Diversity has always been part of 500 Startups’ DNA. We know great companies are born of great ideas, and great ideas come from founders of varied race, gender and geography. While institutional investors have historically overlooked diverse leaders, we consider teams with a range of backgrounds as a competitive advantage in our portfolio. 

But it’s 2020. After a devastating pandemic and widespread social justice movements, we can’t help but reflect on what’s been brought to light. 

While we’ve always championed diversity as a critical part of our ethos, if 2020 taught us one thing, it’s that we need to do better. Showing the diversity of our investments is a good place to start.

Here’s a snapshot:

• 4.4%¹ of companies in our portfolio have at least one founder who identifies as African, African-American, or Black (compared to 1%² across the larger venture industry), and have a combined valuation of $1.1 billion³. 
• 10.4%¹ of our startups have a Latinx founder (compared to 1.8%² for the venture industry), and have a combined valuation of $4.4 billion³. 
• 25.1%¹ of our portfolio has at least one woman founder (compared to 13%² for the venture industry), with a combined valuation of of $17.5 billion³. 

We’re thrilled to see our metrics best industry standards, but given the deal flow and the interest we attract from diverse founders, we know we can improve these numbers.

We are exploring ways to increase and support diversity within 500 Startups, and have already initiated changes. For instance, 500’s flagship accelerator program boasts a higher number of diverse founders in 2020 compared to  2019, including 26% Black founders in the first group participating in our fully virtual accelerator. We want to make sure these entrepreneurs get in front of the right investors and mentors. 

We are spotlighting diverse portfolio founders across our platforms, building out programs for female founders and creating a Black founders hub to extend resources, content and ongoing admissions into our accelerator program. The 500 team is hard at work on our seventh Unity & Inclusion Summit in 2021, after holding our last one in 2019. 

Part of our approach also includes training for both 500 and its portfolio companies. We put together a D&I task force and hired third-parties to guide us through this process. We have begun a certification program called Diversity VC, which will assess recruitment and HR, internal policy and culture, deal flow sourcing and portfolio support. One example: being mindful of the language and imagery we use in our job listings. 

We also want to lead the conversation around diversity with LPs. Will they mandate their fund managers to invest in diverse teams–who tend to outperform industry benchmarks? Will they commit to recruiting diverse talent within their own ranks? We’re seeing a move in that direction. In the wake of Black Lives Matter protests, Yale’s chief investment officer told asset managers to recruit more women and racial minorities or risk losing its business.

Those actions can lead to more representation in who’s getting checks, writing checks and taking board seats.

More than ever, diversity is a priority. We want to see systemic, lasting change: internal change within 500, change in our recruiting processes, change in the makeup of teams, change within deal flow, and change within the broader venture industry.

References

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