Jean, I could not agree with you more entrepreneurs can be anyone come from and anywhere. I’ve seen this firsthand for the last 6 years investing in startups from around the country. The spirit of innovation cannot be restricted by area code. Unfortunately, what has also been true is that venture capital availability has largely been confined to a small number of geographies. The majority of funding tends to originate and remain in the general vicinity of three locations, Silicon Valley, New York, and Boston. That leaves a large swath of the American landscape competing for limited resources and relying upon its own ingenuity to create and sustain viable, growing enterprises.
When we acknowledge the dramatic impact of capital distribution by geography and combine that with the even more limiting factors contributing to the lack of diversity in the investing ranks of top venture firms, what we see across the technology ecosystem is a direct reflection of the industry’s inability to “…consciously step outside their comfort zones.” As recent research conducted by Richard Kerby at Venrock revealed, an incredibly low percentage (<2%) of venture capitalists are African American. Today, many of those individuals are pursuing the opportunity of managing their own funds rather than attempting to progress through the ranks of established venture firms.
The ability for the firms with the largest pools of investment assets to find and cultivate new talent with the greatest potential will be directly correlated to each firm’s willingness to engage with a more diverse pool of entrepreneurial talent. Since venture capital is such a relationship-oriented business, it means that authentic and enduring efforts must be made towards connecting with historically non-traditional entrepreneurial ecosystems, physical and virtual. As long as investors hold to the premise that certain people and geographies do not possess entrepreneurial DNA or are too risk averse to warrant regular visits and investment, we will continue to see the stark contrast between who and what gets funded, and who and what does not.
As a true believer in the entrepreneurial abilities of anyone from anywhere I propose Opportunity #4. It’s time for fund investors (limited partners) to make investing in diverse fund managers a high priority. Just like founders of startups, these managers have a vision for the future and must gain access to capital to realize their dreams. As anyone that has tried will tell you, raising capital is hard, and it is particularly difficult if you are raising a fund. However, I believe that this new wave of investors represents the venture capital industry’s best opportunity to “…consciously step outside their comfort zones.”
Many of these new fund managers have taken the approach of investing in the best companies, regardless of geography, ethnicity, gender, etc. They seek to be regarded as highly impactful and successful investors, period. However, they also represent a fantastic opportunity for investors, entrepreneurs, and others to gain greater insight into the founders, technologies, consumers, and geographies that will drive our country forward over the next several decades. I expect the best performing funds and investors in the future will be the ones that are diverse in mindset, inclusive in practice, and focused on solving the problems facing an economy growing more and more economically divided. How the venture capital industry and its financial backers respond will determine whether or not we truly tap into the collective genius of our country that is actually hidden in plain sight.