A new plan for promoting diversity in tech – ProWellTech
It’s no secret that the tech world struggles with diversity. Women, African Americans and Latinos respectively comprise 33%, 8% and 7% of the total tech workforce and just 20%, 5% and 5% of its leadership, despite evidence of a correlation between diversity and success.
As an industry, tech has succeeded in normalizing the topic of workforce diversity, and while the results are slow coming, there is movement, and that’s worth acknowledging.
But there are other ways we should be thinking about increasing diversity in tech, and that’s on the cap table. The secret is that it’s not actually hard to do, but it isn’t the norm yet. We did it at my company, and it’s worth demystifying the process so you can do it, too.
People like me don’t get hired — or funded
Before we get into it, it is important to understand something often called “people like me” bias. Human beings unconsciously relate to, and therefore choose to work with, people that look and think like they do. It’s a cognitive bias that is hard-wired into our evolution, and it’s extremely hard to overcome.
Investing in female- and minority-led startups will naturally create more diversity in startup cultures because “people like me” will start to reflect the diversity of those companies’ founders. It’s not particularly shocking, then, that according to Solv’s 2021 EEO report, we are 45% female, including roughly 33% of our technical teams.
The problem is that “people like me” also affects who gets funded in the first place, not just who gets hired and promoted within a startup. Among venture capital partners, 80% are men, and they are overwhelmingly white. Women represent just 13% of U.S. venture capital partners, and African Americans and Latinos make up just 3% each. Unsurprisingly, while 40% of new startups had female founders, they received just 2.2% of all 2020 venture capital.
As it turns out, we don’t just have a diversity problem in tech employment. We have a diversity problem in tech investment as well.
It’s time to take a new approach
What if the key to achieving diversity in the startup world was extending tech investing opportunities to more women and minority investors? Let me spell it out: Making room at the (cap) table for those who typically have not had such access enables wealth creation. And with wealth creation comes the capacity to invest in other companies and founders, or to become entrepreneurs themselves.
At the closing of our last financing round, I called a longtime friend, investor and thought partner, Kara Nortman, to celebrate the moment. I was emotionally done with fundraising and ready to get back to building my company, but she was direct and unapologetic: “We’ve talked about cap table diversity for a long time. You have an opportunity to open up some space in this round to women and especially women of color. If you say yes, I’ll help you make it happen.” With her push and inspiration, that’s exactly what we did over 10 days.
We set up a special purpose vehicle (SPV) focused on female investors. We reached out through emails and text messages to the female angel investors in our network and asked everyone to invite at least one woman of color who is an accredited investor to consider investing in our round. Then we held two Zoom meetings and delivered our pitch, just like we would for any other investor. Looking at this group, I saw the people who actually use our platform, and I knew immediately how powerful this approach could be.
To be clear, this was not just a publicity stunt or token gesture of corporate social responsibility: We raised $3.5 million from this group over the course of those 10 days. Sixty percent of the SPV investors were women of color and one-third of them had never made a venture investment before.
Here’s how you can do this, too
So you care about cap table diversity and want to make it happen? Good! We’ve already “won some and learned some” on this, so here’s my advice to help you get started:
