I’m a Latina who was born in a small New England town and attended a small women’s liberal arts college in Virginia. But that’s not how I thought of myself during the early days of getting my company off the ground. When I was heads down in code building TaskRabbit, I thought of myself as an engineer. When I was in the throes of pitch decks and investor meetings, I thought of myself as a founder. My identity and background didn’t factor much into how I spent my time each day, and I wanted to believe they wouldn’t matter when it came to my chances of raising venture capital.
In reality, I didn’t match the pattern. VCs had an idea of what successful founders looked like, and they didn’t look like me. It took another woman of color hearing my pitch to open up opportunities for me. And that woman, Ann Miura-Ko, was only in a position to say “yes” to me because another VC (Floodgate’s Mike Maples) took a chance on her. As a founder and CEO, I recruited a diverse team of talented individuals who brought different backgrounds and life experiences to the table. Many of these people have gone on to become founders themselves, building their own teams. Others have gone on to become venture capitalists. This is the virtuous cycle of wealth creation in action. And all it took to get it going was one VC deciding to take a chance on someone who didn’t match the pattern.
We need more of this. And we need more of it at each step of the funding process.
Let’s back up and clarify how the venture capital process works. Limited partners (LPs) fund venture capital funds. Venture capitalists then wire capital to founders, who in turn recruit teams of individuals. Those individuals—particularly those from successful startups—often grow to become founders and/or investors themselves, who then recruit or invest in more individuals. Rinse and repeat. This cycle is why today’s VCs look so much like yesterday’s founders.
To accelerate diversity within the venture and tech landscape, we have to optimize for inclusion at the inception of this cycle. This means doing whatever we can to get more underrepresented investors in the position to allocate capital as they see fit. More diversity at the VC level will kick off the cycles that bring more diversity to the founder and team levels as well. The rinse and repeat part starts to yield a much healthier, more representative, more equitable, and more lucrative future.
Someone has to assume the risk
Here’s the problem: Saying “we need more diverse venture capitalists” is pretty much the same as saying “we need more diverse founders.” As a community, the LPs at the top of the capital stack usually aren’t in a position to just start writing checks to unvetted emerging funds. To get that initial capital into the hands of new, more diverse fund managers, someone else has got to take the risk. Luckily, one of the players in this game has risk right there in the job title. We’re called venture capitalists for a reason.
So here’s a big risk for us to consider: Let’s help our competitors get started.
This is the idea behind Screendoor, an investment vehicle started by a group of VCs (disclosure: myself included) ready to do unconventional things to increase diversity within the venture ranks. With a mandate to “take a chance” on managers that don’t match the pattern, seasoned venture partners identify high-potential underrepresented emerging managers. Then we back them up with the capital, access, and network they need to achieve success. This structure gives LPs an avenue to invest in vetted emerging funds that don’t often fit their fund allocation model.
Funding the competition may seem counterintuitive to some, but the business case for what these competitors can bring to the table is strong enough to warrant it. Contributing to building durable wealth (and influence) for these new funds and their portfolio companies pulls more talent onto the field and puts more markets and sectors in play.
Venture capital was once a business that took big bets on outsiders—it wasn’t long ago that the college drop-out computer nerd cliché was a novel, risky opportunity. As the industry has matured, we’ve defaulted to pattern matching (which too often means young, white males that resemble those once-novel success stories) instead of seeking out founders of different backgrounds, different geographies, different skill sets, and different demographics. Our current cycle tries to play it safe. There’s nothing virtuous about that, and it also runs contrary to the ethos of venture capital—which is about taking a chance on something or someone with the potential for disruption.
Now that I’ve seen the way money moves around the venture and tech landscape, it’s become clear to me just how much those “female” and “Latina” modifiers really did matter when I was starting out. They made it harder for me to get funded. But guess what? They also gave me a unique perspective on problems and solutions in markets those pattern-matched founders couldn’t understand. And they likely informed the kind of team and company culture I built. It’s become clear that diversity is an issue that’s been talked about with great fanfare, but little effect for years. There may not be an easy solution to finally moving that needle to where it belongs, but sparking as many virtuous cycles of wealth creation for underrepresented talent as possible is a critical piece of the puzzle. And all it takes to get started is quitting our pattern-matching habit.
Leah Solivan is the founder of TaskRabbit and a general partner at Fuel Capital.