editione1.0.2
Updated February 11, 2023Laura Huang (Harvard Business School)
Laura Huang is a professor at Harvard Business School and has been researching topics right at the heart of DEI in venture capital and technology companies her entire academic career. She has published widely on how female and male founders are treated differently when pitching to VCs and the role that gut feeling plays in the investment process, among other things. We talked about implicit bias among VCs, what needs to change to overcome it, and the disparity of education in the tech ecosystem, which is reproducing another kind of elite.
Interviewed via email March 2021
Johannes Lenhard (JL): You have been involved in pathbreaking work on the relationship between VC investors and (female) founders, and are published widely in top journals. Translating this back into concrete insights for VCs and founders and their everyday work: what are the biggest findings when it comes to identifying problems in the investment process with a specific focus on DEI?
Laura Huang (LH): One of the largest problems in the investment process is the impact of implicit bias—the perceptions people hold of others based on internalized biases and stereotypes. Effectively communicating with and winning over investors is one of the most imperative skills to the development of a founder’s career, and getting funding from VCs is heavily reliant on how the investors perceive the founder. However, as a result of implicit bias, many investors have an unconscious idea of what a successful entrepreneur looks like. Based on common stereotypes, this image typically reflects a young, white male entrepreneur. This is the root of the problem, as this puts female founders at a disadvantage from the get-go: they simply don’t look that part of a successful entrepreneur.
From this initial disadvantage, internalized implicit bias continues to have a negative impact on female founders by manifesting itself through investor-founder communication. In my research, I have found that while investors are more likely to pose positive, promotion questions to white male founders, they are more likely to pose negative, prevention questions to female founders. This disparity in communication, based upon the investor’s initial perception of who “fits the bill” of a successful businessperson, allows white male founders to discuss their business in a more positive, attractive way while female founders are left to grapple with defending their pitches from negatively tinged questions.
For example, take a founder who is seeking investment from a VC in order to scale a company that has struggled with generating revenue in the past. If the founder is a white male, he is more likely to be asked questions that allow him to highlight the positive aspects of the company, such as discussing the total addressable market or emphasizing the potential for high-market return on investment for the VC. However, if the founder is female, she is more likely to be asked questions that require her to defend the company’s issues, such as explaining the current lack of investment or discussing the barriers to past revenue generation.
As you can see, these positive and negative spins on communication can have a huge impact on the investment process—founders who are able to engage in positive communication are significantly more likely to land a successful pitch with a VC than founders who engage in negative communication. Therefore, implicit bias and perceptions are incredibly influential in investing and can shape the entirety of interpersonal relationships from the start of a conversation. In relation to DEI, this has negative implications for how female founders operate within the world of business. If female founders are put at a disadvantage just based on their gender and appearance, how can they effectively position themselves to compete with their male counterparts?
JL: Turning from the problems to possible solutions, have you come across any best practices which VCs could embrace and use in order to overcome the issues you identified in the investment process? What do VCs need to do better to increase DEI in the space?
LH: First and foremost, we must remember that even though VCs are large financial institutions with significant influence, at the end of the day, they are organizations comprised of a group of people. As I’ve discussed in my research, people have the natural tendency to internalize stereotypes, make snap judgments, formulate their own perceptions, and make judgments. However, this can become problematic if people with a lot of power, such as partners at VC firms, foster and unconsciously act upon implicit biases that negatively impact minority and female founders. At its core, this is a deeply human problem based on perceptions and negative attributions. Although my research and book focus on addressing those at a disadvantage—learning how to flip negative perceptions and turn adversity into advantage—I also believe progress can be made if those with the advantage are willing to make a change.
I believe there are a number of actions VCs can take if they want to solve the major problems that currently stand in the way of a more diverse and equitable investing landscape. First, VCs can make an impact by hiring partners from diverse backgrounds. VC partners typically fit the archetype of the wealthy, white, male investor, which means that most of the decision-making power is given disproportionately to members of that group. If the partners of a VC firm were more diverse, meaning if there were a greater balance of women and people of color given a seat at the table, then the biases of the entire decision-making organization would not skew so significantly in the direction of favoring one particular population. Additionally, VCs can counter implicit bias and stereotypes within their organizations right now through the implementation of diversity, equity, and inclusion training courses as a requirement for every single investor meeting face-to-face with founders. These courses can help train their current executives to unlearn implicit biases and approach investing in a more effective, open-minded fashion that benefits both the founder and the VC.
JL: In your book Edge: Turning Adversity into Advantage, you draw learnings from both your own and other people’s experience as an overlooked and underprivileged person. What are the top three learnings that specifically an entrepreneur can take from Edge? What are concrete best practice for entrepreneurs to take on to do better?
LH: In my book, I describe what I like to call the “EDGE Principles”—the four steps to honing your own unique edge. The acronym stands for Enrich, Delight, Guide, and Effort. I believe they are the top learnings that any entrepreneur should take from Edge.
Enrich calls upon the individual to identify your own basic goods—the greatest value you have to offer. What is your greatest strength that sets you apart from others? At the same time, you must be able to recognize your weaknesses as well. From this holistic understanding of both your strengths and weaknesses, you understand the cards you bring to the table and can operate within that parameter.
Delight is the idea that you must pleasantly surprise key stakeholders in order to make others more intrigued by you and/or your services. Delight can come in many forms, such as micro interactions or company-wide policies. For example, a founder of a small clothing business can delight customers by offering them a free gift with their purchase. This gift both pleasantly surprises the customer and gives them incentive to return to the store in hopes of more delightful interactions.
Guide calls upon the individual to reframe others’ potentially negative perceptions into a positive view. For entrepreneurs, this is an incredibly effective tool that can help them grow and manage a startup. First, you must recognize the reason why others have a negative view of you, your product, and/or your business. Then, you must understand the positive perceptions you want people to have in place of the current negative perceptions. From here, you must formulate an action plan that can reframe people’s perception of your business to highlight the positive and downplay the negative. Guide is not about denying or changing yourself, it is about embracing yourself and your brand completely and purposefully highlighting the positive aspects. Essentially, you must figure out a way to tell people about who you are rather than letting them rely on their own personal assumptions and snap judgments.
Finally, Effort is the classic “hard work” that is touted to everyone as the key to success. I include it last in this acronym because I believe hard work alone won’t carry success. However, hard work is a very necessary component to success and will carry you to the finish line if you can master the first three skills. After enriching, delighting, and guiding others’ perceptions of you, effort is where you have to show up and perform the hard work you promised to from the start.
JL: In some of your work, you talk about the role of “gut feeling” in VC investment decisions (also in contrast to the relative lack of impact of “hard data”). Isn’t the impact of such “soft factors” a convenient excuse for VCs to keep investing in and hiring an un-diverse set of founders and next-gen investors? Could a “professionalization of the industry” (e.g., with data) help get over this kind of self-reproducing behavior?
LH: That is an interesting idea, and my first instinct would be to question what kind of data we would use to “professionalize the industry.” We have to remember that, as in interpersonal relationships and current investing processes, hard data and statistics can also be manipulated by the personal biases of the people programming, coding, and analyzing the data. With that said, even if it were possible to completely randomize, redact, and present founders/startups as anonymized datasets, I am not sure if the industry would be accepting of this kind of change. At the root, entrepreneurship and investing are deeply human, people-facing industries. However, the only way you can remove the impact of the aforementioned soft factors is by removing all interaction between VCs and the founders, as these soft factors are the result of gut feel, internalized biases, and quick perceptions. Would any VC be willing to make a major investment into a company without having substantial face-to-face interactions with the founder and startup team? I would imagine it would be hard for a firm to part with a large sum of money to invest in a company without having any interaction whatsoever with the leadership team.
With all of this said, would I like more attention paid to the hard data founders present in their VC pitches? Yes, as this is often the “meat and potatoes” of the investment pitch. However, the problem won’t be solved by doing a complete 180 and focusing solely on data. Instead, the duty should be placed upon VCs to see the value in DEI and put measures in place to prevent implicit biases on part of their partners from negatively impacting investment decisions. There are a number of actions VCs can take to promote DEI, as I discussed above already. In summation, I believe we can tackle the lack of diversity in entrepreneurship by calling upon VCs to change their business practices that currently have the most negative impact on diversity in investing.
JL: Most recently, you have been working on female founders and their networks, and how that affects their chances of success. What are you learning from that (ongoing) research? What concrete “best practices” would you advise female founders to proactively engage in based on these findings?
LH: As I continue to work with female founders and their networks, the greatest defining feature that always pops out to me is the disparity between how male and female founders are treated in business. It seems that women in business tend to get the short end of the stick, especially when communicating with VCs. With that said, I’ve also found that these same female founders are also incredibly intelligent and talented businesspeople, which makes this disparity all the more concerning.
Regarding best practices, the first thing female founders need to understand is that they have power over how others perceive them. As I discuss in my book Edge: Turning Adversity into Advantage, we are able to guide others’ perceptions of us to view us as how we want to be recognized. Relating back to the investment process, female founders can guide communication with VCs to parry unproductive discussion topics. It is difficult to change the communication style of the investor, simply because investors hold the power. However, female founders can work proactively to identify red flag statements from investors that indicate negative implicit bias, and then reframe the discussion within their retort. Essentially, female founders must master the art of noticing prevention questions, and then phrasing their response in a way that reframes the initial statement as a promotion question and then answering in a positive fashion.
For example, imagine a situation in which an investor asks a female founder how her company can be attractive if it currently is underperforming in revenue generation. If the female founder is able to recognize this communication pattern, then she can answer this prevention question in a promotion-based nature that reframes the conversation and makes the business appear much more positive and attractive than before. She can respond by acknowledging the investor’s concerns, but then asking him to look at the issue from another perspective: “Though we don’t have significant revenue stats as of right now, we are a scrappy startup that is prepared to take on the market as we grow and scale even further. In fact, our total addressable market is [amount of money] and we expect our revenue margins to exponentially increase as we continue to build out our product and push our new and invigorating advertising campaign. In fact, let me tell you more about our new and innovative marketing approach …” From here, the female founder has not only gained control of the conversation, but can now direct it to highlight the positive attributes of her business. And this tactic doesn’t have to focus on an advertising campaign, but can redirect the conversation to anything such as product development, partnerships, and the management team.
Essentially, I advise female founders to gain a comprehensive understanding of communication styles and implicit bias. From here, they can go on to utilize what they’ve learned in the workplace.
JL: Lastly, what is a big area of interest for you that is not understood well enough yet when it comes to increasing DEI in the tech/startup/VC ecosystem? Where are the crucial blind spots you will be working on next?
LH: I think another crucial blind spot that currently plagues the industry is understanding how inequality in education impacts the tech/startup/VC ecosystem. In this country, there is a significant disparity in the quality of education students receive based upon the socioeconomic status of their family. If you are only enrolled in the public education system, then the quality of education you receive is solely based on the family in which you were born as well as the geographic location of your home. This tends to create a racial divide in which students of color, who are more likely to be born into low-income neighborhoods, receive a lower quality education in comparison to their white peers. This goes on to follow low-income students throughout their professional careers, as they lack access to the resources and capital necessary to thrive in school, gain acceptance to a higher education institution, and ultimately land a job in tech or entrepreneurship.
This has always been an issue I’ve been passionate about—in fact, my first job out of college was as a math teacher in a low-income neighborhood in Maryland. If we want to increase DEI in the tech/startup/VC industries, then we need to start empowering underrepresented populations at an early age. As such, I am in the process of founding Project EMplify, a non-profit dedicated to helping underprivileged students develop integral soft skills, bridging the gap between what is taught in school and what is needed in the workplace. Project EMplify’s mission is to combat socioeconomic inequality by giving disadvantaged students access to the resources necessary to become competitive in the professional workplace, including a book donation program, mentorship program, and workshop series. I look forward to working with our first cohort of students and working towards making the future professional working environment more accessible and diverse.
Bianca St. Louis (Black Innovation Alliance)
Heather Matranga (Village Capital)
Ben Younkman (Village Capital)
Dahlia Joseph (Village Capital)
Village Capital has been doing things differently in the VC world since they started in Atlanta in 2009. They have always been strongly focused on impact and equitable access—with a lot of success; almost 50% of companies they have invested in or that went through their programs are run by women. We spoke to four representatives of the Village Capital team (Heather Matranga, Ben Younkman, and Dahlia Joseph) and the Black Innovation Alliance (Bianca St. Louis) about the structural issues in the VC model that prevent access for people, their work to overcome some of these problems, and their overall focus on “process innovation,” i.e., radically rethinking how VC works.
Interviewed September 2021
Johannes Lenhard (JL): If we want to really have diversity and inclusion in this industry, do we need to change the model of venture capital and rethink the structure of GPs and LPs more generally?
Bianca St. Louis (BS): We need to not look to those stakeholders as the only people in the conversation. We need to think not just within the realm of the venture ecosystem, but also to who supports the work of enabling the next generation of entrepreneurs. We need a more holistic conversation, asking: what does it mean to support diverse entrepreneurs?
Heather Matranga (HM): We cannot expect a one-size-fit-all funding model to work in all circumstances. We cannot take this old model and use it to solve structural inequities that have existed for a long time. We need to be more creative about deploying capital, not only in terms of what structures we are using, but also in terms of who is managing that capital, where it’s directed, and who is making the decision on how to deploy capital. For example, the traditional fund model worked for a particular type of investment focus and type of company, but it has limitations for supporting very early stage companies and aligning incentives for fund managers.
JL: What are other non-traditional funding channels, and who are the other stakeholders that need to be elevated?
BS: I am of Haitian descent, and we have a practice in the Haitian community called sou-sou. It is a money pot, like a savings club. Some new FinTech companies are leveraging similar models. There is this desire to reinvent the wheel, versus leveraging the work that has already been done, just slightly differently. How do entrepreneurs already interact with funding and information? We need to step back and look at where the gaps between the currently powerful system and other systems that people are already engaging with are. Many times, these are accelerators. We need to understand where the people that you are looking for are and why they are within those systems. How can we overlay some of the current structures to find that middle ground to close the gap?
Ben Younkman (BY): The decision-making process of how venture capital is deciding how to allocate their capital and what their criteria are is opaque. Increasing transparency is a step in the right direction to helping people understand what they need to come to the table with, to be attractive to that individual funder.
BS: Programs that have a sheer level of honesty remove a lot of friction. The best entrepreneurs have quality information, and they have great access. Mentors are giving them the truth. People are currently so mindful about not “looking bad” that they may not be telling the truth and not enabling the entrepreneurs. People that are leading the accelerators and managing entrepreneurs can help fill in the gap.
JL: Coming through the initial gap does not necessarily mean that you are able to then become the unicorn. That is another question in and of itself. Do we want to create unicorns, just led by a more diverse set of founders? Or do we want to focus on something else, for instance, more sustainable zebra companies? Do we want a secondary, alternative system, or just to make the current system more inclusive?
BS: We need to get more participation for companies to grow, whether that is mentorship, capital, or something else. It is analogous to saying to a young child, “Good luck. See you when you graduate and I have all this money waiting for you here. Good luck getting there.” What does it look like to be invested throughout the lifecycle of these founders? Is it participating in the entrepreneur support? Is it being in conversation with a different ecosystem player? I do not think it requires a second system, what we see are massive gaps that illuminate the opportunities.
JL: Dahlia, at Village Capital, in collaboration with the Black Innovation Alliance (BIA), you just launched Resource, a project to focus on minority founders. Can you tell us about it?
Dahlia Joseph (DJ): Resource was born out of COVID. We all know that COVID disproportionately affected the BIPOC community systems like health care, education, finance, housing, all of which were meant to protect us and our wellbeing, and that really let communities of color down. We also saw that in the venture space and entrepreneurial space. There tends to be a lot of focus on entrepreneurs, which is great. Yet there was not a lot of support for organizations that support those entrepreneurs. It is all a system—if one is unhealthy, it can trickle down. Village Capital and Black Innovation Alliance came together to address that problem, specifically around unclear practices. When it comes to running accelerator and incubator programs, there tends to be many siloed resource networks. There tends to be secretive conversations and inequitable funding.
BS: These entrepreneur support organizations (ESOs) are the front line of defense—listening to the entrepreneurs and supporting them on the late nights. As we think about Resource, we wanted to create a community of support, and be a resource for them along this journey because it has a deep impact on the entrepreneurial ecosystem.
JL: We know much of VC is about having the right relationships; is one part of Resource about making the connections that can help strengthen people?
DJ: A big part of this program is Village Capital and BIA being connectors to both stakeholders and entrepreneur support organizations that would not necessarily have the opportunity to connect with such large funders like JPMorgan Chase or UBS. The funders in this program play a big part in building this network together, and they also have the opportunity to engage not only with the ESO but also the ESO’s network—their startups, entrepreneurs, and community. We act as a bridge between the two.
BS: We also do not rely on the same networks. If success is being a white male VC from Stanford, then we are failing to include others. What are the different pathways to success? Once we start to invest in different pathways and different resources, we create a different conversation around success for entrepreneurs.
JL: At Village Capital, DEI has been at your core from the very beginning. What are the ways you have increased access for diverse founders and funders?
HM: Our mission at Village Capital is to go big—to reinvent the system to support the entrepreneurs of the future, which are the entrepreneurs that have lived experiences, are impact oriented, and want to solve some of the most pressing global problems. We cannot continue to maintain the status quo, and we really have to re-evaluate the way that the system works. The current system is not supporting the types of entrepreneurs we want to support.
Our core innovation is a process innovation. Rather than just thinking about who or what we are supporting, we look at how we are supporting them and how we are investing. One focus was peer selection—where we democratize entrepreneurship and increase access, by changing who makes the decision. We facilitated that process for ten years and made over a hundred investments that way. A few years ago, we looked at whether the hypothesis that peer selection would lead to more equitable and inclusive decisions was true. We did a data-driven evaluation with an academic partner from Emory University, and the top line message is that entrepreneurs are well suited in forecasting which of their peers will be successful, and they do so in a way that does reduce bias. They are evaluating the companies according to the company’s merit, and less about the demographics of the founders. It is not perfect and there is more work to be done; bias is not completely eliminated, only mitigated.
We are also pushing ourselves in continuing to think about ways to improve the way capital is allocated. We have launched other research studies, some around capital structures. What investment tools and structures can improve inclusion? Can we tweak the way that investors evaluate companies? Will that lead to more inclusion? The ecosystem needs a lot of testing and experimentation to push the status quo and, ideally, scale those solutions to mainstream investors.
HM: Peer selection has lots of benefits. It is also pretty resource intense and is risky in the eyes of many institutional investors. There has been friction in getting them on board. The more fundamental question is, is there a different process than what currently exists to reduce and mitigate bias?
JL: Many GPs and LPs say, “I have one thing to do in this world. That is not to fund diverse entrepreneurs, but it is to make money.” Erika and I argue that by not funding diverse entrepreneurs, VCs are losing out on financial returns, in fact. Would you make a similar argument?
HM: Yes. For traditional LPs and investors, investing in diversity is not about what makes you feel good, but because you are leaving money on the table. It is an uphill battle to make that case to those who rely on pattern recognition. The way we have tackled changing the investing process is not inclusion for inclusion’s sake, but so that you are identifying the highest potential company that is going to make you the most money. We continue to point to success stories and do the work of demonstrating through data that more inclusive companies and diverse founders are leading to higher returns. We have done a study that demonstrates that, on average, for every dollar invested in a woman entrepreneur, they outperform in terms of revenue generated for the company.
BY: How can you improve network access for these entrepreneurs? Can you improve the visibility of different companies and how they are being evaluated? We have created something called Avoca, which tries to connect people and investors who care about a particular theme such as gender, sustainability, or something else. We want to cluster those investors and highlight entrepreneurs that might not have visibility yet. To do this, we must be really intentional with partnering with people who have deeper networks, like the Black Innovation Alliance or Female Founders Alliance. That helps us improve our pipeline, and then we can highlight how these entrepreneurs have great ideas. We are much more intentional about our sourcing process and expand that network to be as inclusive as possible to get the best ideas, not diversity for diversity’s sake.
JL: Is there anything that you have not tackled yet that is an important piece to move the tech ecosystem as a whole and that you are looking to as an important lever going forward?
HM: When one part of the system is unhealthy, it infiltrates the whole. One big missing piece of the system is policy and regulation from the government side in the US and abroad. For example, the US passing the ability for individual investors to invest in companies through crowdfunding can be massively impactful, help launch innovative businesses, and create more access to capital. More research needs to be done, but there is a role for government and policy to play.
BY: Another challenge that impact faces is a unified way to measure and track. It is also not incentivized by investors. There is an attempt with ESGs [environmental, social, and governance criteria], but it is a big challenge that we are trying to explore. This needs to happen to move us to an inclusive and impact-focused investment community.
HM: The other piece is the people who control money. If we are demanding more of where our money is going and more of our institutional investors, you will start to see more systemic change. With the Black Lives Matter movement and protests against police brutality, there was an awakening among many institutional organizations in the US who are making commitments to support racial equity. This has resulted in many Black-led funds raising more capital. In ten years, we might see, as a result of what is happening now, a number of diverse founders getting more capital and scaling businesses. This leads to more success stories.
Hadiyah Mujhid (HBCUvc)
Hadiyah Mujhid is the founder and CEO of HBCUvc, a non-profit mobilizing the next generation of venture capital leaders to increase access to capital for communities historically overlooked. In our conversation, Hadiyah shares how HBCUvc is developing, connecting, and mobilizing the next generation of venture capital leaders in communities where entrepreneurs face barriers: they run (educational) programs, build inclusive networks with existing communities, and help VCs jump over “wealth barriers” with their own pool of capital. All of these initiatives empower a new generation of Black, Latinx, and Indigenous VCs to take HBCU culture into VC.
Interviewed February 2021
Erika Brodnock (EB): Hadiyah, you are educating VCs around the HBCU [historically Black colleges and universities] ethos. Can you tell us how that is different from traditional VC?
Hadiyah Mujhid (HM): When we are thinking about developing the next network or next generation of investors, we do anchor in HBCU ethos, which is not a formal ethos. It is a unique American experience, where people throughout the diaspora can go to a place and participate in educational and professional opportunities, and at least in the United States, do not have this invisible layer of racism, or this invisible layer of being the diversity token. It is one of the few environments outside of your home environment where these multi-layered identities that you have, such as being Black, are not something that you see as a barrier.
In that sense, HBCU culture is very affirming. It is also encouraging and inspiring, and it facilitates the environment for students to thrive. It shows the vastness of the diaspora and the diversity of Blackness. It shows the students that there is not one way to be Black. It encourages freedom and liberation.
When we say that we are rooted in the culture of HBCUs, especially when we teach venture capital, we want our next generation of Black, Indigenous, and Latinx venture capitalists to be rooted in their own cultural competencies—not to run away from that—and to come to the table understanding that those cultural competencies are the value added.
Johannes Lenhard (JL): Venture capital is a relationship business, both when it comes to recruiting into VC, but also when it comes to investing. It is based around university friends, company networks, etc. What are you doing specifically to build up a new, much more diverse, Black VC network—in a sense, a second pillar that in and of itself functions?
HM: Those tight networks and relationships, which are usually anchored in universities that exist in traditional VC, we also have them in our program. Those connections and those relationships are already there. We do not have to recreate that. It is important for us that we are not creating separate but equal. We are not creating a separate silo of networks in this VC network that will operate independently. It is important that we build strong bonds with the community of existing networks.
One of the ways that we do that is by teaching them just how important the existing relationships that they have within their HBCU community are. We start with how they are formed and allow them to leverage the ways that they built these relationships. Once you show them that informal relationship building is happening, and show the ways that they are doing it, it provides a pathway for them to intentionally create those networks. They have the blueprint to build strong relationships with this existing ecosystem, which is rooted in networks.
EB: What are the practices and programs that you use to build up the network? There are so many new networks forming at the moment, particularly for Black and Brown founders; are there good practices that you would share about some of the things that you have done, to enable strong foundations?
HM: You have to create the unicorns. At the same time, there is still work to be done while the unicorns are being created. After there is the awareness of just how important relationships are and the intentional drive to create more of them, we then create opportunities for these relationships to happen. Before COVID, it was in-person retreats, where we put people in the same room, and they did not have the distractions of their day-to-day, and they could really get the opportunity to get to know each other. You spend three days in this beautiful location and get to know up and rising Black VCs with different backgrounds. How do we create those opportunities to put everyone on equal footing, just to build strong friendships?
With COVID, we still want to create these experiences and we are moving along alongside society as we learn how to create new relationships without in-person interaction. We are still creating these opportunities for people to connect, but it looks very different, whether it is through various tools like Zoom, or other networking tools.
EB: Are you using the Kauffman Fellows Program, for instance, to support Black VCs, to get their foot in the door and to build networks? I completely appreciate that there is the opportunity to create a network within the HBCU community, but I wonder if that recreates the same thing too, in that if you did not go to a HBCU as an entrepreneur or as a VC, you could end up locked out. It would be the same Harvard-Stanford network, but just for HBCUs only, and even though lots of Black people go to HBCUs, there are still millions that did not. How do you incorporate the rest of the ecosystem, as well as ensuring that you do not end up just recreating the same problems?
HM: Our HBCU program is one of four programs. Our HBCU students or participants in our program are only a third of the people that we support across all programs. Second, in the program itself, we teach the systemic issues of venture capital. There is an awareness that because of these siloed communities, we have created limited opportunities. Now that you know that they exist, and being rooted in inclusiveness, how do you break out of these in use? You informally created these communities, now how do you break out of this to intentionally build relationships outside of just your neighbors within reach?
EB: How do the programs work? What do they look like?
HM: Each program is slightly different, but we are anchored around teaching modules. We have foundational classes that we teach, a lot of them are educational and a lot of them are soft skills—such as, how do you build a relationship intentionally and, at the same time, leave room for serendipity? For the HBCU program, which runs throughout the academic year, there are scheduled classes and activities where relationships can be built not only within the community, but also with existing partners and leaders in the industry.
Our summer program is open and is not HBCU-specific. It is anchored in more of an apprenticeship model, where you are placed in a paid internship program at a firm, but you spend two weeks full-time in an immersive experience that brings these fundamentals upfront—the foundations and histories of VC, the soft skills, the motivations of a VC (which is something that we have to teach). There is a classroom-style curriculum to it, as well as a component where every opportunity or every interaction is adopted, building a line of relationships.
JL: One thing that is complicated when it comes to becoming a VC is the commitment of GPs. In order to start a fund, you need both a track record and cash. You basically need to be wealthy. What can you do about that with your programs?
HM: There are a couple of things. There is absolutely the ability to develop your own track record and your ability to show that you can find entrepreneurs, who will go on and generate the returns that VC deems worthy. Traditionally, building your own track record came through you using your own wealth to demonstrate that first. Within the past 10 years, we have seen that shift slightly, where people have shown that they have the opportunity to access these entrepreneurs without using their personal wealth.
In traditional VC, I would use my own personal wealth as a demonstration that I have done this, but then go out and raise larger capital. The end factor was that I was always managing someone else’s money. We are ultimately seeing LPs just want that return. If you are able to show that you have that potential of a return, what we have seen are some LPs becoming a little bit more lenient on how much the GP commits. We are also seeing the development of other programs where you can develop your track record without using your own capital—maybe it is just developing an entrepreneur support company. I have seen people develop their own portfolio of companies that they support without using money.
One of the ways that HBCUvc is very specific about doing this is that we have created our own fund or pool of capital that our fellows could use after developing their own track record and give entrepreneurs a stipend through this fund. It creates a financial relationship with entrepreneurs, and then they work with entrepreneurs to develop that relationship to support them to grow.
EB: What is next for HBCUvc? What is the next barrier that you are hoping to not just attack but to fundamentally change?
HM: In the last five years, there has been a lot more awareness of the impact of the industry and how racial inequities exist within the industry. What we have seen as a result—which is all good—is a lot of programs that are similar to ours, who are helping to develop this pipeline of investors who were overlooked. However, I do not think it is the total solution. When you look at the people who are leading these efforts, a large percentage of us are coming from the communities who are impacted by it. We are trying to solve a problem that we did not create.
There is a huge amount of work for the institutions that have created the structure, to truly understand the barriers and take serious actions to remove them. Right now, there is a whole system that is to this day upholding barriers that prevent talented people from entering the industry and prevent talented entrepreneurs from receiving funding to grow their business. The industry has to take a serious effort in going beyond diversity-speak about the barriers and commit to serious action to eliminate that. When I think about what is next for HBCUvc, it is important for us to shift the culture for the institutions to understand how complicit they are and for them to drive serious action to remove the barriers.
EB: It is one of those age-old issues that I fight against on a day-to-day basis. I am constantly asked to help companies to shift and restructure the way in which they are built and the way in which they operate. But they never want to pay me a fee.
HM: The lack of understanding of how that perpetuates the issue they want to stop is ridiculous.
EB: What you have said there is interesting, around the fact that you do not want to be responsible for solving the problem that you did not create. How does that stack up and what has your experience been of situations like this? What would you say would be the best way out of this? What is the solution?
HM: It is asking us for a solution. We do not own the solution, because we did not create the problem. We care about the solution because it has impacted us and we are tired of living like this. We are going to keep fighting for it, because we are fighting for our own survival. In the United States, one of the strongest impacts in the capitalism system is slavery. Using Black bodies and Black laborers to create the system and build wealth. The United States’ capitalism system was first built on stolen land. We took the assets from Indigenous peoples, and then we stole people to build up the land. Some of the guidelines around capitalism have changed, but I do not think that many people understand that this concept of the devaluation of Black and Brown bodies in their labor still exists.
We are formed as a not-for-profit organization. We are not operating to create a profit, but it also does not mean that money is irrelevant in how we operate. We have full-time staff that need to be paid, they need to feed their families, and all of our staff identify as being Black or Brown. When we talk to our for-profit partners, we talk about this commitment in both a time commitment and an awareness, this intentionality to learn, to improve, but also a financial commitment to support this organization to make a change.
It is interesting how after explaining the history to the institutions, around 50% of the time we get pushed back on the financial push. It is mind-boggling to see that. One of the largest firms we have been in conversations with has said, “We are in alignment with your mission, we want to change.” We say, “Great, are you able to make a financial contribution?” They say, “No.”
EB: I am not surprised at all. I would also not be surprised if that was an institution that put up a black square on Instagram. I too am tired of the performance. You do not get to pretend that you do not understand that it is wrong to ask people to work for free. We shall—even if not overcome yet—write it down.
Leslie Feinzaig (Graham & Walker, Female Founders Alliance)
Leslie Feinzaig started one of the biggest communities of female founders, the Female Founders Alliance. At its core is a simple principle: you are stronger together. Over the last few years, it has developed from a mentoring and sharing community to running an accelerator and a VC fund, Graham & Walker, all with a focus on female entrepreneurs. Leslie is hopeful and is seeing the fruits of her and others’ hard work, but she worries about the increase in women leaving the workforce and the lack of support when it comes to childcare and parental leave policies.
Interviewed February 2021
Johannes Lenhard (JL): In 2017, you founded one of the biggest startup communities for women, the Female Founders Alliance (FFA), which currently has 25K+ members. What motivated you to do that and what aims did you have with it?
Leslie Feinzaig (LF): I do not have a founding story like other companies or startups. It was not as if I woke up one day and decided to build this. It was more that I was going through all the motions of growing my company—find a co-founder, raise some capital, and hire people. In the process of it, I hit a wall, and I started this community as a way to help myself.
Gender wasn’t something that I had ever felt held me back before. Throughout my early career, the idea that I was having a different experience than my peers because I am a girl, or because I am a mom, or because I am Latina, or whatever—it never occurred to me at the time. With the benefit of hindsight I realize that I was wrong, of course gender had an impact. I spent decades internalizing what turned out to be gendered feedback—that I was too emotional, too quiet, too loud, too aggressive, etc.—and just assumed that there was something wrong with me that I had to keep working at fixing.
That changed in the context of trying to raise capital. The impact of gender was no longer quiet, it was obvious. I was the only woman in the room so much of the time. The reasons I got rejected were very often clearly stemming from gender bias. And what’s more—it was not fine anymore to be treated differently. It was demoralizing. It was minimizing. And it was a waste of time while I was getting my startup off the ground.
What’s now the Female Founders Alliance began as a small Facebook group. I started adding all the women that I met along the way. It was what I needed for myself at the time—a group of peers that tacitly agreed to lock arms, help out, and figure it out together. And it turned out a lot more women needed it too. Four years later, with a lot of work, it is a much bigger thing.
JL: Now, after several years of running and growing the community, what do you think it does for female founders? In what way is it something important for them, and how is it concretely helpful?
LF: We run a private online group that is super active and for founders only. No investors, no employees, no media. It’s much easier to be authentic and vulnerable when you’re not being evaluated. We run programs to match founders one-to-one with investors, media, and subject-matter experts routinely through the year—we broker hundreds of these meetings annually. This is a big part of the secret sauce: to broker relationships that result in the startups’ advancement. And we run a very successful accelerator. You can learn more and join the community at femalefounders.org. It is free and accessible to scalable startup founders everywhere.
JL: Are there two or three best practices for underrepresented founders to succeed?
LF: In my experience, the biggest challenges are faced by first-time founders that are also outsiders to venture capital and tech. Picture a more traditional founder: a software developer or a product manager from Stanford or Google or Facebook, or a hot growing startup that “fits the type” and is well connected to angel investors. Underrepresented founders who also don’t have those mainstream credentials and that network are the ones who have it hardest.
So if you are some version of that founder, what do you do?
The short answer is you have to prove yourself first, and build out your network. One way to do that is to try working for a well-known startup for a while, and develop your idea on the side. That way you add to your experience on how startups work, add to your credentials, and add to your network. This is especially doable these days when so many startups are hiring remotely, you don’t actually have to move to Silicon Valley to get that experience anymore.
If you don’t have the time or ability to do that, then you have to build those same proof points through your startup itself. The first and most effective way to do that is to gain traction with your company. Get real customers that love what you offer, even if your product has to be a very minimal version of what you want it to be. Focus on growing that customer base reliably. Real results are hard for any VC to argue with.
Simultaneously, you have to build your reputation among possible investors. Meet them before you need their money, and keep them updated so that they can witness you delivering results and will be more ready to invest in you when you ask.
Finally, it is so important to surround yourself with a community that is supportive, authentic, and tangibly helpful. It helps on so many levels! You get to share the ups and downs, and get advice from others who know the space. You get access to resources and introductions—a huge help in building that network of investors, or access to that network, from your own peers. Because most investors won’t know you, so a referral from another founder is the next best thing. We need more mechanisms by which those first-time founders get taken seriously, and these referral networks are an incredibly powerful and grassroots approach to solving that problem together.
JL: Have you seen any that work well?
LF: That is what our accelerator does. We look for founders nobody else believes in. We admit first-time founders who have achieved traction on their own, and we put a stamp of approval on them a little bit, and we teach them how to play the game and talk the talk. This is specifically our accelerator, which is much smaller than our community. We have done it three times, graduating eight startups per cohort. It is tiny, if you compare it to Y Combinator, which is graduating 300 startups a year. I am doing eight, but we really take care of those eight. Our most recent cohort graduated in December, and half of them have already closed their rounds, collectively raising $7M.
Our approach is to teach founders how to pitch venture capitalists properly, drill down into their business model to help them be defensible when investors dig deeper, and exhaustively have them practice formal and informal investor interactions, over and over again, until they’re super confident. We teach them how to run a fundraising process so that it is successful. On the other side of the program is our investor community, we help legitimize these startups for our large investor community. We tell the investors, these are founders you should talk to, and since the accelerator is so selective, and so much goes into picking the cohort, they believe us. By the end of the program, we put the founders in front of close to 200 VCs and angel investors.
JL: What are the biggest challenges ahead of us right now, maybe thinking about the next five years, when it comes to inclusion? What can we do about it?
LF: Coming out of the pandemic, the biggest challenge I see is women’s participation in the economy, which just took an unprecedented hit. We had been very slowly but consistently making progress, increasing awareness of issues, talking about things, improving them. That is not where we are anymore, by almost any measure. Many women, moms especially, have left the workforce entirely. In my space, the proportion of venture capital invested in women dropped substantially—it is now more unequal than it was when FFA got started. It is going to take a real effort to claw back out of what we just went through.
JL: Do you have any big push that you would like to see over the next 12+ months that would really help with the issues you’re seeing around women’s participation in the economy?
LF: Parental leave, support for childcare. Equitable parental leave is really important. We need to start supporting dads and other parents the same as we do moms. I went to the London School of Economics and I did a senior thesis; twenty years ago, I was arguing for equal paternity-maternity leave before it was cool. We need bigger support for new parents. I would love to see real innovation in the childcare space.
Mara Zepeda (Zebras Unite)