How the Industry Is Already Changing

14 minutes, 38 links


Updated February 11, 2023

When we started the research for this book, our goal was not to put together a critical and theoretically inspired book that practitioners would be unable to use. Instead, we wanted to unearth concrete ideas on how to change behavior, in a book that would not only inspire, but that would also be full of practical and tangible advice that could be easily applied. So, who else to ask but the people who are already doing things differently? Part III: Best Practices, which turned out to be the most substantive, is hence all about presenting the voices of investors and people within the ecosystem who have decided to practice what everyone else is preaching. We sought people who have already proven to be change makers—both in a small or systemic way, as a founder, funder, or funder-of-funds—to inspire change. Conversations range from learnings from VC and founder education programs and the influence of data and journalistic writing, to elaborate “how to” tutorials on increasing inclusion in a fund or running an angel investor program with a diversity focus.

The first section of conversations covers VCs who are doing things differently, looking at established players in the ecosystem and their decisions to tweak the traditional VC approach. We set the scene with a story of two VCs that have over recent years become famous in their own right. Mac Conwell, or “Mac the VC,” raised his first fund, RareBreed Ventures, completely on Twitter, and publicly documented the process, which involved thousands of calls with potential LPs. Mac was joined by Thea Messel, one half of Unconventional Ventures, a Scandinavian early-stage fund that has been fighting for more diversity in the Nordics for years. With Unconventional Ventures (UV), Thea has raised money to invest in “tech for good” startups with underrepresented founders; UV is also raising awareness and transparency in the Nordics ecosystem with their annual Startup Funding Report. In our conversation, Mac and Thea shared openly about the ordeal that fundraising is (or at least can be) if you are not a white male with a “strong network.”

In the next interview, we focus on an American story (with parallel stories in some European countries like France or the UK) about where investment money flows: predominantly to Silicon Valley, New York City, and Boston. Mucker Capital’s William Hsu and Monique Villa, alongside one of their portfolio founders, Allan Jones of Bambee, talked to us about their explicit focus on investing outside of Silicon Valley. At the latest, since AOL founder Steve Case has been making this point (including with actual investment dollars), we have been seeing a slight diversification.

Elizabeth Yin, co-founder and GP at Hustle Fund in San Francisco, recounts her trials starting her own business and her journey to partnership at accelerator 500 Startups (now 500 Global) in 2014. At Hustle Fund, Elizabeth not only writes VC checks differently (earlier, quicker, to a wider pool of people, without warm introductions), she is on a mission to democratize wealth through entrepreneurship and furthers this with her fantastic Twitter threads explaining the world of VC to the public.

The next conversation features a power couple truly deserving of the name; Mitch Kapor and Freada Kapor Klein have been leading the charge of diverse investing for several decades, with a focus on funding companies that close the gaps of access and opportunity for underrepresented groups, like low-income communities and communities of color. As Mitch explains, Kapor Capital has proven that it can be done, not only in a financially successful way, but also in a way that inspires social change:

Talent development is central and where we will get the most leverage, because what matters is who is sitting around the table when the decisions are made. Until there is really more diversity in VC, we are not going to see as much diversity in the companies that get funded.

The participants of the following conversation are in the same social movement as the Kapors. Charles Hudson of Silicon Valley-based Precursor Ventures; Eghosa Omoigui, GP at pan-African EchoVC; and Paula Groves, CIO at London-based Impact X Capital, are all part of a new wave of Black-led VC funds. We talked to them about the education and careers that led them to the establishment of their funds, and how despite having decades of experience managing and growing multiple millions of dollars, they are still classed as “emerging fund managers.” We also discussed the gaps in fund size for Black-led funds and they were able to provide powerful insights on what action can be taken to fix this.

In the final conversation about VCs doing things differently, one of the most celebrated and famous European VCs, former CMO of Spotify and partner at Atomico Sophia Bendz, talks to us about starting the Atomico Angel Programme. The program gives an incredibly diverse group of people funding to invest in early-stage startups, with the aim of overcoming the barriers posed to so many by the absence of generational wealth. She shared the motivation that led to its creation:

The closed ecosystem presented a huge frustration for me. It was almost like a little boys’ club that invested together, and while I was invited in, I felt like the only woman in the club. … I wanted to demystify it, I wanted to tell the world this is one way of spending your time and money. I think it could lead to more people that were exposed [to investing] to potentially considering a career as a VC.

The next section focuses on best-practice ecosystem approaches that go beyond venture capital investing. First, we hear from Roxanne Varza, director of Station F in Paris, about how at the world’s biggest startup campus, there is a specific focus on underprivileged founders with their Fighters Program. In the next two conversations we speak to Check Warner, GP at Ada Ventures but formerly the co-founder of Diversity VC, and Pam Kostka, former CEO of All Raise, about the approaches of two of the most important diversity-focused community organizations in the tech world. We learn about the power of community to create new role models, and about how role certifications, like the Diversity VC Standard, can formalize inclusivity in venture operations.

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Next we focus on accelerators, often a launchpad for startups at the very beginning of their growth journey. We brought together accelerator builder John Lynn with Camilla Sievers of the Female Founders accelerator and Kevin Liu of Techstars to discuss the role accelerators can and should play to build a different and more diverse startup ecosystem from the bottom up.

Going downstream even further, we met Floodgate GP Ann Miura-Ko and Chuck Eesley, professor at Stanford; the two teach Stanford engineering courses together. We discussed how university education needs to change to facilitate a more diverse set of students into positions where becoming a founder or VC seems realistic. Education is also the topic of conversation in the next conversation, which features Jeff Harbach, CEO of the world’s most famous VC education program, Kauffman Fellows, and Lisa Shu, founder and first executive director of the Newton Venture Program (a Kauffman-like program in the UK), born out of LocalGlobe VC and London Business School. Both share insights into how important it is to broaden access to education, networks, and cultural capital in the VC industry, and their vision for the future, as Lisa summarizes:

To truly change what is “market” in the VC industry, you have to shift the status quo and shift that towards equality by design, and not as a mere afterthought.

The last two conversations in this section bring in the voices of two groups often underestimated as ecosystem change makers, people who produce, work with, and report data. In the first conversation, we speak with Tom Wehmeier, partner and head of insights at Atomico, and responsible for the State of European Tech report, and Gené Teare, senior data editor at Crunchbase News and the person who is single-handedly responsible for including gender (and soon ethnicity) data in one of the world’s biggest startup and funding databases. In our discussion, we unearth the multiple ways in which data can be used to put pressure on decision makers as a key part of building convincing narratives. Atomico’s development is a great example of this, as Tom shared with us:

Atomico’s founding thesis back in 2006 was, “Great companies can come from anywhere.” And that is what we have learned. We have spent more time understanding the industry issues around D&I, that “anywhere” really means “by anyone in any location.” The more we have spent time understanding this, the more it has reinforced and strengthened our conviction in that initial thesis, specifically, our resolve to back underrepresented talent in tech.

In the last discussion in the ecosystem section, we are in conversation with Amy Lewin (editor of the European startup news platform Sifted) and Steve O’Hear (formerly of TechCrunch); together we discuss the important role that journalism should play in keeping the DEI agenda front of mind through consistent and sustained reporting.

The final section is focused on potentially the most powerful change makers in the tech ecosystem, rarely seen and often presumed to be standing on the sidelines: asset owners, limited partners (LPs), and policy makers. Our first conversation is with three LPs—from institutional investor the Mellon Foundation, Monica Spencer; from US investor WeAct Ventures, Darya Henig Shaked; and from European fund of funds investor Isomer Capital, Savitri Tan—about both their power and responsibility to diversify their investments. While a general willingness to wire money to a more varied pool of managers surely pertains, Savitri explains how the path dependency of LPs is remarkable.

The decision that we make to invest, and then the long-term partnership journey that we embark on with managers to help them build their firms, have a ripple effect. Early decisions as a result of questions and challenges will become ingrained as processes in the future funds of these managers, so asking questions, monitoring over time, and working together with managers from their earliest years makes a huge difference in how they approach raising and managing their next funds.

Our second conversation is with Suzanne Gauron and Anna Skoglund, the team that leads Goldman Sachs’s effort to put more money into the hands of Black female founders via the One Million Black Women program and more broadly diverse entrepreneurs through Launch with GS. Goldman Sachs was the most high-profile financial institution to put real money to work, especially to support underrepresented VC managers—something that we hope can inspire others to follow.

Our final conversation in this section, is with three “lobbyists” and policy makers in Europe—representatives from startup and VC groups from the UK (Gurpreet Manku from the British Venture Capital Association) and Germany (Gesa Miczaika, who is an elected representative for the German Startups Association and an investor at Auxxo, a recently launched Berlin-based VC fund) as well as from the French government’s startup initiative (the former head of La French Tech, Kat Borlongan)—for their perspectives on what associations can do to agitate and press for reform. We were surprised that beyond gender, there was very little sense of wanting to apply any pressure from these groups.

We were happy that almost all people who were trying to push for change in the industry were willing to talk to us; however, after finishing the conversations in Part III: Best Practices, we were left with a weird feeling: Is this going to be good enough? Why, if people in positions of power are already doing things differently, are the important partner-level statistics not changing? Our frustration led us to reach out to some less obvious vectors of change, outside of the established industry players. Instead of concluding here as we planned, the final part of the book will consider how these players are looking to build off the current progress and spark further change in the industry.

Conversations: VCs Who Are Doing Things Differently3 hours, 24 links

Conwell, Messel: Raising First Funds

Mckeever “Mac” Conwell (RareBreed Ventures)

Thea Messel (Unconventional Ventures)

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