my company, and it’s worth demystifying the process so you can too.
People like me don’t get hired – or funded
Before we get to the nitty-gritty, it’s important to understand what is often referred to as the “people like me” bias. Human beings unconsciously relate to, and therefore choose to work with, people who look and think like them. It’s a cognitive bias that’s ingrained in our evolution, and it’s extremely difficult to overcome.
Investing in startups led by women and minorities will naturally create more diversity in startup cultures, as “people like me” will begin to reflect the diversity of the founders of these companies. So it’s not particularly shocking that, according to Solv’s 2021 EEO report, we are 45% women, including around 33% of our technical teams.
The problem is that “people like me” also affects who gets funded first, not just who gets hired and promoted within a startup. Among the venture capitalists, 80% are men, and they are predominantly white. Women make up just 13% of venture capital partners in the United States, and African Americans and Latinos make up just 3% each. Unsurprisingly, while 40% of new startups had female founders, they only received 2.2% of all 2020 venture capital.
It turns out that we don’t just have a diversity problem in tech employment. We also have a diversity problem in technology investments.
It’s time for a new approach
What if the key to diversity in the startup world was to expand tech investment opportunities to more women and minority investors? Let me clarify: making room at the (ceiling) table for those who have not typically had such access creates wealth. And with wealth creation comes the ability to invest in other businesses and founders, or become entrepreneurs themselves.
At the close of our last funding round, I called longtime friend, investor, and thought partner, Kara Nortman, to celebrate the moment. I was emotionally done with fundraising and ready to start building my business again, but she was blunt and unapologetic: “We’ve been talking about diversity at the cap tables for a long time. You have the possibility of opening a certain place in this cycle to women and in particular to women of color. If you say yes, I will help you get there. With his push and inspiration, that’s exactly what we did for 10 days.
We created a special purpose vehicle (SPV) focused on female investors. We reached out to female angel investors in our network via email and text and asked everyone to invite at least one woman of color who is an accredited investor to consider investing in our round. Then we held two Zoom meetings and presented our pitch, as we would any other investor. Watching this group, I saw the people who actually use our platform, and immediately understood how powerful this approach could be.
To be clear, this wasn’t just a publicity stunt or a token gesture of corporate social responsibility: we raised $3.5 million from this group over those 10 days. Sixty percent of SPV investors were women of color, and one-third had never done venture capital investing before.
Here’s how you can do it too
So you care about cap table diversity and want that to happen? Good! We’ve already “earned and learned” about it, so here are my tips to get you started: