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Kapor Capital Seeks to Build Diversity Into the Bedrock of Startups with 'Founders' Commitment'

First Posted: Jan 22, 2016 03:21 PM EST
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Venture capital firm Kapor Capital has decided to boost diversity in the next generation of Silicon Valley companies by building commitments to it early.

As major Silicon Valley firms make efforts to increase the diversity of their workforces in fits and starts, another just-as-important part of the technology industry still remains a trouble spot: venture capital.

A very small proportion of minority-founded startups receive VC funding, and startups that do get funding, by nature of their small size and often-cliquish beginnings, are rarely what you'd call diverse.

Now Kapor Capital -- the VC arm of the Kapor Center, which fights for diversity, opportunity and social change -- has taken a new approach to changing VC funding. The Oakland-based VC firm has decided to require all startups who want funding to sign a diversity pledge, which Kapor calls the "Founders' Commitment."

The pledge states that young companies must establish diversity and inclusion as fundamental goals. They must invest in recruiting and hiring, and organize volunteer outreach opportunities for employees to work with underserved or underrepresented communities. Companies must also participate in educational seminars on diversity hosted by Kapor Capital.

Freada Kapor Klein, a partner at the VC firm, says the pledge prompts startups to think and hire inclusively from the first day, rather than starting up programs further down the line, after the company's culture has already taken root.

"Retrofitting an existing culture to incorporate new practices and a new way of thinking is challenging to say the least," said Klein to USA Today. "That's why we've come to the decision to invest most of our time with start-ups in the Kapor Capital portfolio. If the founders are committed to a diverse,  inclusive, forward-thinking culture at the outset -- and they have the resources to keep thinking about it at each stage of their growth -- we'll have more success."

But the pledge is designed to be flexible, and each startup is expected to have a unique plan, depending on its specific needs. "This isn't a check-the-box exercise," said Klein to Silicon Beat. "This is something that's been carefully thought through and tuned to be a strategic business advantage, as well as the right thing to do."

Indeed, rather than being an arbitrary stricture on startups seeking Kapor's funding, the pledge is the result of focus group research into the needs of the companies already in Kapor Capital's fold.

The top demand from founders turned out to be assistance in making their companies more diverse and inclusive. So leaders of some of the VC firms' portfolio companies worked with Kapor to draft the Founders' Commitment in order to set a foundation of diversity that could grow as young companies do.

"The tech ecosystem prides itself on its ability to innovate," said Mitch Kapor, founder and partner of Kapor Capital. "The Founders' Commitment is intended to accelerate innovation in company-building itself."

Kapor Capital is dedicated to promoting diversity in a sector of the tech industry that is as insular as it gets. For example, less than one percent of Latino-founded startups are venture-backed; the same statistic applies to companies founded by African Americans. Only eight percent of VC funding goes to female entrepreneurs.

As Latin Post has previously noted, the dearth of VC funding for underrepresented minorities in technology likely stems, at least in part, to the fact that the venture capital industry, itself, is dominated by white men.

In fact, the world of VC on average is far less diverse than some of the most homogenous Silicon Valley companies.

A recent survey of 552 senior VC leaders across "Sand Hill Road," the similarly location-based nickname for the tech industry's VC sector, found that over 77 percent were white. The same study found that only seven Latinos, total, were at decision-making levels of the venture capital firms surveyed. Meanwhile an overwhelming 91.8 percent of VC decision makers were men.

It's no wonder most venture-backed companies end up being founded by white men.

Kapor Capital thinks differently than its peers, and its founder believes funding founders from underrepresented backgrounds, and now building diversity into the growth plan of these young companies, is an innovation that will not only do social good, it will be a competitive advantage.

"We've seen a sea change in Silicon Valley and other centers of innovation. We used to get a lot of people giving lip service to diversity. Now we're seeing, in our own portfolio and outside of it, that having more founders from underrepresented backgrounds and teams which are diverse have a myriad competitive advantages," said Kapor to USA Today. His wife and partner, Kapor Klein, is excited about what that might mean for the future of the companies they fund, and the industry:

 "I can't wait to see our first startup grow into a diverse tech giant," she said. "That's when we'll have a model for the Valley." 

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