Grind Princeton startup meeting highlights development of greater diversity in venture capital firms – NJ Tech Weekly
Hailing from New Jersey, Sarah Millar, director of City Light Capital (New York), spoke with David Stengle, founder and organizer of Startup Grind Princeton, on how to ensure that venture capital firms address the diversity and inclusion issues.
City Light Capital is an early impact investment fund focused on early stage or Series A companies that have a positive social and environmental impact on education, environment, safety and health, all defined very broadly, Millar told the group.
Outside of her job at City Light, Millar is the US head of an international organization called Diversity VC (London), “which, as the name suggests, focuses on diversifying venture capital, starting from the principle that if you can diversify who invests, you will also diversify who receives the capital on the founding side.
Diversity VC, a non-profit partnership, started in Britain as part of a government initiative to ensure that public funds were distributed fairly. His first project was to examine the teams of venture capital firms that made decisions about government investments. And the numbers came back, “almost exactly as you expected,” Millar noted.
Is the influx of money into various startups real?
In the United States, Diversity VC is currently examining the ‘flow’ of money in various startups and founders, and is trying to ‘measure whether or not this flood that we all see the headlines is actually happening; whether there is actually capital that is being diverted or created to invest in these funds; then, subsequently, the funds managed by [self- identified] Diversity venture capital firms actually invest in diverse entrepreneurs at a higher rate than their counterparts.
Millar noted that, thanks to the standards developed by the UK wing of the organization, VCs can assess themselves against criteria such as, “Do you proactively seek out deal streams from various founders? Do you provide DEI [diversity, equity and inclusion] support for your existing portfolio in terms, for example, of encouraging them to hire people from various backgrounds on their boards? And do you have a recruiting policy that allows you to partner with organizations that attempt to place talent from under-represented backgrounds into VC positions? “
Diversity playbook for VCs
The UK organization has developed a playbook for VCs explaining what they should add to their HR systems and elsewhere in their business operations to attract diverse employees. For example, they learn what a good parental leave policy looks like, she said. The US organization is also participating in “Future VC,” an internship program that “we facilitate each summer, placing talent from under-represented groups in eight-week internships with funds across the country,” he said. she declared.
For startup founders, Millar noted that the company examines who is on the leadership team and whether they have decision-making power. He also looks at things like the startup’s vendors. For example, are you proactively looking to acquire software or any kind of third-party platform from companies founded or run by people from under-represented backgrounds?
Some 60 venture capital funds have tested themselves against the standard, she said, including pioneer funds like 500 Startups (San Francisco), Bessemer Venture Partners (New York) and Microsoft’s Venture Fund (San Francisco ). Some 20 more funds are on board for the assessment soon, she added. And it is not a trivial process. “In fact, we’ve garnered a lot of interest from enterprise venture capital funds. Based on how we assess, standards tend to tick all the boxes around recruiting and HR. The diversity here is “government mandated anyway, so VCs can demonstrate best practice” in this way.
For start-up investors who only invest in black and brown founders or who invest primarily in female founders, following this process is more of a marketing tactic, “signaling to entrepreneurs that” we are open for your business, we have through this evaluation process, we want to be part of this community. ‘ Diversity VC doesn’t certify these investors unless they are successful, but for them, “it’s about being there and signaling that it’s something they care about.
Millar explained how the criteria are ranked so that VCs can qualify by checking a number of different boxes. For example, one of the options for the assessment is portfolio support. They ask: do you offer training in mental health or diversity and inclusion to companies in your portfolio? “Not everyone has the budget to do this. However, there are eight other options that VCs can choose from that are ranked equally, she said.
In response to a question from Stengle about how an entrepreneur can assess the sincerity of an investor claiming to adhere to DCI standards, Millar noted that startup founders can ask funds what they think about diversity, how the DEI manifests itself in their organizations. They can ask how investors are supporting their portfolio companies in terms of DEI. “You can tell when people are going in circles” and don’t really prioritize that, she said.