More and more people are starting to realize that investing in diverse founders (and diverse check writers) is a smart business decision. Female founders and Black founders are raising record highs. More female investors are writing checks. Yet we continue to see the same dismal numbers about funding distribution.
Just 2.3% of venture funding goes to female founders in the US.
Unconventional Ventures found that less than 10% of all funds deployed in the Nordics goes to female founders.
Atomico's report found that female founders received 1.1% of capital, and ethnically diverse teams received almost the same percentage in Europe.
But female founders out-perform their male counterparts by 63%.
And according to Pitchbook, women make up only 15% of general partners (GPs) at VC firms.
Year after year we read these statistics, but the same call to action always follows: invest in more diverse founders. Encourage more women to become investors.
So what is anyone really doing to open up their pipelines, meet underrepresented founders, and write them checks?
Because it seems like a lot of investors are just doing what they've been doing: waiting for their traditional pipelines to feed them the legacy dealflow that they know.
If you feel like you're trying, but for some reason you still can't find diverse founders, I want to talk about some strategies anyone can implement. And it all comes down to being intentional about diversity.
Tell Diverse Founders You Invest in Them
Many investors (especially VCs) say they invest in "disruptors," "innovators," "creatives," or other colorful yet nondescript titles.
"We back people who want to make the world a better place." So...you invest in everyone who identifies as a a good person?
Yes, anyone can be those things, regardless of race, gender, ability, sexuality, or socioeconomic status. But not all founders use those words to describe themselves. And that language also doesn't clearly communicate that you want diverse founders to apply.
Just like job descriptions, the language on your website may be less inclusive than you realize. So consider how else you can attract the type of founder you want to support.
A statement could be as simple as "We invest in diverse founders disrupting the supply chain." Or clarify on your contact form: "We are open to cold outreach from first-time founders." Make it clear that you want to hear from founders who are historically overlooked and may not yet have the network or knowledge to navigate industry jargon, but has what what it takes to build a big company with meaningful returns.
Attend Events for Diverse Founders
We usually attend events that are clearly relevant to our sector and stage. For example, a seed consumer tech investor probably won't find much value at a conference focused on big agriculture. A bootstrapped founder based in Detroit probably won't attend an accelerator that's focused on northeastern startups. It's time to get outside of your bubbles and get over stranger danger to expand your networks.
If you don't work in diversity and inclusion, you may not think a D&I conference is for you.
But it is.
So is a conference for Black founders, female founders, and queer founders. Sometimes they will specifically state that only members of those identity groups may attend. But events that center around interests of diverse groups are a great place to expand your network and your pipeline.
I recently was invited to and attended a lunch for Black founders, because the organizer knows I proactively seek out investments in diverse founders. Make your intention known and they will find you, especially if they believe it's not just politically correct posturing!
It's also a great opportunity to broaden your knowledge about what problems or solutions these demographics encounter. Even at large conferences, we still tend to congregate with people who look and think like us. An alumni network may organize an activity, or an organization will set up a cocktail hour for women in tech.
There's nothing wrong with being in spaces where we feel comfortable. But if you truly want to meet diverse founders to invest in, you need to step outside your existing circles.
Host Open Office Hours
Underestimated founders are hungry for information, but so much industry knowledge is perceived to be kept behind closed doors and velvet ropes. Open office hours give people an opportunity to ask their burning questions in a less public space.
There are a couple ways to do it. You can host a group session, which means that attendees can hear questions they didn’t even think to ask and meet other like-minded founders. The downside, however, is that there’s less opportunity to make meaningful connections depending on the size of the group.
I started a daily Clubhouse room soon after the platform launched, and we easily had over 1,000 attendees on some days. We'd often remind founders to remember that it's a quasi-public forum, so we couldn’t give in-depth, personalized advice. However, we frequently received feedback that the value founders got from our room was life changing. That felt hugely rewarding.
Alternatively, you can offer one-on-one sessions that people can register for. And make it clear that you take diversity into account when accepting office hours appointments (see the first tip!). With an application process, you can ensure founders have equal and equitable access to your time.
For example, I ask founders to fill out a form to make a free mentorship call. It gives me an idea of what they’re building and how they need my help before we meet.
The only drawback to hosting one-on-one calls is that you’ll need to set aside a lot of time for them. So consider your bandwidth before decided which type of office hours you want to offer. It’s a disservice to both yourself and the founders if you can’t bring your full self to the call.
Expand Your Social Circle
We all joke about how hard it is to make new friends as adults, especially during a pandemic. But meeting new people keeps life interesting! So make an effort to build relationships with different people.
For example, when you’re networking at an event, make an extra effort to include people in conversation if they haven’t had a chance to speak. Oftentimes, people who know each other or have things in common will dominate a conversation. Be conscious of who is (and isn’t) sitting at your table, and moderate accordingly. Invite people into the conversation.
Another suggestion is to put yourself into places where you may be the minority. Whether it’s a cultural event or professional meetup, show up and be ready to learn! And while it may be tempting to bring a friend, challenge yourself to go alone so that you have to talk to other people.
But always be conscious and respectful of the purpose of the event. If it’s intended to be a space for healing or inter-community conversation, ask the organizer whether it’s appropriate for you to attend.
Building relationships with people of truly different backgrounds will not only open your mind to new ways of thinking, but also help you understand why people are building solutions for their communities. And this, ultimately, will help you understand and meet more diverse founders.
Connect with Other Investors Focused on Diversity
No one can single-handedly increase diversity in the startup ecosystem.
There are a lot of outspoken investors and advisors who are open about their work as well as their dealflow. Look at lists compiled by numerous news sources such as Insider, VentureBeat, or Female Entrepreneurs. Follow social media lists recommended by leaders in the ecosystem.
And in Angel Club, you can find a number of members and people in the investor database who either invest in underrepresented founders or are underrepresented themselves.
Diverse investors are bound to lead you to great investment opportunities!
BONUS: Find Startups on Crowdfunding Sites
Even if you're accredited, you can oftentimes find diverse founders via crowdfunding since many don't yet have the fundraising networks at the beginning of their journey.
Republic.co and WeFunder, for example, help you identify startups led by minority founders. Seed&Spark proudly states that the majority of their projects are female-led.
Diversity Requires Work
Just by being here, you've made a commitment to supporting underestimated founders. But this is just the beginning of the work.
Many diverse founders, especially those who come from economically challenged communities, face barriers that investors don’t often consider. For example, the “friends and family” stage of fundraising isn’t a practical option for many diverse founders. (Although, I constantly advise founders that this group includes people who've seen your work and know what a rockstar you are. It's not only your inner circle.) When a founder has a very limited network of people who are in a position to invest, being an early stage investor can be can be risky yet incredibly rewarding.
Beyond making financial returns, you can make a positive impact, be a partner throughout the growth of the company, and invest in follow-on rounds. You can open doors to warm introductions so that these founders don't have to rely on cold emails.
But you won’t see that impact if you don’t make the effort to meet women, people of color, neurodiverse, and LGBTQ+ founders.
If you want to connect with more diverse founders and investors, I’m happy to introduce you via my network and set up office hours for you in Angel Club.