Diversity, equity, and inclusion (DEI) is a hot topic in the venture capital (VC) industry now more than ever. Yet while there is a growing list of resources and data to help improve diversity amongst investors, proven strategies to funnel dollars towards historically marginalized founders remains elusive at best.
I spoke with platform leaders at top-tier firms to kickstart JetBlue Ventures’ own journey to building a diverse portfolio pipeline. The following are actionable takeaways from those conversations that any VC can put into practice.
Start with data
Earlier this year we set out to collect our founders’ and CEOs’ diversity metrics. Diversity comes in many forms: gender identity, race, sexual orientation, veteran status, disability, and more.
Because we are a small firm with limited resources, we opted to focus on gender and race to start. We put out a three-question survey* that allowed these key players to self-identify and received a 98% response rate from our portfolio companies (after much badgering from me.) The data is as follows:
As a travel VC, the odds of finding a wide array of founders are somewhat stacked against us. For example, just 12.5% of the top 350 travel technology companies are led by a woman. But that doesn’t make the task impossible: knowing our current status allows us to set realistic goals as we work to improve these numbers. After all, you can’t manage what you can’t measure.
*During my conversations, I learned that some VCs catalog diversity metrics by using founder photos. While technically more efficient, this can be a problematic strategy not only morally, but legally. In the long run, this methodology proves more harmful than helpful.
Create SMART goals
I love goals; I think they’re the backbone of society. They also help to ensure that diversity initiatives actually get implemented rather than just talked about.
I’ll use an example related to our stats to prove my point. It’s unrealistic for us to say that we’ll fund X% more Native American founders by the end of 2023. However, it is realistic to say we’ll review X% more Native American founders than we did the year prior. Just like in hiring, diversifying deal flow increases those founders’ chances of making it to the end of the due diligence process and receiving investment for their merit, rather than to check off a goal.
To achieve this, it’s imperative to collect founder data at the source of intake. While some might consider asking founders for gender and diversity information off the jump “aggressive,” I call it necessary. It also indicates to the founders that your firm walks the talk when it comes to diversity.
Go out of your way to build a diverse team and network
A baseline component in finding these founders is to ensure that you have a diverse venture team. If we return to the hiring example, studies show that managers tend to hire people that look and act like themselves–that’s why corporate HR teams have such robust practices surrounding training and interview best practices. The same sentiment rings true for funding, though there are less strategies to combat it.
Beyond that, connecting with relevant organizations is key. Well-known firms like Harlem Capital, Lightship Capital, and more all have proven investments in traditionally underrepresented founders. If you know these investors well, you’re likely to get tapped on the shoulder to fund their portfolio companies’ future rounds.
Still having trouble finding the right people? The Diversity VC Standard or Diversio Certification are some of the only certifications currently available for VCs and provide a network of like-minded investors who are serious about improving DEI.
Invest in training
A crucial component to any DEI strategy is training your team to recognize its importance and value. Many people aren’t even aware of their own unconscious biases as they make everyday business decisions. There are several organizations that specialize and work with VCs/startups to create actionable training that directly correlates with deal flow. Below are a few of them:
Embarking on diversity work can be overwhelming, but it doesn’t have to be. This guide was put together through nine months of research, conversations, and learnings from others who have already started their firm’s journey. If you’re looking to connect with like-minded folks, I highly recommend the VC Platform Global Community as a place to start talking. Together, we can impact this industry for the better!
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