The One Thing VCs Could Do Immediately to Increase Returns - Nilofer Merchant - Harvard Business Review
Nilofer skewers Ted Schein of Kleiner Perkins, who insists that VCs are ‘color-blind’ despite all the evidence.
Ted Schlein, general partner at Kleiner Perkins, was recently invited to discuss race and investment in technology. The conversation took place at an inaugural conference called Platform, created by Hank Williams after a provocative series that Soledad O’Brien did on CNN on black entrepreneurship. At Platform, luminaries like Quincy Jones and Governor Deval Patrick, as well as entrepreneurs like urban revitalizer Majora Carter, and Juliana Rotich of Ushahidi came together to discuss what specific changes could be made to have all aboard the innovation economy.
And so all ears were tuned in when well-known VC Ted Schlein of Kleiner Perkins started talking… but Ted denied there was a problem. Despite the story the numbers tell — women receive less than three percent of all venture capital funding, and blacks even less than that — Ted said that the venture capital community was “color-blind” and “operates fully on a meritocracy.” This continued argument disregards the astounding facts that essentially 100 percent of funded founders are white or Asian, and 89 percent of founding teams are all-male.
Since then, we’ve had the case of Paul Graham, whorecently got into a brouhaha because he claimed a correlation “between founders having very strong foreign accents and their companies doing badly.” He continued to dig into his argument, believing people were simply misunderstanding him, but he doesn’t acknowledge the facts: immigrants with accents do found successful startups, but often without VC support. Kauffman Foundation research shows that more than half of Silicon Valley start-ups are founded by foreign-born entrepreneurs. Imagine if those with accents could get your support — what tougher problems could they solve?
And who can forget that only two years ago, Vinod Khosla saidthat only the young can innovate. “People under 35 are the people who make change happen,” said Khosla, who explained his belief that old entrepreneurs can’t innovate because they keep “falling back on old habits,” because “people over 45 basically die in terms of new ideas.”
So, basically, if you followed this limited logic… you’d hear that if you’re a woman, black, foreign, or old, you need not apply; you will not be seen. No matter how good your idea could be. No matter how many lives it could save, or new solutions you create, or how much revenue it could generate.
At the core, VCs share a culture which like all culture has foundational beliefs that are generally unspoken and which are taken as givens. VCs — and the larger tech community — wants to believe their culture is meritorius, and that the ones that become successful succeed on their talent, not on luck or privilege. As a result, they will disregard evidence to the contrary and exclude those that say the unspeakable.
Nilofer wants to change that culture, and hopes that a group of influential figures might step forward to make that happen. My bet is that we need a shift in the larger culture, the one in which VC culture is embedded and from which it draws it power, before we will see very many more black, brown, or female faces at venture-backed start-ups or VC firms.
When I hear the word “meritocracy” I reach for my gun…