The past decade has seen black founders raise a negligible portion of venture capital funding. How to solve the problem? That question is always answered with the same answer: allocate more capital to black entrepreneurs.
But that has yet to happen. In fact, black founders receive less than 1.5% of all venture capital funds, be it a bull or bear market. So what’s going on?
Perhaps it is time for this discussion to focus on limited partners (LPs), especially since they are at the very top of the VC power structure. According to McKeever Conwell, founder of RareBreed EnterprisesIf LPs don’t allocate more money to different funds or managers, in some ways there will always be a shortage of capital that can – and possibly will – be allocated to different founders.
At the institutional level, the responsibility for change rests with those who have the power to make it happen. Supporting diverse funds means supporting diverse thinkers and their networks. It is necessary† then pressure LPs to support more funds that champion diversity, support diverse funds and managers, and create specialized funds to invest in diverse founders.
“Reward the actual behavior and not the intention.” Kerry Schrader, co-founder of Mixtroz
The amount of capital allocated to different individuals must go up, and LPs must first concern and rehashing their own core values to promote economic justice.
“There will always be reasons to wonder how much they really care about them,” Conwell said. “But we’ll see over time.”
The mandate of responsibility
LPs have the power and flexibility to require that at least some of their capital be allocated to different founders because fund managers are committed to them as the source of their money, Esosa Johnson, co-founder of Black Women Talk Tech, told TechCrunch.
“Their feet haven’t been pushed to the fire,” she said of fund managers. “After all this time, they should be held there.”