Venture capital's diversity issue undermines initial efforts to introduce diversity into the tech industry as a whole.

The tech space has yet another diversity issue that rarely makes headlines.

While IT is slowly but surely becoming a more diverse space, those who ultimately hold the keys to success in Silicon Valley tend to hail from one specific side of the tracks.

Venture capital firms have an even bigger diversity problem than the startup companies themselves, employing almost exclusively white men to decide the fate of hundreds of startup companies from increasingly diverse backgrounds.

This exclusivity is reflected in the companies chosen: the majority of startup funding goes to companies headed by white men, leaving just one percent for black entrepreneurs, eight percent for female entrepreneurs and 12 percent for Asian entrepreneurs, according to a report on diversity in venture capital and startups from CB Insights.

“Most investors accept pitches only from entrepreneurs who come through an introduction, and they tend to finance people who have succeeded before, or who remind them of those who did,” said the New York Times’ Claire Cain Miller.

“Because of investors’ lack of diversity, they do not necessarily understand the value of companies that make products for customers who are not like them.”

This trend is evident along gender lines as well. According to Babson College’s Diana Project, venture capital firms with a female partner are three times more likely to invest in startup companies with a female founder. Unfortunately, only six percent of venture capital partners are female.

This lack of diversity creates a technological echo-chamber for like-minded venture capitalists, who consistently fund businesses run by a singular demographic.

One step forward and two steps back

Venture capital’s diversity issue not only creates a roadblock for women and minorities, but it also undermines initial efforts to introduce diversity into the tech industry as a whole.

For example, many link tech’s diversity problem to a lack of educational opportunities for women and minorities, creating a field dominated by white and Asian men with computer science degrees.

A slew of educational initiatives have sprung up in response, all designed to encourage these marginalized groups to pursue degrees in the STEM fields or to take up a coding class.

Take the National Girls Collaborative project. The nonprofit organization has created a nationwide network of organizations that are “committed to informing and encouraging girls to pursue careers in science, technology, engineering, and mathematics (STEM),” according to their website. This mimics the widespread efforts of Google, who recently launched a diversity initiative and established a coding and tech scholarship for women and minorities in 2014.

Unfortunately, all the minority-held computer science degrees in the world won’t matter if they’re met with discrimination – no matter how unconscious – from venture capitalists, hiring managers and the like. While educational outreach is a good start, the tech industry’s diversity problem is widespread, and must be met with a dynamic solution.

Our take

We often see headlines subjugating Silicon Valley for its lack of diversity, but it’s important to remember that there is no one perpetrator of discrimination. If anything, a similar diversity problem existing in venture capital paints a more realistic picture of inequality – it’s elusive, it’s entrenched and it’s pervasive.

As we work towards a tech industry that’s reflective of our diverse society, we will begin to foster a world of tech innovation that’s as blended as our country’s history.

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Header photo: David Paul Morris / Getty Images


Posted 03.14.2016 - 06:30 pm EDT