Small venture firm, big mission: Diversity
The next wave of entrepreneurs given a chance to shine
Precursor Ventures is not yet a big name in venture capital, but it’s taking on a big mission: Making sure more entrepreneurs from diverse backgrounds get an equal shot at venture capital dollars and their Silicon Valley dreams.
For decades Silicon Valley has been known for its racial and gender gap. In recent years, the technology industry has begun to try to close it. Nowhere is the lack of diversity more pronounced than in venture capital, a clubby profession dominated by white men who, by and large, fund very few start-ups founded by underrepresented minorities and women.
A new wave of venture capital firms and a new generation of venture capitalists are emerging to shake up the status quo. Chief among them is Charles Hudson, one of the few African-American technology investors running his own venture firm.
Since striking out on his own with Precursor Ventures two years ago, Hudson has raised $15.3 million for his first fund and made more than 50 investments with the help of an associate. Of those investments, 31% of the companies have at least one female founder, 16% have an African-American founder and 7% have a self-identified Hispanic or Latino founder, Hudson says.
Those demographics are very different from the norm at tradi- tional Silicon Valley venture firms.
By making investments at the formative stages of a company, well before later-stage investors open their wallets, Hudson hopes to gradually shift the gender and racial make-up of the tech industry, especially in its Silicon Valley power center.
“The fastest, simplest way to change the composition of the tech industry is to change who gets to make funding and hiring decisions,” Hudson said in an interview with USA TODAY.
Venture capital is ground zero for the growing push to diversify the tech industry. Big bets by venture capitalists can give a young company the opportunity to mature into the next Facebook or Google. Yet a fraction of start-ups led by women — and a smaller number led by African Americans, Latinos and Native Americans — attract venture dollars.
To break that cycle, Hudson accepts a lot of cold calls and emails as he hunts for start-up founders with hustle, ingenuity and a good idea, not necessarily the “central casting ” pedigree, such as studying at big name school or working for a hot startup or major tech company. Many of Hudson’s investments are outside of Silicon Valley and outside of tech hubs with venture capital firms.
This unconventional approach can make a big difference over time, uncovering promising entrepreneurs who don’t fit the Silicon Valley start-up stereotype and who have been overlooked by traditional venture firms, Hudson says. His belief: It’s also a competitive advantage. When Hudson met Samyr Qureshi, the founder of Knack was living in Florida. Qureshi had built a tutoring application for college students but was not in a region with a strong tradition of venture-backed investing. “I led the first institutional round of investment,” Hudson says. Another investment, mobile device repair start-up Fixt, hails from Baltimore. Hudson says he was drawn to its CEO Luke Cooper. “From the first time I met Luke, I could tell that he and the team had spent a lot of time getting their model right and were on to something big,” Hudson says.
Matthew Capizzi, founder of ZenRez, which lets you book lastminute yoga and fitness classes, had plenty of experience in biotechnology and health care but not much in software. Capizzi, who started the company while in business school at Carnegie Mellon, now calls the Bay Area home. Not all of Precursor’s investments back women or people of color, and that’s by design. “I certainly get a lot of questions from folks: Hey, is this going to be a minority-focused fund because you are black? And you know, I thought it was an interesting question. I tell people: No, it’s not a minority-focused fund. But I think we’ll see a disproportionate share of people of color approach the fund because it looks approachable,” Hudson says.
Women, African Americans and Latinos are significantly underrepresented in venture capital, with few holding decision-making positions, according to a report from the National Venture Capital Association and Deloitte University Leadership Center for Inclusion.
Women make up 45% of the venture capital workforce, mostly in administrative roles, but just 11% of investment partners, or the equivalent, on venture investment teams. African Americans make up 3% and Latinos 4% of the venture capital workforce. None of the 217 firms with more than 2,500 employees surveyed had an African-American invest--- ment partner.
There are signs of change, albeit slow in coming. Women are making the fastest strides. In October, Sequoia Capital, the prominent Silicon Valley venture firm that backed Apple and Google, hired its first female investing partner in the U.S.
Championing a more diverse set of entrepreneurs is a growing number of venture capitalists of color such as Base Ventures’ Erik Moore, Cross Culture Ventures’ Troy Carter, Marlon Nichols and Trevor Thomas, Laurence “Lo” Toney from GV (formerly known as Google Ventures), Y Combinator’s Michael Seibel, Backstage Capital’s Arlan Hamilton, Kapor Capital’s Ellen Pao and Carolina Huaranca and 500 Startups’ Monique Woodard.
“The fastest, simplest way to change the composition of the tech industry is to change who gets to make funding and hiring decisions.” Charles Hudson, Precursor Ventures