If you know where to look, Los Angeles and its surrounding cities are full of little gems explaining the area’s history. While stopped in traffic in Santa Monica today, one plaque caught my eye – it proclaimed that African-Americans are one of the oldest cultural groups to call the beach cities home, dating back to the late 1800s, and are responsible for building much of the infrastructure we use today.
Looking at the makeup of the business communities in Santa Monica and neighboring Venice, that historical context is far from evident.
There are few people of color who found tech startups in their neighborhoods in Silicon Beach who can find venture funding to back them up. A 2020 Deloitte study found 93% of VC firms didn’t have any Black partners, and that Black founders received just 1.2% of funding invested into U.S. startups during the first half of the year.
For women, the numbers were similar. They’re likely to raise 2% to 4% of venture capital funding compared to men, according to Halogen Ventures General Partner Jesse Draper, whose Playa Vista-based VC firm is on a mission to fund more companies founded by women.
Local efforts to change this dynamic were the focus of L.A. Tech Week’s “Diversity and Inclusion in the VC Value Chain” event, held Friday morning.
Hosted by a coalition of nonprofits and outreach groups including Diversity VC, BLCK VC and L.A. Mayor Garcetti’s PledgeLA, the event focused on what venture capitalists and bankers can do to encourage more diverse investment in Los Angeles and across the globe. The general consensus was straightforward: in the world of finance, numbers and data speak loudly. The more research can be collected on how disparate the finance ecosystem is for underrepresented populations, the more likely VCs are to change their minds and hire more diverse fund managers.
Diversity VC is currently working on its second report on diversity in venture capital, which will be published this October.
“The powerful thing about data is that you can't argue with it,” Sarah Millar, chief operating officer of Diversity VC and panel moderator, told dot.LA. “We see the data as a way to engage stakeholders that might otherwise say, we just don't have enough information to make these decisions. By providing them with the information, we can at least move them a step forward.”
Aisling Carlson, former chief business officer of Sieo and current market strategist for Diversity VC who helped organize Friday's panel, mentioned the company’s studies are sponsored by Amazon Web Services and Silicon Valley Bank.
“Sometimes it’s these bigger institutions that are part of the problem, but yet they’re also trying to be part of the solution, so it’s a weird dichotomy,” Carlson said. “Knowing [the problem], and then actually doing something about it are two very different things.”
Some of the panelists were critical of what companies are actually doing with their diversity and inclusion initiatives. Mandy Bynum McLaughlin, CEO of BLCK VC, said she worked for a startup called New Relic in San Francisco as its global head of diversity and inclusion. She found work trying to push those initiatives ended up “watered down.” McLaughlin was speaking alongside Draper and Fernando Zeledon, managing director of StartUp Grind East Los Angeles.
“That is all to say that racism is alive and well and it evolves very intelligently,” McLaughlin said. She noted that she’s trying to convince older, wealthier Black people to put some of their money towards investing in Black founders. “There's a lot of money within our community. but the way that our community is investing is pretty traditional,” Bynum Mc Laughlin said, pointing to athletes who invest in restaurants or sports teams.
During the panel discussion, Millar and Draper both said that when it comes to convincing VCs to back diverse founders, it can seem like a no-brainer on paper, especially when considering that women founders are more likely to exit and have higher rates of return compared to men.
Draper recalled being contacted by Andreessen Horowitz (the sponsor of L.A. Tech Week) about a cultural impact fund, then being told it was only a $10 million allocation.
“I was like, well, you guys manage billions of dollars and [this fund] is only $10 million… So I wrote this article, ‘Investing in Women Isn’t a F—--- Charity,’” Draper said. “[This] does a disservice to investing, and it looks like charity, and it was very frustrating to me as a woman.”
Every panelist agreed that mainstream investors are missing out on millions by not funding more diverse businesses. “These are people that are not receiving capital, and this is an economic opportunity for me,” Millar said. “Because if you don’t invest in them, and I invest in them, and they succeed, you miss out. How is that not a financial decision?”
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Grid110 founder Miki Reynolds alongside colleagues.Courtesy of Grid110