Every venture firm can take these quick steps toward greater diversity, says one of Silicon Valley's few black VCs. What the steps have in common: Reach out.
Precursor Ventures managing partner Charles Hudson has some advice for his fellow venture capitalists as they consider trying to address the industry's longstanding, systemic racial inequities. The venture industry employs and backs exceedingly few black people. Firms won't be able to rectify that problem overnight, but there are some steps they could take today to get the ball rolling, Hudson told Business Insider. Among other things, they could be more open to unsolicited pitches and to hiring non-traditional venture employees in entry-level roles, he said. Click here for more BI Prime stories.
As the venture industry wrestles with addressing its longstanding diversity problems amid a nationwide reckoning with systemic racism, Charles Hudson has some advice. Reshaping the business isn't going to happen overnight, Hudson, the managing partner at Precursor Ventures, told Business Insider. But venture firms can take some relatively simple steps today in how they approach funding and hiring that could lead to meaningful change, he said. "I hope that this whole moment promotes real introspection in our industry about who we hire and who we fund," Hudson said. It's clear that the venture industry has a big problem with diversity, particularly when it comes to race. Black people comprise just 4% of all venture employees and just 3% of investment partners, according to Deloitte and the National Venture Capital Association. Only 1% of founders of venture-backed companies are black. Hudson both knows the problem intimately — and how to address it. He's one of the very few black venture capitalists in Silicon Valley and one of the even fewer who runs his own fund. He's made a point at Precursor to back businesses founded by African-Americans, Latinos, and women. And he's become known for it; many of the entrepreneurs he's invested in have sought him out. Precursor highlights its diverse group of founders One of the first decisions he made with Precursor was to showcase those founders. The web homepages of many venture firms feature big pictures of their partners or logos of the prominent companies they've backed. By contrast, Precursor's homepage is filled with photos of the founders it's backed — a diverse assortment including numerous women and people of color. The point was to signal "to people that we're open for business for all types of people," Hudson said. Other firms could copy that strategy, if they've invested in minority founders. And they probably should, if they really want to invest in startups led by more diverse teams, he said. "I think it's completely reasonable, if you're an entrepreneur, to go to a firm's website, look at the team page, not see anyone who looks like you, look in their portfolio and not even see a hint of a founder who looks like you ... [and] conclude, 'Hey, maybe this firm isn't for me,'" Hudson said. Another change firms could make is in how they solicit potential investments, he said. Many venture firms won't meet with founders unless those entrepreneurs have been referred to them by people they know. Many ignore emails that come in from out of the blue. But many people of color simply don't have those networks of contacts who can introduce or recommend them to venture investors, Hudson said. So what he's tried to do instead is to be open to and to read and to respond to entrepreneurs who email him cold, without any kind of introduction or referral. He and his team don't respond to every message that comes in, but they try, he said. "Being open to people outside your network reaching out to you is step one," he said. "That's one way to level the playing field," he continued. "It means that people don't have to know me or know someone who knows me." People outside the industry can easily learn about it The other relatively easy change venture firms could make would be to broaden the pool of candidates they look at when when trying to fill entry-level analyst-type positions, Hudson said. Many venture firms focus on finding people who are veterans of the big tech firms or have startup experience or are graduates of Stanford or other prestigious universities and have computer science degrees, he said. But that focus makes the potential pool of black or minority candidates very small, because none of those institutions is terribly diverse. But there's no reason the industry has to look for candidates that meet those kinds of criteria, he said. Most venture firms are generalists; they don't typically require people who have deep technical knowledge or science backgrounds or even experience in the tech industry, he said. "I don't understand why as an industry we've been hung up on a really specific profile," Hudson said. By contrast, Precursor hired a black woman to be an analyst who is from the East Coast who had never worked in tech and never been a founder. "She's a smart person," Hudson said. "I think she can figure out how this business works in a year. And the things she doesn't know about venture, she'll learn. And the things that she's bringing from her old job ... is going to be additive to our firm." Such changes would be an important "signal" If other firms took a similar approach, they too could quickly increase the diversity of their teams, he said. "Even if hiring a [general partner] is scary, most of these funds have analysts and associate programs," he said. "You could get a person of color on your investment team who would immediately give you access to a new perspective and a new network, if you empower that person." He continued: "That's something you could do tomorrow." These kinds of moves won't solve venture's diversity problems by themselves. The industry has lots of systemic problems that need to be addressed, from the priorities of the limited partners who back venture funds to the venture firm's broader hiring and funding decisions, he said. But these kinds of changes would be important to make, Hudson said. Doing these kinds of things would be "a signal," he said. "It's a start." Got a tip about the tech industry? Contact Troy Wolverton via email at firstname.lastname@example.org, message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. 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Read more about diversity in Silicon Valley: One of Silicon Valley's few black VCs says the industry has a systemic problem with race, but he's hopeful the George Floyd protests are finally going to spark real change A diversity consultant says real change may hit the tech industry due to the George Floyd protests and the coronavirus crisis. Silicon Valley hasn't changed much after past scrutiny, but this time could be different. 'THIS IS NOT A CHARITY': Andreessen Horowitz defends itself against the criticism surrounding the size and structure of its new nonprofit fund SoftBank commits $100 million to invest in companies led by black Americans and people of color: 'We need to do better' SEE ALSO: Silicon Valley billionaires are lining up to condemn racism. But the tech and VC industry has a shameful, decades-long history of ignoring and perpetuating inequality. Join the conversation about this story » NOW WATCH: Pathologists debunk 13 coronavirus myths
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