dot.LA Summit: VC-led Diversity and Inclusion Initiatives Still Need More Funding

In 2021, women raised just 2 percent of venture capital in the US in 2021. Black founders raised just 1.2 percent of total VC funds last year — and will likely raise even less this year amidst the economic downturn. This is all to say that efforts from VC funds to invest in female and racially diverse founders don’t appear to be enough.

So what more can be done to create equity in the world of venture capital? In a panel at the dot.LA Summit, LA-Tech.org’s Ko Trinidad-Williams spoke to the heads of a number of diverse VC funds about solutions for creating more inclusive organizations.

Marcos Gonzalez, the founder of LA-based VamosVentures, urged firms to build a pipeline of diverse talent —— from intern level to mid-level positions to partner. Recruiting diverse candidates at all levels will ensure that firms will be able to move people into seats that “have a say” on what type of deals they look at and the amount of funding. “Those networks are a critical part of creating equity,” Gonzalez added.

Merely recruiting diverse candidates for internships isn’t, however, enough. “It’s not about that internship,” said Derek Smith of Plug In South LA, which aims to build out the tech ecosystem in South Los Angeles. “It’s about converting that internship into a job, and then converting that job into a professional career, and then converting that career into an entrepreneurial endeavor.”

Stuart McCalla of Evolution, a leadership coaching firm, said organizations have to figure out what internal changes need to happen to draw more diverse candidates.

For example, VamosVentures, which focuses on LatinX and diverse funders, has seen increased interest from aspiring entrepreneurs in recent years. “In 2015, I travelled the country and found about 200 deals led by Latino founders that I thought were VC-backable,” said Gonzalez. This year, the firm has over 1500.

Even as recently as five years ago, Gonzalez said it was rare to find Latino-led firms that have raised over $5 million in funding. Now, every firm in VamosVentures’ portfolio has done that.

Gonzalez’s firm also offers help to founders who didn’t quite make the cut, either offering founders constructive feedback or connecting them with people who could aid their company’s growth. “What bothered us ins that when we looked at 100 companies and invested in two, we had to say no to 98 of them,” Gonzalez said.

Aisling Carlson of Diversity VC, which researches diversity in the VC industry, agreed that while there’s been an uptick in women and founders from minority backgrounds receiving funding — the total amount is still “orders of magnitude” smaller than what goes to white male founders.

Even funders that have launched “diversity, equity and inclusion” initiatives have diverted a tiny fraction of resources to those efforts. “We’re talking about an average fund size of $250 million for your more homogenous funds and $20 million for your DEI (diversity, equity and inclusion) fund,” said Carlson. “So that difference is just so big, and as much as we should be saying, ‘Oh, this is great progress’, it’s just not enough.”