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The venture capital industry has lacked diversity and inclusivity. In this first episode, we discover how innovators are shifting the industry to include all people of all backgrounds.
Welcome to the Venture Capitol podcast, the place where politicians can impact the startup industry nationwide. Join NVCA President & CEO Bobby Franklin for a unique podcast that looks at public policy through the eyes of America’s venture capitalists — the people who are investing in the high-growth companies of tomorrow. This show brings together VCs, policymakers, and policy influencers to discuss and debate issues that affect our nation’s economic future.
Bobby Franklin (00:06):
Welcome to the Venture Capital Podcast, where there's an O in capital as in Capitol Hill, the seat of the U.S. government, the place where politicians can impact the startup industry nationwide. I'm your host, Bobby Franklin and you're tuning into our very first episode. We are excited to bring you a unique podcast that looks at public policy through the eyes of America's venture capitalists, who are investing in the high-growth companies of tomorrow. This new show brings together VCs, policy makers, policy influencers, to discuss and debate issues that affect our nation's economic future. On this episode, we're going to talk about why and how enhancing diversity will make our industry a better version of itself.
Bobby Franklin (00:56):
Joining me for our very first episode of the Venture Capital Podcast is my colleague, Maryam Haque, the very first Executive Director for Venture Forward, our connected organization that is galvanizing an internal industry-facing focus on DE&I. Maryam, thanks for joining us.
Maryam Haque (01:15):
Thanks so much for having me, Bobby. I'm excited to be here and talk more about diversity in the industry.
Bobby Franklin (01:20):
Well, first I think what we should probably do is help our listeners understand what Venture Forward's all about and kind of how we came together to put this together. And, I guess, this is going to be a little bit different in terms of a podcast interview, because I'm a bit of a participant in this as well. So you may have questions for me, or you can remind me to share things with our listeners, and I can ask questions of you. But I think it's a tag team to make sure everybody understands what we created, why we created it and what we're doing. So maybe just start us off here and give some background here.
Maryam Haque (01:58):
Yeah, well, I mean, I think the crux of Venture Forward really stems from the fact that our industry has lacked diversity and inclusivity for its entire history. And that's no fault of any one particular area or firm or person, but it really has just been how the industry has evolved over the past 50 years. And recognizing that we have under representation when it comes to women, people of color, and other marginalized communities, this industry just hasn't truly been able to capitalize and maximize returns and impact and opportunity given those blind spots that are being missed.
Maryam Haque (02:38):
And so our mission, at a very core level, at Venture Forward is to change that. We want to increase the diversity of all of the investors to have more women, to have more people of color, and to really help take the industry to the next level of really being able to be the best version of itself, to really maximize returns, maximize impact and at the end of the day, really maximize innovation, because that's really what venture capital is aiming to do as an industry overall.
Bobby Franklin (03:07):
That's very well said. I remember when you and I were talking about how we were going to get this off the ground. And as we were talking to some of the folks that gave us support to get it off the ground, the conversation was always around, "Well, wait, you have NVCA. Why do you need another organization?" And I remember saying to many of those folks that, "Look, if you wake up every day and you're thinking about a lot of the public policy priorities that NVCA focuses on and what's happening in Washington, DC, it's really hard to then prioritize how you make sure the industry, as we like to say, becomes the best version of itself." And I think that's just a very important point.
Bobby Franklin (03:54):
Under the way the IRS rules are set up, NVCA and Venture Forward are connected organizations. We're all kind of part of the same family. As I like to say, it's one team and two platforms. One wakes up and thinks about public policy to make sure entrepreneurs have the right rules of the road so they can go create new products and services. And the other thinks about how the industry can better itself, right?
Maryam Haque (04:21):
Yeah. And I think, Bobby, you know this a lot better than I do, but the breadth and depth of the public policy issues that the industry is facing over the past few years and will continue to face over the next few years, it's growing. And NVCA was founded almost 50 years ago, I think our anniversary is coming up very soon, to lead advocacy and public policy efforts. And it's going to continue to do that. Those are really important elements to ensure that we have a healthy venture ecosystem and startup ecosystem. However, we recognize at the same time that there are areas that the industry can improve on, that it needs to really have long-term, sustainable resources to address these issues particular to diversity. And so it's actually a really common thing in DC for a trade association to have a 501(c)(6). So in that case, it's NVCA. But then also have a sister organization, which is a 501(c)(3), in this case it's Venture Forward.
Maryam Haque (05:21):
And so together we're sort of very complementary to one another to help the industry in terms of its health and ensuring that it is making the impact that it should be making, but just approaching it a slightly different way in terms of one focused more on advocacy and Venture Forward focused on really help being the industry from within to think about diversifying. And within that, we also are very focused on education, because we know that historically venture capital has been a small industry and sort of concentrated in certain geographies and amongst certain people, depending on where you went to school or who you knew. And so just trying to democratize some of that education through some of our programs and really to help anyone who wants to break into this amazing industry and make an impact and has a great idea to just be able to facilitate that a bit better is really our goal.
Bobby Franklin (06:19):
Let's talk just a minute about VC. Let's talk about entrepreneurs. Part of when we think about diversity, it's really all parts, including geography. And the theory is that if you really look closely, there are entrepreneurs everywhere. And there are entrepreneurs that are of all genders, and races, and ethnicities, and backgrounds, and orientations, and all that kind of stuff located all over the country. And we know, because we put out data about this, that a lot of funding typically goes to just a few geographies. And we're trying hard to make a difference and make sure that gets spread out across the country. But just having money in different places is not enough.
Bobby Franklin (07:08):
I mean, you actually, because we all have unconscious bias and we've gone through unconscious bias training a number of times, what we know is that check writers are probably more likely to write checks into people that look like them, or people that live close to where they are. Particularly, if you're kind of early-stage angel investing, seed investing, things like that, you want to be close to those entrepreneurs in their first efforts at building a new product and service. So maybe you can talk a little bit about the way we think about it from the Venture Forward perspective and how we really are leaning on the diversity angle.
Maryam Haque (07:46):
Our goal since the beginning has really to been approach diversity through an intersectional lens. And what that means is it's recognizing that an individual can belong to, or be part of, multiple underrepresented demographics. And the barriers or the challenges that one might face from coming from maybe multiple demographics, underrepresented demographics, can just inherently produce more challenges to entering the industry. And so, what do I mean by that? I think a good example is if a white woman trying to raise a fund in the Bay area is going to face a unique set of challenges than say, a black woman in the Midwest.
Maryam Haque (08:24):
And so we really want to recognize that sort of the elements that you mentioned, gender, race, ethnicity, geography, these are all elements that we want to ensure that we're being more inclusive to provide opportunities for folks from these under upper underrepresented groups and backgrounds, to be able to access venture capital. And you raised a good point there, Bobby, around everyone has unconscious bias. And I think more so in this industry, there has been a tendency to gravitate towards who you know, people who look like you, people who went to the same school as you. And that relates to hiring or investing decisions. We've seen some data. I think there was a report that PitchBook put out, where they found female investors were twice as likely to invest in a female CEO. We pulled some data from Crunchbase that helped us find, I think, black-led funds, high-portfolio companies led by black founders at a rate of four times more than other investors.
Maryam Haque (09:25):
And so our theory, and we know this to be true, is if we diversify the check writers and the investors in our industry, it's going to lead to a more diverse set of entrepreneurs raising capital. And that's why our focus really has been around the investors in our work. And that part of it is that NVCA has those really great relationships with firms and has established that connection through the advocacy and public policy side to help us sort of leverage those connections and really focus and double down on diversifying investors.
Bobby Franklin (09:54):
Well, one of the first things we did, and this was even before we launched Venture Forward, we took the old adage that you can't improve what you don't measure. And a lot of studies, when I came to the industry in 2013, were really, if you peel back the onion, it was an intern going to look at pictures on websites. And I never thought that was a very reliable data source and a lot of subjectivity there. So could you talk a little bit about what we do with the Human Capital Survey and our friends at Deloitte?
Maryam Haque (10:27):
Yeah. This has been a really big undertaking. And it's one of our primary initiatives at Venture Forward, which is to have the data to track and measure the industry's progress over time. And that's the only way we can see whether or not we are making progress or are improving. And VCs and companies are all about KPIs and tracking where we're going and are we doing a good job, and this is exactly what we want to reinforce with the industry as it relates to diversity.
Maryam Haque (10:55):
And so we went down the path with Deloitte back in 2016 to do the first survey that is tracking the demographics of venture firms, collecting data on everyone who works at a firm from managing partner level all the way to Finance, Operations, Marketing, Admin teams. Collecting data on gender, race, ethnicity, age, education, graduate degrees in several different elements, disability status, veteran status, et cetera, and collecting all of this at an industry level to just kind of understand, okay, where are we as an industry today? And so not surprisingly in 2016, we saw that we are not where we need to be at all. And it was a baseline to start with. And we've now refreshed this survey every two years since then. We're planning to be back out in the market this year, doing the fourth version of the survey.
Maryam Haque (11:47):
Not only do we collect the demographics of VCs and investors, but we also actually are capturing data on how firms approach talent management and talent recruitment practices, because that's actually a leading indicator for some of those demographics. And what I mean by that is, are firms even prioritizing diversity? Do they have a diversity strategy? Do they have someone on their team tasked with diversity? And what we found is that most firms don't. They don't have someone. And we've seen some progress over the past few years where firms are prioritizing this a bit more. And our hope is that with those increases and progress, it will lead to more diversity amongst the investor base. But honestly, it's slow.
Maryam Haque (12:30):
As many of us in the industry know that our in is a very long-term asset class. It takes a long time to even just know if you've been successful. And so our hope is as we go back into the market this year, we'll see some progress. But just in terms of when we did the survey in 2020, 16% of investment partners were women. 3% of investment partners were black. I believe also 3% are Hispanic. And so these are numbers that are sobering, but I think are ones that we really need to just recognize are the facts. And we need to see what we are and can be doing about it.
Bobby Franklin (13:08):
I like telling policy makers in Washington about Venture Forward. And one of the things I love to highlight is the education component and how we're trying to democratize access to information and education. I grew up in little town in Arkansas. And it's not as if it was the backyard of Stanford in the Bay area or the backyard of places in New York or Boston, where so much of the venture capital activity happened. So it would've been really hard for me to learn about venture capital. Of course, I'm dating myself in lots of ways in that regard. But talk to us about kind of the education component and what we created here.
Maryam Haque (13:45):
Well, similarly, I grew up actually right next door to Arkansas, in Mississippi. And I had no idea what venture capital was until I moved out to the Bay area in 2007. Then if you don't know about the industry or you don't know someone in the industry, you just probably don't know about this incredible, powerful sector of our economy that doesn't get talked about much in the news. If you take that one class in business school on venture capital, you probably know about it. But otherwise, you just don't. And so we recognized this when we were launching Venture Forward and realized we have a role to play here. And creating something that is democratizing access to venture education, in the long term, can make a huge impact. So we've created this program called VC University. And it is jointly produced with Venture Forward and NVCA as well as UC Berkeley.
Maryam Haque (14:37):
And so having a really strong academic institution partner has helped us to tackle this program from the point of view of covering really technical topics as it relates to VC, things around finance that you just have to know in terms of how term sheets work, and distributions, and calculating, and doing doing diligence on a startup, and kind of all the fundamentals of investing. But where we also layer in some cool additional content is actually having interviews with investors, really talk about, "Okay, that's how you're supposed to do things on paper. But this is actually how we do things day to day, and how we evaluate companies, and how we think about portfolio construction, and follow on financings, and diligencing a company." And so we've been really excited to see the interest in this program.
Maryam Haque (15:26):
It's been amazing to see some of the aspiring investors come through this program who reach out to us and say, "Hey, I just got a job at so and so firm," or, "You really helped me break in and now I'm raising my own fund." And we started this program in 2019. We've had now nine sold out cohorts. We've had about 1,500 people come through, almost 300 full scholarships that we've awarded to aspiring investors from underrepresented backgrounds. And we're really excited to just see... We have our next cohort starting in a few weeks. And so this is a program where I encourage anyone who is interested in breaking into venture to really check out. Or if you're an experienced VC, we're always looking for mentors or scholarship sponsors. So there's a lot to get involved with. And it's a really great program to, I think, help shape the future of our industry.
Bobby Franklin (16:15):
That's great, Maryam. And it's one thing to educate somebody, but as folks in the industry know, it's really hard to raise a fund. And I know one of the things that we kind of think about and talk about is, how can we help somebody that has gotten smarter about what it means to be an investor and work alongside the amazing entrepreneurs to help them take their dream of building a new product or service to reality? What else do we do at Venture Forward to help those folks that have knowledge and are kind of ready to try to go raise a fund?
Maryam Haque (16:52):
Well, there's a lot of inherent risk when it comes to raising a fund. And part of that, or a lot of that, is the financial risk. So if you don't come from wealth, or you haven't maybe been a successful entrepreneur and had a big exit that you can then put towards a fund, that initial step of having the capital to take whatever your big idea is, your awesome investment piece, or your awesome network to be able to just get that off the ground. And we have spoken to a lot of emerging managers over the years. And I think one of the hardest parts of fundraising is just, there's a lack of transparency when it comes to someone who doesn't know the industry that well, to be able to go find a limited partner. Or where do you even go talk to a limited partner to have a conversation about raising capital for your fund?
Maryam Haque (17:43):
And so we created this program through Venture Forward called LP Office Hours. And we've now held this six times over the past couple of years. And the goal here is to bring together a group, typically about 25 emerging managers from underrepresented backgrounds. Set them up to have small or short meetings with LPs in a purely educational format. But it's a way to just have an honest dialogue about fundraising best practices, dos and don'ts for pitching to an LP, how to reframe your pitch, how to think about LP communications, how should reporting work, just everything that goes into the GP and LP relationship that, again, just doesn't get talked about a lot. There's not a lot of transparency, not a lot of information out there. I think the good news is there are now additional or open source things that are sharing more of this.
Maryam Haque (18:35):
But I think LP Office Hours has provided a really unique way to be able to facilitate and convene these and curate these meetings in an educational format. But it's also helping some of these emerging managers connect with LPs they never would've likely had an opportunity to do so. Pre-pandemic we used to do this program in different markets across the country, where there was a local critical mass of LPs. We've done Palo Alto, Boston, LA and DC. And during the pandemic, we've moved this to a virtual format, which is actually great because we're able to reach people from more geographies around the country. And the two ones that we've done virtually have actually been a focus on different LP types.
Maryam Haque (19:19):
So we did a focus on fund-to-funds for one of them. And then we did foundations and endowments. This year we're planning to, hopefully, try to do one in person again, if it's safe to do so. And then do one virtually, because I do think that again, just to try to have it more accessible to more people across the country meets a lot of our goals as well.
Bobby Franklin (19:42):
I think that there's a lot to be excited about with Venture Forward. I really am thrilled to think about where Venture Forward can help drive the industry. And I know when we started, we sort of asked ourselves, "What will success look like?" And for me, it was always that years from now, and I mean years from now, that we can proudly look back and clearly see the fingerprints of Venture Forward. Our hope is that there are all sorts of fingerprints from lots of different organizations that are all trying to do the same thing. We know that there are groups that are focused on certain demographics. There are groups that are focused on certain geographies. And so no one organization can solve this problem. It's too big.
Bobby Franklin (20:32):
But hopefully, we see the progress made. And hopefully, we can see the fingerprints that Venture Forward had on making this happen. I do believe that's possible. Maryam, we obviously can't, this is a 501(c)(3), we can't do this without the support of our donors. Can you tell folks where they could go and make a donation to support this great work?
Maryam Haque (20:57):
We are solely funded by tax-deductible donations made by individuals as well as we have a few corporate donors who we're very thankful for, Silicon Valley Bank, Deloitte and Gunderson Dettmer. For individual donors who might be interested or for VC firms who are interested in donating, I would highly encourage you to go to VentureForward.org and check out the Donate Section. We are trying to be inclusive in terms of the types of donations that we accept, everything from stock to donor-advised fund, et cetera, Venmo. We're not quite there yet in terms of being able to accept Carey. But if anyone is really interested in that option, I think we would definitely be happy to explore it.
Maryam Haque (21:40):
But that's really through our funders and our donors, that's how we're able to make the impact that we have thus far, even just being 18 months since we publicly launched in June of 2020. But there's so much more that we as an industry need to be doing and we as an organization can be doing to help drive progress faster and have it just touch more people. And so with that, I think, I would highly encourage anyone who cares about their legacy, cares about the future of the industry, to really consider making a donation. Any size helps.
Bobby Franklin (22:11):
Well, I appreciate you making that point. And again, VentureForward.org. And there's a nice big donate button at the top of there, so it's very easy to find out how to do so. But don't forget, Maryam talked about other ways that people can be supportive here. We're looking for mentors to help the folks that are trying to get into the industry. Donate a little bit of your time and help the next generation of folks enter this great industry and be there to support the wonderful entrepreneurs that are all across our land.
Bobby Franklin (22:42):
Maryam Haque, thank you so much for joining us today on Venture Capital. And let me just take a personal note to say, thank you for all the work you put in to Venture Forward, to get this off the ground. Your its founding Executive Director. It has so much to accomplish. And I know under your wonderful leadership, we will get there. Thank you, Maryam.
Maryam Haque (23:07):
Thanks so much for having me. I look forward to sharing more progress the next time I'm around.
Bobby Franklin (23:17):
Before we go to our next segment, I wanted to share some exciting data we recently released. NVCA, Venture Forward and the University of North Carolina Kenan Institute of Private Enterprise conducted a study on employment at VC-backed companies. And we found that employment at VC-backed companies grew nearly a thousand percent from 1990 to 2020. That's eight times compared to non VC-backed companies. The report also finds that over 62% of employment at VC-backed companies is located outside the states of California, Massachusetts and New York. Meaning VCs are impacting economies in all 50 states.
Bobby Franklin (23:55):
Resiliency is another striking attribute of venture-backed jobs we found in our report. During the great recession, annual private-sector job growth decreased by more than 4%, while job growth at VC-backed companies increased 4% during the same period. When it comes to VC-backed companies, the data shows without a doubt, they are the MVPs of American business. Policy makers in Washington should recognize the importance of America's startup ecosystem and encourage more VC investment to benefit the overall U.S. economy and ensure the country remains competitive in the global race for innovation.
Bobby Franklin (24:33):
We also want to let you know about some great events we are doing. On March 30th, we are holding a webinar on how to build, forecast and communicate them to LPs effectively. In partnership with our friends at Diligent Equity, we will discuss how VCs handle fund modeling and effectively communicate their analysis to their LPs. Please visit our website, NVCA.org to register for that event. And on June 2nd, we are holding our Annual Leadership Gala in San Francisco, where we meet in person and celebrate the venture industry. We honor those who have made significant contributions to foster innovation, advance technology, and drive new company formation. I hope you'll join us. Please go to NVCA.org to register for the gala.
Bobby Franklin (25:17):
Now, let's move on to our next segment, which features a rising star who has made a big impact in venture in a very short time. Meagan Loyst founded Gen Z VCs, a global community empowering the next generation of leaders in venture capital. She has grown Gen Z VCs to more than 12,000 members since November 2020. Her Gen Z VCs summit included 3,000+ attendees from 71 countries. The group's Mentorship Program includes more than 200 mentees, 41% of whom identify as people of color and 31% women. She is also the youngest investor at Lerer Hippeau, where she has sourced and helped lead three investments working with 12 portfolio companies.
Meagan Loyst (26:12):
I started in venture last September, so September 2020. At Lerer Hippeau, I was the youngest on my team, our first Gen Z hire. And what I realized very quickly is as we're meeting more and more companies that are targeting Gen, Z focused on Gen Z, I'm the target demographic for a lot of those companies. And so my perspective is very valuable. And on top of that, I didn't really know other people in this space, largely because of COVID. I was living at my parents' home at the time. I didn't know many other young people at other venture firms. And so initially, I turned to Twitter to basically just make friends and meet my peers working at other firms. And that spiraled into eventually 71 conversations with my peers all over the world, Gen Z VCs at college funds, angel investors, GPs who've started their own funds and people like me that are just working at venture funds, like Lerer Hippeau, for example.
Meagan Loyst (27:05):
And then I wrote an article about it, basically recapping all of those key findings. What are our favorite trends? What are our favorite companies? How do we think about mission-driven companies? And that was when I coined the term Gen Z VC. And the article just blew up, which was great. I think not many people knew that Gen Z were old to be doing investing. But then on top of that, everyone's curious about what the next generation is thinking and what they're interested in. And so, I think, because of those two forces coming together, there was just immediate interest in the things that we were doing. And so on the back heels of that, because I had already spoken to again, 71 investors all over the world, almost every call that I did, they had the same exact question. It was, "Well, who else are you meeting? I also just started. During COVID, I don't have any friends either. I'd love to meet all the people you're meeting."
Meagan Loyst (27:51):
And I love bringing people together. In a non-COVID world, small dinner parties are my favorite thing in the whole world. So I was like, "You know what? I'll put us all in a Slack group. I'll put together a Zoom call since I know everyone. And I'll think about the breakout rooms and whatnot." And that was how Gen Z VCs really began. It started with the article. Then I started the community, just a Slack group initially not really intending for it to become what it is today. And people just found so much value in it in the early days. We went quickly from 30 people to a thousand people, as soon as I sort of opened up the community. And that was in a period of four days. And now, 11 months later, we're at 12,000 people.
Meagan Loyst (28:30):
It's the largest and fastest growing community for young people in tech and VC. And on top of that, incredibly engaged. It's really become a real ecosystem and a movement beyond that. So it's Gen Z VCs, but it's also founders. It's students who are learning about VC for the first time. It's operators who want to start companies one day and are looking for resources and a ton of initiatives that sort of support our mission to make VC more accessible, more transparent, and more welcoming, I would say for the next generation. Because VC, I think, has historically been... There's this traditional notion of what an investor looks like. You're farther along in your career. You have X many years of operating experience or whatever it may be. I think we're really flipping that narrative and making, I would say, our whole industry more accessible in a lot of ways.That's what I try to dispel as much as possible.
Meagan Loyst (29:19):
It's much more about having diversity of thought. When you think about building strong teams, making great investment decisions, you want to have a diverse team. And if you're investing in companies that are being built for Gen Z, being built for the next generation, whether it's Gen Z, Gen Alpha, after us, diversity in age is also quite important. You want to have diversity in thought, diversity in race, diversity in background and diversity in age. Because I am the target customer for a lot of these companies that are being built, I can think about it from the perspective of the user, from the perspective of my two younger sisters, who are even more Gen Z than I am. And so I think it's really just about having that diverse perspective around the table.
Meagan Loyst (29:59):
What I'll say in terms of goals for 2022, I think it's continuing to empower Gen Zers broadly. It's empowering the Gen Z perspective and Gen Z voices, where Gen Z VCs serves as that platform where people are discovering VC for the first time. They're sourcing deals and getting promotions because of it. They're finding jobs. Founders are finding Gen Z and angel investors and bringing them on their cap tables. You see all this amazing value that's being created in the community already.
Meagan Loyst (30:28):
And so I think when I think about next year, a big pain point still is helping people find jobs. I think I do a lot of work with students. There are thousands of students in the community that are hungry, want to find jobs and maybe don't feel like they have the right access or opportunities. And so I think that's an immediate pain point that I'm focused on. But I think the biggest thing is just continuing to make noise, make change, and do work that is impactful and meaningful and sort of creating opportunity for Gen Z.
Bobby Franklin (30:58):
And impactful she is. Did we mention she is also on the Forbes 30 Under 30 VC 2022 List? Keep up the great work, Meagan. Well, that wraps up our first episode of the Venture Capital Podcast. Thank you for listening. But before we gavel out, here's a fun fact. For those of you who love Star Wars, Darth Vader actually adorns the National Cathedral here in Washington, DC. This iconic building has many gargoyles and one of them is the sculpted head of Darth Vader. Bring binoculars and check them out on the northwest tower the next time you are in town. Again, thank you for listening to the new Venture Capital Podcast. We are excited to bring you this show, because investing in tomorrow starts with smart policies today. I'm your host, Bobby Franklin. Stay safe and be well. (silence)