Investing in Diversity

Diverse Workforce
(Image credit: Jopwell from Pexels)

In 2018, U.S. companies raised $130bn in venture capital funding, yet only 2.2 percent was invested in female-founded companies and less than 1 percent in businesses founded by women of color. To shine a spotlight on this situation, Tiffany Moore, senior VP, Political and Industry Affairs, Consumer Technology Association, hosted a session called “Investing in Diversity,” where she welcomed investors who are working to change those statistics.

Included on the panel were Elizabeth Galbut, managing partner, SoGal Ventures; Kim Folsom, co-founder and CEO, Founders First Capital Partners, LLC; and Chelsea Morris from Rethink Impact. Each of the represented companies work with women and minority founders to help them be successful and create innovations. But, as Moore put it in her introduction, this is not about charity—it is about making money. Something these underserved founders have proven to be extremely good at.

When discussing why it is difficult for female and minority founders to get capital for their companies, lack of representation was targeted as a main cause. “As a founder of a tech company, I was fortunate,” Folsom. “But I was always the only one in the room. This needs to change.”

“Ninety-four percent of venture capitalists are men,” added Morris. “There are not a lot of women at the investment table. Seventy-seven percent of top firms had never hired a woman. How do you pitch your business?”

[How Diversity Will Ignite Growth in the AV Industry]

Another point the panel agreed on is that it is definitely not a pipeline issue. “Deal flow is not a problem,” said Galbut. “We hosted a global pitch competition and received 2,000 applicants in 60 days with at least one women or minority member on board. Access to networks and representation on the other side are the problems.”

Another advantage to investing in diverse startups is that if they start diverse, they stay that way as they grow, eliminating the need for companies to redefine their corporate culture for inclusion and equality.

“Culture is ingrained in a company when you get to 10 employees,” said Galbut. “It is tough to affect culture backwards. Hire toward that at the start. We have companies that within three years have 250 employees, and they don’t have to have employee resource groups because they have an inclusive workforce.”

Folsom added, “You don’t have an equal-pay gap in diverse-founded companies.”

Venture capital funding is tough enough to secure, but especially so for women and minorities. The key, according to Folsom, is to be prepared before you meet with potential investors. “There is so much content out there,” she said. “Find companies like yours and find what capital they used. Reach out to them. Have knowledge before you meet the investor. There are so many great accelerators out there—I recommend you use them to help you be better prepared to successfully grow your company. It is not just about the money—it’s about the impact you will make.”

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Anthony Savona is vice president of content creation at Future U.S. He writes and edits stories for Systems Contractor News, Residential Systems, and TWICE, amongst others.