Making Room at the Cap Table a New Plan for Promoting Diversity in Tech

Making Room at the Cap Table a New Plan for Promoting Diversity in Tech

It’s no secret that the IT industry has diversity issues. Despite evidence linking diversity and performance, women, African Americans, and Latinos make up 33 percent, 8 percent, and 7 percent of the computer industry’s overall workforce, respectively, and barely 20 percent, 5 percent, and 5 percent of its leadership. While results are sluggish in arriving, there is progress, and that is something that is worth praising, and the tech sector has been successful in normalizing the discussion of worker diversity.

But there are other ways we should be thinking about expanding diversity in tech, and that’s on the cap table. The trick is that while it’s not difficult to execute, it isn’t yet the standard. My firm did it, and it’s worth explaining how it’s done so that you can too.

People like myself are not employed or given funding. Before we go into it, it is crucial to grasp something frequently dubbed “people like me” prejudice. Unconsciously, people seek to associate with and work with those that share their appearance and mentality. It’s a cognitive bias that has been ingrained in us throughout evolution, and it’s really difficult to get rid of.

Because “people like me” will start to mirror the variety of those firms’ founders, investing in female- and minority-led enterprises will inevitably increase diversity in startup environments. The fact that we are 45 percent female, with around 33 percent of our technical teams being female, according to Solv’s 2021 EEO report, is not especially remarkable.

The issue is that “people like me” have an impact on more than simply who is hired and promoted within a business; they also have an impact on who receives initial funding. Eighty percent of venture capital partners are men, and most of them are Caucasian. Only 3% of African Americans and Latinos and 13% of women are venture capital partners in the United States, respectively. Unsurprisingly, despite the fact that women founded 40 percent of new businesses, just 2.2% of venture funding was allocated to them in 2020. It turns out that our diversity issues extend beyond the field of technology employment. We also have a diversity issue with tech investment.

It’s time to adopt a fresh strategy. What if opening up more tech investment possibilities to women and underrepresented investors was the key to attaining diversity in the startup world? Let me state it clearly: It is possible to create riches by giving individuals who otherwise lack access a seat at the (cap) table. Additionally, the ability to invest in other businesses and founders or to start your own business comes along with wealth accumulation.

I contacted Kara Nortman, a longtime friend, investor, and thinking partner, to celebrate the completion of our most recent fundraising round. We’ve spoken about cap table diversity for a long time. I was emotionally done with fundraising and eager to return to creating my firm, but she was direct and unrepentant. You have a chance to open up some room in this round to women and especially women of color. I’ll assist you in making it happen if you agree. That’s precisely what we accomplished during a 10-day period with her encouragement and motivation.

A special purpose vehicle (SPV) targeted towards female investors was established. We contacted the female angel investors in our network via emails and texts, requesting that each one invite at least one accredited woman of color to consider participating in our round. Then, just as we would with any other investor, we had two Zoom sessions and gave our proposal. Looking at this group, I recognized the individuals that truly utilize our site, and I understood instantly how effective this strategy might be.

To be clear, this wasn’t just a publicity stunt or a flimsy attempt at corporate social responsibility: over the course of those 10 days, we raised $3.5 million from this group. One-third of the SPV investors had never made a venture investment previously, and 60% of them were women of color.