How can we make the VC world less pale and male, Congress wonders
- Reference: 1656520214
- News link: https://www.theregister.co.uk/2022/06/29/congress_tech_bros_diversity/
- Source link:
The House Financial Services Committee's Task Force on Financial Technology is scheduled to meet on Thursday. FSC majority staff said in a [1]memo [PDF] the hearing will focus on how VCs have failed to invest in, say, fintech companies founded by women and people of color.
We're told Sallie Krawcheck, CEO and cofounder of Ellevest; Marceau Michel, founder of Black Founders Matter; Abbey Wemimo, cofounder and co-CEO of Esusu; and Maryam Haque, executive director of Venture Forward have at least been invited to speak at the meeting.
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"VC firms have demonstrated a strong interest in technology-based companies, including fintechs," the staff wrote. "However, the majority of that investment has been directed towards White and male-founded companies."
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The memo claims investors are 21 percent more likely to back founders of the same ethnicity – White employees account for roughly three-quarters of the VC workforce – so either more diversity is needed or a little less bias.
We're told Black founders have been handed only one percent of funding. Latin-American founders received only slightly more at 1.8 percent. Asian founders received 17.7 percent. That doesn't quite match up with the US adult population; less than 17.7 percent of the US population is Asian, and more than one percent is Black, for instance.
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Similar goes for gender: female-founded companies consistently receive only two percent of VC funding, despite women owning 20 percent of all US companies, the memo states.
The FSC memo names three VC firms well known in the tech world: Y Combinator, Sequoia, and Andreessen Horowitz, aka a16z, though it doesn't direct any specific accusations at them.
Looking through the archives, we can find [6]wide-scale harassment of women by various VC firms. In 2018 a survey of women founders working with Y Combinator found that [7]one in five were sexually harassed. Sequoia-backed Uber paid out [8]more than $4 million to settle sexual harassment and retaliation claims in 2019; that same year the CEO of an a16z-backed fintech startup was sued by [9]three female employees over sexual harassment.
Policy solutions?
The hearing's agenda includes a look at policy tools that could help women and minority-owned businesses land more VC investment, though it doesn't say what those policies could be. It does contain a hint about where possible action could come from, however.
The final section of the memo examines differences between disclosure laws for VC companies and VC advisors, the latter of whom are under far more scrutiny from the SEC. VC advisors can include fund managers, who are responsible for identifying investment opportunities.
[10]Salesforce faces diversity audit from activist investors
[11]Microsoft shareholders vote for a report into harassment within the company
[12]Trouble hiring? Consider loosening your remote work policy
[13]Amazon internal chat app that censored talk of unions and ethics may 'never launch at all'
According to the memo, the SEC has been "increasingly engaged" with tackling the lack of diversity in the VC ecosystem. The SEC Small Business Capital Formation Advisory Committee has recommended the regulatory body take action "to reduce barriers to entry for underrepresented founders and their investors."
Those interested in seeing what path VC regulation might take can tune in to the virtual hearing on [14]Thursday at noon US Eastern Time. ®
Get our [15]Tech Resources
[1] https://financialservices.house.gov/uploadedfiles/hhrg-117-ba00-20220630-sd002.pdf
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2YrzLhLr2bGNH5kpJT4KTrwAAANA&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YrzLhLr2bGNH5kpJT4KTrwAAANA&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YrzLhLr2bGNH5kpJT4KTrwAAANA&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YrzLhLr2bGNH5kpJT4KTrwAAANA&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://www.theregister.com/2017/07/05/silicon_valley_sexism_row_explodes/
[7] https://www.theregister.com/2018/10/15/ycombinator_women_founders_harassment/
[8] https://www.theregister.com/2019/12/19/uber_eeoc_settlement/
[9] https://finance.yahoo.com/news/andreessen-backed-fintechs-abusive-boss-212834202.html
[10] https://www.theregister.com/2022/06/09/racism_in_tech_sector_salesforce/
[11] https://www.theregister.com/2021/12/01/microsoft_harassment/
[12] https://www.theregister.com/2022/06/25/remote_working_hiring/
[13] https://www.theregister.com/2022/04/05/amazon_chat_app/
[14] https://financialservices.house.gov/events/eventsingle.aspx?EventID=409522
[15] https://whitepapers.theregister.com/
> Asian founders received 17.7 percent. That doesn't quite match up with the US adult population.
It is interesting that although Asian founders were mentioned here, what wasn't specifically mentioned was that this is well over the proportion of Asians in the US.
Just picking one of a number of references online, we see that Asians account for only 5.6% of the population (in 2019 according to this reference). Asians are not "white".
https://www.visualcapitalist.com/visualizing-u-s-population-by-race/
I am definitely for dealing with the alleged predatory sexual behaviour experienced by people. It's not acceptable.
However, let's not ignore the obvious anti-white bias of the report. According to that same report, white people in the US account for 60.1% as of 2019 so 3/4 is not a million miles away from equal representation. If it was 90+% then I think it would have a fair point. At least some of that low accounting for black people is taken up by the high (x3) representation of Asians.
'what wasn't specifically mentioned'
Yeah, that's what we meant by: "That doesn't quite match up with the US adult population."
The amount of funding given to non-White people is out of proportion – whether it's too much or too little.
C.
Re: 'what wasn't specifically mentioned'
Similar story saying no Wall St firms employed minorities.
Just good WASP names like Goldman, Sachs,Lehman etc.
If Asian-Americans re over represented then they obviously don't count as a minority. So minorities are still underrepresented
Re: 'what wasn't specifically mentioned'
> If Asian-Americans re over represented then they obviously don't count as a minority. So minorities are still underrepresented
Any race that accounts for just 5.6% of the population is, by definition, a minority.
The fact that whites are the majority is just a function if their proportionate population in the country. What is significant if we want to examine what we might call "bias" (although that term is rather begging the question) is the difference as a proportion of their base population. For whites, this would be about 25% higher representation, whereas for Asians this is about 300%. That difference is enormous, which is why I question the leading point about whiteness and maleness.
The real story here is why Asians are massively over-represented compared to all other racial segments. It is probably due to their cultural obsessions with education and preference for family business.
"That doesn't quite match up with the US adult population."
But what about the "startup population"? Something tells me that there are more companies founded by Asians than Africans or other ethnic groups.
If that the case then the problem happens well before VCs look for where to put their money into. Any policy that would favour disproportionately a small minority may mean VCs may be forced to ignore companies that have better chances to success, just because a given sector doesn't not reflect the distribution of the overall population.
But wake me when, for example, Hollywood and most of the entertainment/fashion/advertisement sectors start to really reflect the overall population distribution - and doesn't select just a minority of "beautiful" and "young" people... and stop the huge women exploitation.
Re: "That doesn't quite match up with the US adult population."
> ...and doesn't select just a minority of "beautiful" and "young" people... and stop the huge women exploitation.
Never going to happen. If you are advertising clothes, you put them on attractive people because that's what sells. People like to see beautiful people: it is human behaviour. It's not just in adverts, it is in real life.
Dove did a series of ads a while ago featuring "real" people. I had a lot of respect for what they were trying to do and it may have worked for them as a novelty but I doubt that it would work generally.
TBH I'm not sure why we would think differently with respect to attractiveness as we do to other attributes that we are born with. The best intellectual jobs are given to the most intelligent people by and large. Would we be that naive to think that the most attractive people wouldn't be doing jobs that benefit from being the most attractive?
Re: 'what wasn't specifically mentioned'
> Yeah, that's what we meant by: "That doesn't quite match up with the US adult population."
Gotcha, and perhaps I should have been more clear that I wasn't criticizing the article, but the committees' comments.
> ...whether it's too much or too little.
I guess it is subjective as to whether or not it is too much or too little. If a particular ethnic culture has a propensity for producing a larger or fewer number of entrepreneurs then we should expect more or less representation in the figures.
I suspect that the truth is complex and involves a number of factors in varying magnitudes including racial bias on the part of the investors and the cultural underpinnings of the racial groups. As I indicated below, that Asians are punching well above their population weight in terms of successful funding scorns the simplistic idea that this is all about pro-white bias.
I still find it bizarre that some people believe that domination by white people in these areas in a country that is majority white is somehow strange or unexpected. ¯\_(ツ)_/¯
"a larger or fewer number of entrepreneurs"
Yeah, that did cross my mind. How many people in each bracket want to start their own business, and how many would consider taking VC money?
But then how many don't even consider it because of other effects... it feels like a complicated puzzle of many moving parts.
C.
In other words, they're wondering how they can "force" failures to be successes just because they aren't white males. Unfortunately, customers rarely even know what CEOs and management look like, and really don't care.
Failures like Facebook, ibm Netflix are run by white guys. Successes like Microsoft, amd, nvidia are run by Asians.
Never bet on the white guy in tech (except tim)
How can we make the government
less white and male asks the VC industry