Silicon Valley's Lack Of Diversity In Venture Capitalism


The year 1965 changed the cultural and technological landscape of the United States as it was the year that the Immigration and Nationality Act was passed. As a result of the passing of the act, the number of migrants coming into the United States from Asia, Africa, Latin America and the Middle East increased overnight, particularly to the south of the San Francisco Bay Area which later became known as Silicon Valley.

What came after the passing of the act was the number of tech companies such as Intel and Apple establishing their presence in Silicon Valley at the beginning of the 1970s. The presence of these tech companies also meant the expansion of the workforce in high-tech and production, especially after the end of the Vietnam War where thousands of Southeast Asian refugees gained employment in the region’s rising tech industry shortly after settling in Northern California.

Over 40 years have passed since the rise of the tech industry in Silicon Valley and yet, it seems the region's venture capital industry is still lacking in cultural diversity. According to an article from TechCrunch, one percent of venture capitalists are of Latinx descent while African Americans make up three percent of venture capitalists.

Richard Kerby, a partner at Equal Ventures, compiled data and results over the past two years that relate to the lack of diversity in Silicon Valley venture capitalism. Kerby noted that while African American venture capitalists grew from two percent in 2016 to three percent in 2018 and female venture capitalists are 18% in 2018 compared to 11% two years ago, the percentage of Hispanic venture capitalists remained the same.

Kerby had also mentioned that the venture capital industry is more insular than it had ever been given the lack of diversity. One example of how insular Silicon Vally's venture capital industry can be, according to Kerby, "with 82 percent of the industry being male, nearly 60 percent of the industry being white males, and 40 percent of the industry coming from just two academic institutions, it is no wonder that this industry feels so insular and less of meritocracy but more of a mirrortocracy.

One notable aspect of why the venture capital industry lacks diversity is because of the universities that most of the venture capitalists had attended, 40 percent of them either attended Harvard or Stanford. Kerby emphasized this matter because most people generally want to work with those who they are more alike with, "Everyone wants to work with those they are most similar to, and education, gender, and race are attributes that allow people to find similarities in others.

The lack of diversity also affects startups that are owned by women (and even men who are of color) as most venture capitalists have been conducting a strategy called “pattern matching”. This strategy is aimed towards aligning venture capitalists with startups and their founders who operate exactly like the venture capitalists in terms of similar methods and behaviors.

If the venture capital industry remains mostly composed of white males, it’ll mean that white male venture capitalists will less likely to be working with those who do not look like them. Having a less diverse venture capital industry can also mean missing out on a wide variety of collaborative ideas that may help some companies become successful.

On December 12, 2017, New York-based magazine and multi-platform publisher, The Atlantic, hosted an event in San Francisco titled, "Inclusion In Tech", that addressed the challenges of women, people of color, and underrepresented groups in the tech industry. Some of the challenges that were discussed at the event include the low count of female and minority recruits and the increasing number of scandals committed by venture capitalists and other prominent Silicon Valley tech executives.

Some of the sexual harassment scandals include the case of Sherpa Capital's co-founder Sherwin Pishevar, an early investor of Uber, who resigned from the venture capital firm last December due to allegations of sexual harassment and assault by various women. Another example of a venture capitalist landing in hot water is Binary Capital's co-founder Justin Callback who resigned in June 2017 due to allegations that he made sexual advances toward female entrepreneurs.

The lack of diversity and inclusion in work environments also affects some of Silicon Valley's most prominent tech companies. One current example is Google in which according to an annual diversity report that the company always releases, 

    The percentage of female employees rose by .1 percent to 30.9 percent. The percentage of Asian employees grew by 1.6 percent to 36.3 percent. The number of black and Latino employees grew by .1 percent to 2.5 percent and 3.6 percent, respectively.

 In support for an inclusive venture capital world, a coalition of 400 Silicon Valley entrepreneurs recently founded a group called, “Founders for Change”, which aims to promote a growth in the number of female and minority venture capitalists. The group’s main goal is to garner awareness of the tech industry’s lack of workplace diversity and its members include Dropbox CEO Drew Houston, Airbnb CEO Brian Chesky and 23andMe CEO Anne Wojcicki.

The efforts of groups and organizations such as Founders for Change and The Atlantic are helping the cause for a diverse venture capital industry that should welcome prospective venture capitalists based on their ability and not based on their race. The most important thing is that the other venture capitalists should hopefully be supportive of the increased diversity that female and minority venture capitalists will bring to the industry in Silicon Valley.