No Women Or Minorities? Most Investors, Entrepreneurs Respond With A Shrug

Mercury News

Despite the recent national outcry over the tech industry’s lack of diversity, a new LinkedIn study found that most entrepreneurs and investors don’t consider the issue a priority.

More than half of investors surveyed said that an entrepreneur’s commitment to diversity was the least of their concerns when deciding whether to fund a company, according to the nationwide survey of more than 600 LinkedIn members. And 70 percent of startup founders said their company has no program in place to increase employee diversity.

The results, released Thursday, show that while the absence of women and minorities in tech is frequently addressed in panel discussions at industry conferences and in media op-ed pieces, for the people with the power to implement change — such as the investors shaping future Facebooks and Googles — the issue remains on the back burner.

“LinkedIn’s data confirms how broken today’s venture capital establishment is,” Ellen Pao, co-founder of Silicon Valley diversity initiative Project Include, wrote in an online post Thursday. “Many VCs don’t seem to care about the problems they create, how founders perceive them, and the lack of diversity in funding practices.”

Women make up 7 percent of entrepreneurs who receive venture capital funding, according to Bloomberg. And the majority of the world’s top 100 VC firms have no female investing partners, a recent CrunchBase study found.

Pao helped catapult that problem into the spotlight last year during a high-profile gender bias trial against venture capital firm Kleiner Perkins Caufield & Byers. She lost the case, but the trial highlighted the tech and VC industries’ high concentrations of white men. Now Silicon Valley VC firms and tech companies, many of which have started releasing regular diversity reports, face pressure to make their offices more inclusive.

Some investors and tech companies are making strides. Last month Sequoia Capital, one of Silicon Valley’s most prestigious venture capital firms, hired Jess Lee as its first U.S.-based female investing partner. Advocates heralded the hire as an important step toward bringing more funding to women-led companies.

According to LinkedIn’s study, white, male founders and investors often are unaware of the barriers their more diverse colleagues face. A majority of female founders surveyed said they have witnessed sexism while trying to raise capital, but only 8 percent of male founders said the same.

Committing to building a diverse team is “somewhat silly,” one white male founder wrote. Another responded that making his company diverse has nothing to do with his business. Several founders and investors dismissed recruiting with an eye toward race and gender as akin to affirmative action.

Karen Bairley Kruger, a San Francisco-based angel investor, called the LinkedIn numbers “staggering.” Kruger co-founded Wingpact, an initiative dedicated to encouraging women entrepreneurs and investors.

“At first I was discouraged,” she said of her reaction to the study. “And then I was a little bit surprised at seeing some of the numbers. And then it made me angry. I feel like there is a lot of hypocrisy that is jumping right out of these statistics.”

One number in particular bothered Kruger: 40 percent of male investors believe the media spends too much time focused on diversity in tech.

Those attitudes and other barriers sometimes have made it difficult for Pao to get investors on board with Project Include, she wrote in her online post. In one case, a VC turned down Pao’s invitation because he said his firm was unlikely to hire more than two female or minority partners in the next 10 years. Another VC told Pao that he was unable to find any women investors willing to work at his firm because of the male-dominated culture.

There has been progress — more people are aware of the diversity issue, and are discussing it in helpful ways, Pao wrote.
“Numbers like these, though,” she wrote of the LinkedIn study, “show how far we still have to go to change attitudes and then practices in venture investing.”
——
By the numbers
— 70 percent of startup founders say their company has no program to increase employee diversity.
— 45 percent of investors say they face a “pipeline problem” when trying to invest in diverse startup founders.
— 50 percent of white founders say focusing on finding the best talent is the number-one obstacle preventing them from developing a more diverse team.
— 80 percent of female investors say they have witnesses sexism in the industry, compared to 28 percent of male investors.
— 40 percent of male investors say the media spends too much time focusing on diversity in tech.