Editor's note: This is the first in our series examining diversity in venture capital. Read the second and third stories here and sign up for our newsletter to get updates.

The nationwide protests in response to the killing of George Floyd led to a flurry of discussions and self-reflection in the overwhelming white male world of venture capital about what needs to change to make the industry more diverse. While many VCs were quick (or not so quick) to take to social media to say they support diversity or attend webinars on inclusivity, meaningful concrete action has been less common.

"The venture field has been probably the slowest to let minorities and women in," said Sue Toigo, co-founder of the Toigo Foundation, which helps underrepresented minorities get careers in finance. "It has the worst record of all asset classes."

Just 4% of VC employees are black, according to a 2018 survey by the National Venture Capital Association, an industry trade group, which announced a new nonprofit arm this week focused on diversity. However, the true numbers are likely much lower because that survey – like all others examining diversity — is self-reported. Only 203 of the 1428 VC firms NVCA contacted even bothered to answer. A local initiative to increase diversity, PledgeLA, has also been hampered by limited participation.

Along with Softbank, Andreessen Horowitz has been the only major firm to announce a new fund in the wake of the protests that will focus on underrepresented founders. But its new Talent x Opportunity Fund will start with just $2.2 million in donations from partners, a relative pittance for a firm with $14 billion under management.

"I'm worried that this is being treated as more of a charity case rather than doing the work to reform our internal process so that we don't discriminate against founders of color," said a black VC who works in L.A. She asked to remain anonymous because she was afraid speaking out could harm her future career prospects. Asked why she was afraid of using her name even after so many in the industry have spoken up in support of diversity, she said, "There are professional ramifications that may come with being known as the investor who only invests in founders of color. When you speak about diversity you're the diversity person and you're taken out of deals that don't have diverse founders, which is sad."

This VC said she was happy to finally see more people "waking up" to biases in the industry and that most have good intentions but she wonders if partners are willing to do the harder things necessary to truly change how investment decisions get made. "Companies need to tie their executive compensation to these efforts if they're serious about it," she said.

Luma Launch, the four-year-old investment arm of the film studio Luma Pictures, is a typical VC firm. Its three investors are all white and out of the 28 companies in its portfolio, none were founded by a black person.

"The reality is we are the problem," said Luma's lead investor, Laurent Grill. "We've obviously all contributed to this in some form or fashion whether it was passively or actively."

In 2017, as the country was roiled by the Me Too movement, Grill and his partners revamped their deal flow to ensure more female founders get funding. He says the percentage of female founders the firm sees increased from 10% to 30% and now he is determined to hold the firm accountable to invest in more people of color.

"This is not being charitable," Grill said. "We are not trying to just invest in companies to check a box, that's when things will crumble and fail. I don't have the perfect solution. We are genuinely having conversations about this."

The effort to add more female VCs after #MeToo can provide a helpful template for increasing diversity, according to Paul A. Gompers, a professor at Harvard Business School who studies the demographics of finance. He found that after 25 years of virtually no gains, over the past four years the number of female VCs hired nearly doubled, though it is still just 18%.

"We have these strong biases to associate with people who are like us," Gompers said. "I think most venture capitalists aren't sexist and they're not racist but these unconscious biases affect our decisions."

Gompers has found VCs who have daughters tend to hire more female partners and their portfolio performs better. He's now turning his attention to ethnic diversity, gathering data to see if VCs who played on diverse intercollegiate athletic teams are more likely to hire people who do not look like them.

"Who you invest in looks a lot like who you are, so white men who went to Stanford and worked at Google like to invest in white men that went to Stanford and worked at Google," he said. "We know there are underserved pockets of entrepreneurs out there and those opportunities could perhaps create greater returns."

Internships are a crucial pipeline for recruiting new talent, but Toigo says VC firms can often be reluctant to bring them on, blaming fears about exposing proprietary deals to someone who might only stick around for a summer. "We have a hard time placing our interns at firms," said Toigo.

If nonwhite people do somehow make it in, they rarely advance, especially to the highest levels from principal to partners, who are usually brought in from the outside from those who can raise capital themselves or have operated their own company.

"When you don't have representation on your investment committee, it is very hard to properly assess people that come from backgrounds very different from yours," said Austin Clements, a partner at early stage venture firm OPV and the managing director at Grid110.

Just 10% of VC-backed companies in Los Angeles are run by a person of color or a woman, according to PledgeLA.

If one was trying to create a deal- making process from scratch to perpetuate whiteness, you would be hard pressed to come up with one more exclusionary than the current one where pre existing networks and who you know are paramount. Many firms require "warm introductions" before they will even consider evaluating a company.

"The same VCs who complain about 'not getting deal flow' from diverse- or females-led companies are the same people who have the 'we prefer a warm intro' line on their website," tweeted Samantha Smith, founder & CEO of Vishion.

Clements said he sees it all the time. "When people come and speak to South L.A. or predominantly minority communities, the common thing to say is 'to get in touch with me through a warm introduction'," he said. But many in the room think "'how can you possibly look at me and think we have any mutual friends in common.' I don't know that (investors) really have accepted that. People think if you have enough hustle you can get in touch."

Making matters more difficult, investors typically don't want to put money into startups that other VCs have not already invested in. And in the absence of the sort of financial metrics that would usually be the most important criteria for more mature companies, VCs have to weigh something far more subjective: Whether they trust a founder.

"The question is what makes people trust people?," said the VC who wished to remain anonymous. "Is it how educated they are? Is it how many friends they have in common? Their similarities? People tend to trust people that are more like them. It's easy to see how certain demographics are cut out of the very beginning of deal evaluation."

Editor's note: This is the first in our series examining diversity in venture capital. Read the second and third stories here and sign up for our newsletter to get updates.