This year, massive unrest in the United States has finally encouraged corporate America to take diversity and inclusion seriously. The venture capital sector, often perceived to be younger and more diverse than traditional financial firms, has also taken notice. That’s because venture capital has a lingering diversity problem of its own: VC and venture-backed startups continue to be dominated by white and Asian men.
Despite viewing itself as the incubator of a better and more prosperous future, Silicon Valley has long struggled with gender and racial diversity gaps that seriously endanger the credibility of the industry. VC firms and venture-backed startups are dominated by men, and like many other white-collar industries, the startup world is blindingly white. I am not trying to be glib with my description: racial homogeneity, combined with an excessively wide gender gap, renders entrepreneurs and venture capitalists blind to problems and opportunities that are easily identified by more diverse teams.
The persistence of the diversity gaps in Silicon Valley has led me, and many other minority investors, to question the sincerity behind stated efforts to diversity in the industry. As a woman and a first-generation immigrant with experience in tech, finance, and VC, I understand all too well the ways that a commitment to diversity can start and end with lip service.
Look no further than the example being set by top tech firms. In October 2019, Wired magazine compiled and analyzed five years’ worth of diversity reports from Facebook, Apple, Google, and Microsoft. The results weren’t pretty. While the size and valuations of these companies have grown tremendously since they first began releasing diversity statistics in 2014, the diversity of their teams has not: each has only made modest gains in recruiting underrepresented minorities. What’s worse, gains in representation are largely restricted to operations and sales functions. For example, although Latinos are the fastest-growing minority demographic in the United States, Google and Microsoft increased Latinx representation on their technical staff by less than one percent each.
When it comes to startups, venture funds were often happy to look the other way—as long as their investments were delivering returns for investors. According to a study conducted by Crunchbase in the summer of 2020, venture capital raised by Black and Latinx founders accounted for just 2.4% of all funding raised in the United States between 2015 and 2020. This is a pitifully low number, considering that these groups account for approximately 30% of the US population.
But things are beginning to change. There is a growing recognition in Silicon Valley—and on Wall Street—that if we actually wish to build a more inclusive society, the technologies of tomorrow must be imagined and designed by a diverse workforce.
As a venture capital investor, I believe that venture managers and their limited partners have an important role to play in changing the direction of the industry, and in accelerating changes already underway. Venture firms can and should be leading the way forward. As the co-founder of one of the most diverse VC firms in the business, I believe that our industry can make changes to ensure that we guide entrepreneurship toward a more diverse and inclusive future, all while securing returns for investors and improving the culture and products at the companies where we invest. I know it’s possible because at TI Platform Management, it’s what we’ve been doing since Alex Bangash and I co-founded the firm in 2015.
Here’s how we do it:
1. Invest in Diverse Fund Management
Venture funds come in all shapes and sizes. But it’s not always the giant legacy venture firms that are best positioned to find the most diverse and innovative teams. Because of its nimble size and team composition, the TI Platform has been able to make diversity a priority at every level of its operations. The first and most obvious way a firm can make an impact in diversity is to focus on investing in diverse fund managers.
Since 2015, the TI Platform has deployed almost $475 million to numerous emerging venture funds as of September 30, 2020, and we’re proud of our record: 75% of those funds have at least one female or minority GP. While by no means a guarantee, allocating funds to diverse managers is the first step toward ensuring a more diverse workforce at portfolio companies. We take the time to evaluate the missions and track records of our managers and limited partners, to be sure that their commitment to diversity aligns with ours.
2. Recruit Globally
Our definition of diversity includes geography. With hot venture hubs emerging across the globe in places like China, India, Israel, and beyond, venture capitalists must think in terms of global networks of entrepreneurs and markets. At TI Platform Management, we believe this is best achieved by hiring and retaining a global network of talent. Our investment specialists are based in cities across Europe and North America, and their national origins represent more than 10 countries across five continents. It can make conference calls a little tricky at times, but we think it’s worth it: this global perspective gives us unique insight into emerging markets by diversifying our geographical perspectives and knowledge base.
3. Commit to Diversity Across the Spectrum
Many Silicon Valley firms have tried to solve their gender gap by accelerating the hiring of women, a trend that has largely benefitted white women. As a firm founded by two immigrants of color, the TI Platform brings a different approach to organizational diversity: we actively recruit diversity across management and among the entire team. Our strength, and the uniqueness of the firm, derives from our diversity. Change begins in our organization, with every hire.
4. Stay Engaged
TI Platform Management partners with Trusted Insight to host an annual conference for the LP community. One of the objectives of this conference is to increase discussion and transparency surrounding diversity and inclusion. The conference brings together LPs from the world’s leading foundations, endowments, pension funds, private equity firms, sovereign wealth funds, and other institutions. It provides opportunities for LPs to hear from peers who have been leading the way forward on diversity. Our 2019 event featured a panel titled Lifting Barriers for Diversity and Inclusion, hosted by Carlos Rangel of the W.K. Kellogg Foundation, an industry-acknowledged leader in diversity, equity, and inclusion, in conversation with Brian O’Neil, CIO of the Robert Wood Johnson Foundation; Mallun Yen, founder of Operator Collective; Dawn Song, founder and CEO of Oasis Labs; and Areije Al Shakar, senior vice president at Bahrain Development Bank. Critically, the conference also allows entrepreneurs and venture studio founders to meet LPs, in order to find the organizations whose diversity goals align with their own.
As a venture capital investor, TI Platform Management guiding objective to back ambitious entrepreneurs creating today’s most disruptive venture structures. TI Platform Management seeks out the world’s most innovative companies and invests in tomorrow’s category-defining leaders. Our commitment to diversity and inclusion is not only compatible with this goal: it’s essential to it. The unicorns of tomorrow are companies that will serve an increasingly diverse population of globally connected consumers who are sensitive and responsive to inclusive design. Venture capitalists who acknowledge this by diversifying their investment teams and strategies will not only stand to gain: they will help VC live up to its promise of a better future.