The Investment & Inclusion Series

Let’s Make it Non-Optional to be Inclusive

Written by Lisa Frusztajer, Investor in Residence at The Capital Network

In 2020 and 2021, The Capital Network has been partnering with the Venture Capital Inclusion Lab at Brown University’s Nelson Center for Entrepreneurship for a series of conversations about Investment and Inclusion The most recent of these, entitled, Amplifying Funders of Color, featured four investors of color who are leading new funds by and for new majority investors, training and empowering the next generation of funders.

Each panelist shared compelling stories about their professional and personal journeys to become leaders who are building and mobilizing networks, knowledge and capital. And each provided specific actions we can all take to make funding more equitable.

Courtney Scrubbs

Founder, The DAWA Investment Network

Courtney is a corporate attorney who works with life sciences companies. Courtney’s initial exposure to venture capital occurred earlier in her career when she was “blown away,” Courtney says, after meeting three physician-entrepreneurs, who, just three years after starting their company had made enough money to set aside millions of dollars to benefit their children.

Courtney’s medical school training meant that her network was largely made up of African American physicians. It struck Courtney that there was no “difference in intellect, capacity, entrepreneurial skill, drive or resilience” between the physicians she knew and the three white physician-entrepreneurs who got the big payoff from their company. “It was exposure.”

To change that, Courtney founded the DAWA Investment Network to educate black women in medicine, from medical students to retired practitioners, about investments ranging from publicly traded stocks and 401ks, to Venture Capital and angel investing.

“Before we can consider seeking funding, or being funders, we have to know that this world exists and how it operates, and we need access.”

Eli Velasquez

Board Member at Angel Capital Association, Co-founder & MD at Investors of Color Network

Eli had several experiences that led him to co-found the Investors of Color Network. One was managing an angel investor network, made up mainly of older white men, located in a US / Mexico border town, which is 80% hispanic. None of the angel group’s investments backed entrepreneurs of color. “With almost 1,000,000 people [ in the community ], 80% of whom were Hispanic you would think you could find a deal that looks like the community.”

Another was working in a West Texas community where the demographics were the opposite — 80% white. There Eli recalls talking with a young white male who remarked how hard it was for him to become an investor. “If he was having trouble, how would I have connected with the investor community?”

“From that point [ I realized we need more entrepreneurs of color . . . ] — they are not hard to find . . . We need more investors of color . . . And we need to connect them. That’s why we founded the Investors of Color Network.”

Vonetta Young

Advisor, Investment Readiness + Fund Formation at VY Advisors & Board Member 1863 Ventures

As a member of a Private Equity fund investment team, working to invest on behalf of public pension plans, in two years in this role, Vonetta met just three black male investors, one or two who were Latinx, and no black female investors.

This experience led Vonetta to the undeniable conclusion that, “. . . if we believe people invest in people who look like them . . . no wonder capital is not going to founders of color. I had met no General Partners of color.”

Vonetta’s current business empowers people of color to break into institutional investing as entrepreneurs and as fund managers.

“Access to capital is a civil rights issue. A significant way to address [ inequities ] is to have more investors of color in the pipeline.”

Samer Yousif

Chief Of Staff at BLCK VC & Co-founder at Investors of Color Network

Samer’s first exposure to investing was as a founder, launching - as a college student - a fintech company that led him to learn a lot about financial regulatory compliance. “Through that,” he saw “how government policies and legislation can either help or hinder entrepreneurship.”

“Wealth creation,” Samer observed, “has been aligned with systemic approaches ensuring that people of color and women have been left out.” Private investing creates intergenerational wealth, and has the power “to change the entire trajectory of a community.”

Building angel investment networks in emerging markets proved, in Samer’s mind, that “becoming an angel investor and a successful angel investor can happen anywhere and it can be done by anyone . . . [ it ] just requires the right training, education and networks.” That led Samer and panelist Eli Velasquez to found the Investors of Color Network, expanding communities of investors of color.

“Let’s make it non-optional to be inclusive. We need accountability.”

The panel was moderated by Banu Ozkazanc-Pan, Founding Director of the Venture Capital Inclusion Lab at Brown University, and hosted by Marie Meslin, The Executive Director of The Capital Network.

Capital invested in entrepreneurs of color is grossly out of proportion with current demographics. Most dollars go to white males.

By now, we are all too familiar with the egregious funding imbalances in venture capital. African Americans account for less than 1% of venture-backed founders, and LatinX founders less than 2%, according to a study conducted jointly by RateMyInvestor and Diversity VC. Funding is orders of magnitude out of step with the US population, which, in 2019, was 13% Black and 18% LatinX, according to the US Census Bureau..

Meanwhile, we have ample evidence suggesting that diversity produces better outcomes, including more innovation, and, on average, better financial returns. A key driver of how capital gets allocated is the profile of people making funding decisions. A Kauffman Foundation study found, for example, that “Female VC partners invest in 2x more Female Founding Teams.”

According to BLCK VC, “More than 80% of venture firms don’t have a single black investor.” BLCK VC further points out a disturbing paradox: “Venture prides itself on being progressive. We disrupt industries. We work fast and break things. We fund dreams and create jobs. Yet, venture is one of the most homogeneous and exclusive clubs there is.”

The VC Industry is aware of funding inequities, but has been slow to act. Diversity benefits all. But the Venture Capital industry remains stubbornly white-male dominated. According to Carla Harris, Morgan Stanley Vice Chair and head of the firm’s Global Wealth Management and Multicultural Client Strategy Group, although venture capital firms know that “diverse entrepreneurs are a good investment . . . three in five VCs [ say ] that prioritizing investments in women and multicultural entrepreneurs is not a firm-wide priority.”

What will it take to change the status quo?

Panelists are driving that change. Each shared recommendations for how we can all make a difference:

Join communities committed to more equitable funding. Be pro-active in mobilizing those communities.

We don’t have a pipeline problem. But networks are siloed and disconnected. Samer Yousif advises, “Regardless of how you identify, be active in networks that are allocating capital more equitably.” Changing the landscape can be arduous, but the more engagement we have, the faster we will see improvement.

Set concrete goals. Be accountable for achieving them.

“Have a solid idea of what you want to achieve vs. what you don’t want,” says Vonetta Young. Don’t dwell on challenges. Young reminds us that we know what the problem is. Ample data underscores inequities – and shows us that addressing funding imbalances benefits all. To move forward, we need to set targets and work towards hitting those targets.

Investors: Take action, be responsive.

A call to action to all investors: When a funder of color calls, pick up the phone; when she e-mails, return the e-mail; when he sends you a deal, look at it. Velasquez reminds us that, day by day, we can all break down barriers. These actions are not difficult to take, but we need to be consistent and deliberate about ensuring that all participate in the investor ecosystem.

Be part of opening doors for investors who are not part of the ‘incumbent’ system.

It’s never too early to educate all – starting at very young ages – about how the capital markets work. “People need to know that [ the early-stage funding ] world exists and how it operates,” says Courtney Scrubbs. We should not take for granted that everyone knows how these systems work. Scrubbs continues, “You have the power to make an impact.”

Institutions need to invest in under-represented founders.

Large institutional investors, and pension and retirement funds in particular, have a lot of influence on capital flows. Today those institutions don’t allocate capital in ways that reflect the populations they serve. Policies to reallocate institutional assets to align resources with demographics would represent significant progress.

On one hand, panelists are encouraged by growing numbers of funders of color, and the expansion of resources and networks for investors and founders of color. On the other hand, change is happening slowly.

Let’s make it “non-optional to be inclusive,” says Samer Yousif. “We need accountability.”

We’ve known for a while that addressing funding imbalances benefits everyone. We don’t need more data to show us why it’s important. It’s time to take action.

Learn more about the Investment & Inclusion Series