editione1.0.2
Updated February 11, 2023Ed Zimmerman (Lowenstein Sandler, First Close Partners)
Mitch Kapor (Kapor Capital and Kapor Center)
Eddie Kim (Gusto)
Maya Horgan Famodu (Ingressive Capital)
Marie Ekeland (2050)
Building on the notion that we need a collective of people with the power, resources, and potential to create systemic change in the venture capital ecosystem, we spoke to a who-is-who of key players who openly celebrate their allyship towards diversity and inclusion: Ed Zimmerman (tech lawyer and LP at First Close Partners), Mitch Kapor (Lotus founder and former GP), and Eddie Kim (co-founder of scale-up Gusto). They were joined by female fund managers Maya Horgan Famodu (Ingressive Capital) and Marie Ekeland (2050, in a demonstration of the power of allyship in creating opportunities and fruitful outcomes for all.
Interviewed April 2021
Erika Brodnock (EB): To the three men in this (virtual) room: what was the lightbulb moment that put you onto the DEI movement?
Ed Zimmerman (EZ): White people ask me this question and I often bristle about answering because I believe part of why they—particularly able-bodied, straight, white people—are asking is because they would like to make sure that I can check a box that they do not check so that they are relieved of any obligation to themselves participate in diversity, equity, and inclusion. There is an extent to which they are looking for an excuse. Years ago, when my father passed away from lung cancer, everyone asked, “Was he a smoker?” I feel that there’s a similarity between those two questions; people wanted to say, “If you are underrepresented then it makes sense that you are doing DEI work,” just like you don’t really have to worry about lung cancer unless you smoke … In other words, it’s not actually their problem.
My older sister was in a wheelchair. She looked very different and interacted with the world in a way that was very different. She was six years my senior and I have very vivid memories, as well as palpable anger, at the way she was treated and disrespected. She was stared at and pointed at, and people crossed the street to avoid her. I saw some of that same behavior with friends in college who were Black. We went into an elevator together and a woman grabbed her purse, and I knew that she was not clutching her purse because I was there. I would say that, certainly through high school, I was probably about as racist as the next person in my neighborhood, and about as xenophobic as the next person in my neighborhood in Brooklyn.
I started actually acting on things in college and going to a couple of marches and engaging more. As a practicing lawyer, I did some things that were tangible steps forward in favor of diversity, equity, and inclusion in the ’90s. In ’94, I asked for permission to be pro bono outside counsel to a dance company that was led by a Black, HIV-positive, gay dancer and choreographer. I worked for free on a project about AIDS, which was a pretty controversial project. I have been pro bono counsel to that arts non-profit for the last 27 years. In ’95, I asked the firm if I could host a gathering and a dinner, when I went on campus to my alma mater, for all of the leaders of the student organizations like Lambda, Black Law Students Association, and Asian Pacific American Law Student Association. We as a law firm had never done that before. To them, drinks and dinner were great, but bringing people back to the firm, when the firm was not particularly ready for them, was less effective. It was the right idea, but there was so much more work that needed to be done, and I lacked any economic power or oversight within the firm as a young associate still making my way.
Mitch Kapor (MK): In my childhood, I skipped second grade and went directly into third. This left me almost two years younger, and that was really disastrous socially. It cemented my identity as an outsider that I had all the way through high school. I was convinced that I was the least popular child that ever went through the Freeport public school system.
Fast-forward a couple of decades and unexpectedly, in my early 30s, I found myself running a wildly successful tech startup, Lotus, that was experiencing explosive growth. In that situation, as we have seen from all of these other companies like Google and Facebook, the founders get a get out of jail free card. There’s no adult supervision. The founders can do whatever they want. Some try to send rocket ships to Mars, I was interested in making Lotus be the kind of employer that even a misfit like me would feel comfortable in.
Freada and I began working together there. She was hired to make Lotus the most progressive employer in the US. We were not a couple then. We were professional colleagues and worked on many projects around building a highly inclusive and diverse corporate culture. That was in the ’80s. In the ’90s, we got together as a couple. By osmosis and proximity, I moved into a different world than the world that I grew up in. Frieda has been doing DEI work for four decades. She is a pioneer and co-founded the first group in the US on sexual harassment, and has been on top of issues of intersectionality when it comes to gender discrimination. We have dozens of colleagues who are people of color, and our scholarship programs serve low-income communities of color. Through dozens and hundreds of encounters and relationships large and small, I began to have a better understanding of the day-to-day experiences of people who, just by virtue of the color of their skin, face barriers, discrimination, and microaggressions. There is a whole range of manifestations of systemic racism that is part of day-to-day life.
With Freada’s framework with which to understand this and do something about it, I have over time had my own evolving process. I was not racist in an overt way, but I certainly had a very large number of unexamined assumptions about who is likely to succeed and who was not in tech and startups that amounted to racist beliefs. It is a continuous and often painful process of reassessment. I was, in hindsight, overly focused on ways in which I had been excluded, which were real. I went to Yale as a lower-middle-class kid in the late ’60s, early ’70s, which still reeked of privilege. I knew that Yale was not the kind of place that was made for people like me. Yet, until the last decade, I was not paying attention to the advantages I continuously derive from being white, male, and Ivy League educated. A lot of the work that I have done has been in understanding that I have gotten boosts through means that I cannot take any credit for. There is a fundamental injustice around that. It is just wrong.
Eddie Kim (EK): A couple years after co-founding Gusto, we had raised our Series A round of financing and were hiring software engineers as fast as we could. We had an engineering team of eight, all men and one woman. I went on vacation for a couple weeks and, to my delight, by the time I came back we had hired another three engineers. In my first weeks back, I had a one-on-one meeting with Julia, the only woman engineer on the team. She told me that while it’s great that we’re growing our team so quickly, she wanted to share with me her experiences being an “only” on the team. Over the next few weeks, I asked a lot of questions about diversity and inclusion as we went on late-afternoon runs together up and down Embarcadero Street in San Francisco. I cared about Julia a lot and took our conversations to heart.
Our conversations gave me more questions than answers, and I started to do more research in this space, particularly on gender diversity in software engineering. I had a lightbulb moment when I stumbled across a chart published in an NPR article titled “When Women Stopped Coding.” The chart plots the percentage of college graduates who are women in certain majors over time. The four majors plotted were medicine, law, physical Sciences, and computer Science. From 1965 to 1985, all four plots look about the same: they start around 10% and make their way up to 35%, indicating that the fields are getting more gender diverse. Three of the lines—medicine, law, physical sciences—continue upward to nearly 50% by 2010! But the line for computer science takes a different trajectory starting in 1985. Instead of continuing upward, the percentage of women majoring in computer science takes a sharp turn downward, settling to a multi-decade low of around 17% in 2010. When you take into context other societal and cultural trends happening in 1985, it becomes very clear that systemic and societal issues played a large part in making the field of computer science difficult for women starting in 1985. It really opened my eyes to how systems, not just individuals, play an important role in creating more inclusive and equitable environments in the technology industry.
EB: People who have been through some adversity or feel as though they did not fit in themselves are much more inclined to have empathy towards other out groups. Ed, do you think that your sister plays a fundamental part in your ability to empathize with other groups now?
EZ: I worry that my experiences with my sister made me more empathetic to people other than my sister. She is no longer with us, but I am sure that it did. I am sure that watching who was kind to my parents (and who was not) played a role. I am sure that seeing my parents struggle and get the short end of the stick also played a role. There was further intersectionality because my sister was bisexual. My mother was bisexual, and also bipolar. There was a lot going on. I lived upstairs with my aunt and my grandmother, and my sister and my parents lived downstairs. My aunt was also disabled. I grew up in a house where there were four women, two of whom were disabled and two of whom were bisexual. My wife and I got together when we were 18 years old. We met on August 28, 1986, during her first day of college and my first day of my sophomore year. She has made me a more empathetic and better person. I have spent the last decades striving to meet what she saw I could be in a lot of ways.
MK: My own experiences and all of the work that I have done to move myself forward into a better, happier, more impactful state, has all really opened the door to understanding other people’s experiences in a way that would not otherwise have happened. This is particularly true for the young people we met in a scholarship program we started for UC Berkeley undergraduate about 20 years ago. We became very close to some of those kids and were surrogate parents to them. I worked to understand that, despite enormous differences in every possible dimension, these kids wanted nothing other than what I wanted. Put simply, I wanted to be who I was and not have to become somebody else. I wanted to have a shot and an opportunity to make something of myself, without sacrificing myself. I understand these kids from low-income communities of color who had really struggled and managed to get into University of California, Berkeley, race blind, also wanted that. But there were structural barriers in their way. I believed we have to do something about this. It was not an intellectual conclusion. It was a deep-seated moral imperative.
Johannes Lenhard (JL): Maya and Marie, you have grown up female in this world of technology. Have male or other allies influenced your careers?
Marie Ekeland (ME): I believe I would not have had the same career if I had not been a female. I started in the VC industry in France in 2000, which was really the beginning of the industry. We had zero playbook apart from just looking at what was being done in Silicon Valley. I was the only woman in the boardrooms for 15 years or so. My French VC colleagues were really looking at Silicon Valley role models. There were no women at all. I never had any female role models to look up to, in my practice. In addition, I was raised in Vancouver and for a while I had been working in New York. I was not impressed by the US culture, because I had partly experienced it.
I am a mathematician and computer scientist by background. My way of thinking was always focused on the question: how can I be the most useful possible? What are the problems that I can solve? This was my way of getting into the job and trying to find my own way of doing it. That has really played a role in my being able to innovate in the VC world, and to find my own way of doing things and to step up. There was freedom because nobody was expecting anything from me, because they had not seen any female French VCs before. I was the curiosity. The good thing is when you are in that position, and you are ambitious and focused on solving problems, and you are efficient in doing that, people remember you. This helped me in adapting the job to what I thought was good for me.
There were three important moments. The first one is that I seeded the biggest French success to date in 2006. I stayed on the board until three years after the IPO. That company is Criteo; the founder is called JB (Jean-Baptiste) Rudelle. He moved to Silicon Valley at some point, and I met him regularly in San Francisco. I remember a particular evening where we were having dinner, and he said, “Marie, when do you start your fund?” I had never thought about it before. I thought, “He thinks I should do it. He is an entrepreneur, and he sees that in me. He is a good entrepreneur, and he feels that I should spread my way of practicing this job.” I eventually ended up building my own fund, two years after. This was the moment when I started thinking about it and started building confidence in doing so.
Number two is in my way of management or being on the board, and in my practice, I was encountering things that were linked to people. One of my founders is Arabic. In France, racism is mostly around Black people and Arabs. He had been suffering from racism since he was a kid because he lived in “the ghetto.” He ended up being a rapper and becoming a tech entrepreneur. He is a self-made man. He was an activist as well, and he would point to me, saying, “This is not normal.” He was the one discovering what was happening to me in boardrooms or in my own company. He helped me in understanding that these relationships actually were not normal, and that they were linked to biases that people were having and that I was tolerating them because I was not seeing them. He helped me react to these behaviors, because he had been fighting all his life for them. He transferred his knowledge to me.
Number three is being able to show what you have done. Whenever Ed would put me on a conference, he would say, “Marie is not presenting herself.” He would do the marketing for me. I never realized before Ed told me that I was the first woman to have raised over $200M [for a] first time fund in Europe. He told me it could even be the case that I would be the first woman in the US. I had mixed feelings. Of course, I can be proud, but it is also so sad. The US industry has been around before the European industry for 20 years. How could I be the first one? I was learning to recognize that if I had achieved something, I should say it.
Maya Horgan Famodu (MHF): In 2014, I tried briefly to raise a fund, and I mainly positioned it towards African investors and a few women angel impact groups. I got no traction and no interest. The people who ended up being interested at first were actually all males from the US. In my fund one, we have 40 investors and four women. It all started in 2016, I was trying to get a job within venture capital; I wanted to be an intern or work and start exploring the industry from that way. When I did not get a job at all, I launched Ingressive Capital as my fund one. Our first 15 fifteen investors were male from Nigeria and the US. Interestingly enough, I would say male allies and those who truly took the leap of faith in our work, before I had the touch points and the credibility, were American and Nigerian investors and businessmen.
EB: What do you think was the main contributor to the difficulties that you faced?
MHF: I started it with little professional experience. I tried launching a $15M fund when I was 23, with about a year of work experience. Reasonably, I did not get very far with that background. However, when I did have investor relationships, knew how to source a good deal, knew how to launch client initiatives across the continent, what prevented me on the Africa side was the very ageist and patriarchal society. I was young, female, with an American accent; there was a lot of resistance at first. At the beginning, I had to either hire an older male, or bring my dad, who is a pastor and has no business experience, into a meeting and pretend that he was the boss, and I was the assistant, and I was speaking on his behalf. I did that for maybe the first two years of business, because I wanted to get the deal done. My thoughts were, “I know that I own the business, but I need to portray myself or the company such that we can get things done, because I am not going to fight that battle at first.” I had my commitment and conviction. If I wanted to, at the beginning, change the narrative and the perception of African and American businessmen about how a young mixed-race woman could succeed, I wonder if I would have gotten as much traction as I did with just wanting to get this done however I needed to. I did not have time to deal with the bias, because I was trying to move ahead, however possible.
EB: Thank you for being so candid about that. There is something to be said about doing whatever it takes to get where you need to go, and then changing it from the vantage point of having achieved that.
MHF: Exactly. Within our fund, we are a strictly for-profits venture capital fund, but 64% of our team is female, and almost 40% of our portfolio companies are female founded and co-founded and 100% are Indigenous Black founders. While I did not focus on it on the front end, we are now financing the next generation of billion-dollar businesses, and they are all owned by people who are women or Indigenous. We are aiming to create unquestionable change, changing asset ownership and wealth creation such that this will never even be a conversation in the future, because the people that are making the decisions are fundamentally different.
EB: What are the most powerful best practices that you have already tried and used effectively to alleviate the pressure of overlooked founders, investors, and employees? What are the strategies that other people should adopt to ensure that they are able to broaden their hiring and leadership practices?
EK: By far, the most important thing is to believe at your very core that funding and hiring people from non-traditional backgrounds is itself a strength that will turn into an unfair advantage for your business. At Gusto, we’ve learned that small business owners are incredibly diverse and come from very non-traditional backgrounds. Oftentimes, they started their business because they were so overlooked and rejected by others that they had no other choice but to do something on their own. If Gusto only hired people whom our society was designed for, we’d have a much weaker understanding of what our customers need and how they think. It would be like trying to understand the nuances of a poem when you don’t speak the language well. But once you internalize that being non-traditional is a strength, you’ll notice a lot of great things start happening: You’ll start to see things that your competitors miss. You’ll make better decisions. You’ll have access to the long tail, which is usually where startups need to get their start.
MK: The most powerful best practice is to hold up a mirror to yourself and to take on your own assumptions and reexamine the whole basis of how you operate as an investor. For instance, in evaluating a founder, it is easy, without knowing it, to apply different criteria depending on who is pitching. You could say, “You do not have the track record,” while in other equivalent cases, you say, “I’m going to invest in potential because I think this person could do it.” The interesting thing is that any investor, including investors of color, can make that mistake unconsciously. You have to systematically go through and be willing to look at that and challenge yourself.
The second-best practice is to diversify your own network and ecosystem. In the wake of the murder of George Floyd [in 2020], so many partners in VC firms came to Kapor Capital and said, “I need to hire a Black general partner.” To which I wanted to say, “Go look over in Aisle 12.” Obviously, it does not work like that. Investors are known for having good ecosystems and they network all the time. They must start being intentional and conscious about diversifying those networks, which is a lot easier to do than hiring a partner, which is a hard decision and something you do infrequently.
The third is to not require a warm intro for founders. One of the most obnoxious things I have ever heard a VC say was from Marc Andreessen, who said, “If you are not smart enough to get a warm intro, you are not smart enough for me to invest in you.” That was really offensive. When you do not let people whom you are connected with jump to the head of the queue, you actually get better results. It is a much fairer process.
The fourth best practice is to rethink what matters when you look at founders. There is still too much attention paid to pedigree, and a corresponding lack of attention to what Freada has called distance traveled—where somebody started in life, what barriers they have already overcome, and how far they have already come. That is a much better predictor, and there is a ton of research that backs up these strategies. There are more best practices, but these are a few key ones.
JL: What is the one thing that we need to fundamentally change and flip this power balance in tech and VC?
MK: I am reminded constantly of a quote by the great Frederick Douglass: “Power concedes nothing without a demand.” If we are going to change things in these many ways, we have to be willing to step up, be bold, take risks, and really to find ways to challenge the systems we find ourselves in. It is a constant, ongoing thing and there is no one magic formula. If we are really committed to doing the work, I think we can genuinely be hopeful that, over the longer term, systems can change, people can rise to the occasion, and we can all get to a better place.
MHF: We need to get rid of the belief that there needs to be a blueprint that came before that looks like us before we can go and enter the industry that we are pursuing. We have to understand and adopt the belief that we are the blueprint. We are defining the new spaces that we are pursuing, as opposed to looking into others for likeness, to be able to have permission to participate. In addition, we have to deeply understand the power of equity and ownership and its ability to support systems of oppression or to transform decision making on a global scale.
ME: We need to change the decision-making process. Finance is really all about machine learning. What you are doing is that you are investing on past data, and you are trying to optimize on past successes. This is one of the reasons that adding diversity at the GP level is hard, because we have to convince LPs, who only invest in people who do have a track record. People who do have a track record are usually white males. There is a bad incentive for GPs to try to hire people who are adding diversity, because there is the risk that they will lose LPs, because this is the way the investment decisions are taken. Yet we can adopt the idea from venture capital, where you do not have data for early-stage venture capital. It is all about pattern recognition. We really need to change the way we make these investment decisions.
EB: You are 100% right. Many people say that we need the data to be able to make different decisions. However, there is a plethora of data, and Mitch’s fund is producing an IRR [internal rate of return] of 29.1% by doing things differently and investing in diversity. How much data do you think we need before we start to see a shift in mindset?
ME: On a personal level, people who are making the decisions are going to say, “I’m putting my money in this fund, which is run by three experienced white males who have been working together for the past 20 years, and not in this new team.” When you start investing in diversity, you do not have that track record to reassure LPs. All you do have are studies to say, we are building the perfect team. The reason I could raise this $100M fund is because I had a track record. The reason I could build my own track record is because I came into the industry when there was no required track record to move up the ladder. Today, track records exist, and these are the people you are competing against. Massive amounts of money go to existing track records. There is an incentive, even if you are not in agreement with your partners, to stay with your partners, because that is a way of getting more money. If you break that, if you bring on new people, then you are running the risk that your current LPs will say there is too much change on the team. The risk reward is not good. You will get a reward to add diversity on performance, but if the risk you are taking on your fundraising is higher, you will not do it. The people who are making the institutional fund decisions are under a mandate, and it is very restricted and standardized. People have said to me, “Marie, I know you’re a good investor. I just know it. I want to give you money, but can you do something normal?” They do not give me the money in the end because their model is in classic finance. If you want to move out of that, they do not have the responsibility for it. I believe change will come from LPs who have their own money and can take the risk. It will not come from traditional finance.
EB: We are seeing some LPs are starting to speak out about this and encouraging others to do things differently by acting themselves. How important are LPs going to be to drive change?
ME: We are living a complete transition of the economy towards a more sustainable economy. It is a transition and disruption that is even deeper than what we went through with digital. The finance industry will need to acknowledge not only financial performance, but environmental and social performance. Most people do not have a track record in this respect, and I believe diverse GPs will stand out positively. Including these parameters in the investment criteria and this type of performance will help move money towards more diverse GPs.
EZ: We really need to understand the way in which we design systems to perpetuate the racism and bias that we have built in, even when we do not think we are doing it. For example, when we talk about the LP-GP dynamic, people have been talking for the last couple of years about the GP commit, and we have a very clear understanding of the wealth gap in America. When we say, in order for you to impress me, that you have “skin in the game,” what we are really saying is, having “white skin in the game.” We know that we have an enormous wealth gap. Yet, we ask the founders of a venture fund to commit a significant number of their own dollars into the venture fund to show that they are committed and that they are at risk. If I am worth $100M and I commit $1M, and someone else is worth $100K, and they commit $50K, they are much more at risk. If my fund fails, and I started out being worth $100 million, I am not that at risk. We (the venture/LP industry) have baked in the further entrenchment of a wealthy set of individuals who are able to start venture funds because of their wealth, not to mention that people with existing wealth typically have the friends and the contacts to further support that wealth.
For years, Beezer Clarkson and I have co-hosted a dinner to introduce underrepresented VCs to LPs of any stripe (meaning LPs who are overrepresented and underrepresented). In 2018, we conducted a survey. These survey respondents were only LPs who self-selected, in such that they would travel to New York to sit in a dinner with us and discuss DEI in venture and meet underrepresented VCs. Presumably, these are very forward-thinking LPs. We asked them what their typical capital commitment to a venture fund is: 47% said between $10M–$20M, 20% said greater than $20M, 0% said less than $5M. If you look at the stats on where diversity resided in the venture world at the time, that meant that none of these LPs who cared enough to meet underrepresented GPs could write a check into a fund of less than $30M or $50M. Few, if any, of these GPs could raise a fund of more than that, or of that size. Similarly, when we asked what sort of experience these LPs wanted from the VCs that they backed, 80% said they would invest in a first-time fund “if the GP has past institutional investment experience,” 73% said they would invest in a first time fund if that fund was a spin out of a prior firm, 47% said they would do so if the GP was a successful angel investor, and only 13% said they would do so if the GP had not invested more than $10M before either as an angel or part of an institutional fund. If you think about the fact that our diversity statistics have been horrific, what that basically means is you had to be white to have done any of those things. We should make it “potential-cratic,” because meritocracy means, “Here is what I got on my SATs or ACTs that enabled me to get into Stanford and put me in proximity with other people who had wealth and who were going to have this career trajectory.” It is very much not, “Here is what I did once I got to University of Maryland or Howard or Hampton or whatever.” The problem is that we have to look into all of these things that we have just laid out and say, these are the trappings of and the perpetuation of systemic racism and systemic bias. We cannot apply these metrics to the people that we are trying to put in positions of financial authority.
We had a dinner a couple of years ago at my firm, during Black History Month. There were a number of white partners who believed we (as a community) can do better, and we need to do better. I think our firm is pretty progressive and forward looking, but we need to do better. One of the Black women at the dinner said that she left a prior firm because the senior partner in her group said, “I really like so and so, she reminds me of my daughter.” She said, “Look at me and where I come from, I will never remind him of his daughter. I needed to go someplace else where that is not the way I get ahead.” I was glad she felt that our firm was a place she could transfer to where she would receive greater opportunity, but her comment about her prior law firm is something I have heard many times about numerous places.
As for best practices, we need to shout vociferously, publicly, and frequently about the things that we see that are wrong. Then we need to follow up, apply metrics, and impact compensation. I recently had a conversation where one of my colleagues was on the phone with me. She is Black and very experienced. The person on the other end of the phone did not know her. I suggested that she and he introduce themselves to one another. He did, she did, and he said, “Oh, so then this isn’t your first time doing x.” She has 15 years of doing x. I called someone to complain about the fact that he had said that. I talked to her about it afterwards as well. He is not part of our firm. I do not care whether he intended or did not intend to be demeaning, I do not care whether he was disrespecting our firm, as opposed to disrespecting her. That was not okay. I realized that I may have impaired a relationship as a result of complaining about that, and I had to follow up to get someone on the phone to complain about it.
We have to call people out and we have to make them feel uncomfortable. We have to seek accountability. This is a particularly important use of the privilege that I have. Watching people complain about the calling out (itself) is really interesting. I know that it is off-putting, and exhausting. People complain, “We want to do this stuff with you, but you’re so damn impatient.” Yet, with 400 years, how much patience are we supposed to have? If more of us are publicly articulating what is wrong, and the fact that most of the bias—99% of the bias—is not implicit, and is second nature, that is very fucking different than implicit. Your racism, your sexism, or homophobia or transphobia, is second nature. It is not implicit. It is built in, build it the fuck out. Dock people their pay. Make sure it is part of the compensation process. Make sure it is part of the review process, pro and con.