100-day challenge: Nearly 200 minority investors endow $16 million to early-stage tech companies

Venture capitalist and angel investor Qiana Patterson is determined to see more people from underrepresented groups succeed in venture capital and tech.

So, too, does fellow venture capitalist Jazmin Medina. They both unapologetically believe in their collective goal to close the racial wealth gap by helping investors who look like them gain access to startup deals. 

"This is something that is very personal for a lot of us," Medina said.

The women are a part of nearly 200 Black, Latinx, LBGTQ+, Native American, and women members of the Cap Table Coalition, that invested $16 million into 13 early-stage tech companies in just 100 days.

The group's seemingly simple, yet complicated goals: to diversify the venture capital and tech ecosystems in Silicon Valley by changing the people who are doing the investing. Why? It's long known that a majority of entrepreneurs who receive venture capital funding are white males, similar to the investors who cut the checks.

And those venture capitalists typically tend to hedge their bets on those who have already seen success or who remind them of themselves. A 2019 survey by NVCA-Deloitte Human Capital said that 80% of investment partners at VC firms are white, just 3% are Black and another 3% are Hispanic/Latino. For Black women and Latina VCs, those figures are even less.

"This all has to change, plain and simple," said Patterson, a founding partner at Tamaa Capital and chair of PledgeLA, a group seeking equity in the local tech scene. "We need to be really intentional to break down those barriers in order to make true change happen."

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There are two key areas that often keep underrepresented groups from investing in the highly competitive tech industry: money and access, said Jareau Wadé, a chief growth officer at San Francisco-based Finix, a fintech startup providing payment processing services for companies. 

"If you don’t have a track record of getting access to deals you won’t get any, and that's incredibly hard for emerging investors and startups founded by people of color,"  Wadé said. "We're sowing the seeds of change to get more people like us to be in the right place at the right time.

"We're not even close to hitting our potential with the velocity and scale we can reach," he added.

The Cap Table Coalition was launched in June, inspired by a "Diversity Rider," language in a contract that states a startup and a lead investor will make an attempt to include a member of an underrepresented group as a co-investor.

The coalition wants investors from both underrepresented groups (and traditional backgrounds) to join a database for co-investment opportunities. The coalition also urges venture funds to commit to using the rider as a standard part of their term sheets.  

The rider was created last year by Alejandro Guerrero, founder of the Los Angeles-based firm Act One Ventures as a blueprint for VCs. Guerrero inspired Finix's founder Richie Serna to pursue fundraising efforts, including pledging to dedicate 10% or more of every funding round to Black and Latinx investors. Finix filled up 10% or $3 million from its most recent funding round for investors from underrepresented backgrounds. 

Serna detailed his reasoning in a series of tweets Tuesday. 

"Whether intentional or not, the game is set up to benefit the same people it has always benefitted. Trying to fix that — and help facilitate the redistribution of wealth — is a huge endeavor that requires a lot of people to make very conscious decisions to do things differently," Serna tweeted, also mentioning that 70% of San Francisco-based Acrew Capital's recent $300 million diversify capital fund came from diverse investors. 

"I hope other VCs take note. I hope actions like this become part of the norm and cease to be notable. I hope that one day, a brown kid from Santa Ana has as good of a shot in Silicon Valley as a white kid from Palo Alto," Serna tweeted. "We’re a long way off from that but we won't stop pushing."

Wadé said as more investors join from different backgrounds, more wealth can be distributed outside of the homogenous group currently benefitting from venture capital funding. He hopes that the more diverse people who decide which startups and ideas get funded is more reflective of the U.S. population that's seen unprecedented multiracial growth. 

Medina, who serves as a principal investor in mid-to-late-stage startups for San Francisco-based NewView Capital, agrees. She said there are no more excuses.

"You cannot be a 21st Century company without having people coming from diverse viewpoints and strategies," Medina said. "They must build these relationships from day one that helps you not only in the beginning but through the life cycle of your company's journey."

Patterson said she wants to have more opportunities to put her funds into companies she believes in. She said the coalition's early success is just the start of an ongoing process.

"I don't think we should see this as being a one-and-done," Patterson said. "We believe in what we're doing will have impact today, tomorrow and for many years to come."