Representation in Venture Capital
The VC asset class is an exciting space that has created many great businesses and amazing products. Venture Capitalists have become rockstars over the years and some have become gurus and oracles. We have the Peter Thiels, Ron Conway and many others. I can go on and on all day.
What do they all have in common? All white men
VC has been dominated by white men since its inception and the winds of change are not flowing fast enough or even flowing at all. Now this is not an attack on white men, it would just be nice to see other races and genders involved in the space. There is an innate bias that people have towards individuals that look or speak like them. Hence VCs will fund start-ups with people that look like them or products that they can relate to. It’s difficult for an investor who lives a lavish life to 100% grasp the daily life of someone who resides in a low income area. They will not understand another race’s pain point because that does not exist in their world.
Whilst Silicon Valley has this problem on a large scale, the same applies globally and South Africa and Africa is no exception to this. It’s not to say that black or female start-ups won’t get funded, but their chances are reduced because seated across the table are people who look nothing like them. They are required to alter their behavior in order to get the investor to fully understand and grasp what they are trying to achieve and the problem they want to solve.
A recent Vice show about pitching a Venture Capital fund further highlighted this issue. Three young black men pitched their VC fund idea to a white male and they highlighted that they wanted to fund businesses created by minorities. In the USA these gents are the minority and they are severely under-represented in this space. This goes for women as well. The investor understood this dynamic and was willing to invest in order to spread the wealth if you like. The gentleman know that is not a silver bullet to change because funds last up to 10 years and therefore real change takes time.
In South Africa, a country that is majority black there are very few black or female VCs. The majority of the population is not involved in an industry that has the potential to change lives and disrupt entire industries. Vusi Thembekwayo is the most spoken about black VC in South Africa but Vusi can’t be the lone voice in this space. Alone he is a shining beacon of hope that fades into obscurity and just becomes dot in the ecosystem. If there were more Vusis it would do wonders for black entrepreneurs and motivate more people of colour to become VCs. The same could be said for women in the VC space. As long as women don’t see other women heading and starting VC funds, they will believe that the career choice is not for them. This is indeed a travesty because the diversity that women bring to any business cannot be replicated by men.
Tristan Walker of Bevel fame is an example of what happens when diversity is embraced to create a lasting business. Tristan wanted to start a tech company but he kept trying to come up with conventional ideas and Ben Horowitz kept shutting him down. After more brainstorming he came up with Bevel. Bevel is the 1st shaving system for people with course and curly hair. Gillette shaving products are a mass market product that do not deal with the issues that people of colour face. This created the opportunity for Bevel to shine and blossom into a great alternative to Gillette and other shaving systems. Bevel grew and was now available in Target stores with a celebrity endorsement from Nas. The brand had arrived and then P&G decided to purchase Bevel. The market segment they had neglected was now seen as a viable part of their business going forward. A product like Bevel would do exceptionally well in the African market because of the number of people with curly hair.
On the side of women, last year I came across an article with the biggest start-ups to go bust in 2018. At the top of the list was Theranos which had raised an astonishing amount of money. The question was how a company worth $4bn could go bust in such a short space. After further reading I discovered that the whole company was a scam and a shining example of the evil that lurks in Silicon Valley and creates cynicism across the rest of America. Theranos could not do anything that it proclaimed it could do but they kept getting funding and business. Why? Why? Why?
The whole business was a sham and was full of lies, but when you read Bad Blood by John Carreyou you realise the desire by Silicon Valley to support female founded businesses. This is because there are so very tech companies that are founded by women. When a female founder presents herself to the market, investors are willing to throw money at her in desperation because women tech founders are almost like unicorns. They are very rare and don’t come around often. Elizabeth Holmes was smart and seen as the next Steve Jobs if she got it right. So many people wanted to believe in her and she kept the lie going as long as possible. She spoke on numerous panels about women entrepreneurship and she became a thought leader. The tech industry dearly needed more people with the punch and impact that Elizabeth had, but without all the dishonesty.
The VC industry is consistently growing and so are the number of start-ups being created. The need for diversity is crucial to the involvement of others and the industry doing greater things than it has done before. It is almost criminal that in 2019 there are very few notable female founders. The industry has to do better and make the space more engaging and attractive for others to partake in. It may take time but the rewards will be huge given the way the globalised world that we live in with diverse problems and challenges.
