Guest blogger Mark Linao is a 2014 Consortium and University of Michigan Ross School of Business alumnus. He is a venture capitalist, startup investor and advisor, and works at a media company in the Los Angeles area. He argues that venture capital diversity is lacking.

It is no surprise underrepresented minorities comprise a small population among MBA students. This small representation similarly occurs in the technology sector and to a greater degree in venture capital leadership. Although more resources have been put into recruiting women and minorities, the workforces at Alphabet, Yahoo, Facebook and Apple still have a way to go.

Meanwhile, Consortium students are finding opportunities to learn more about the tech world, entrepreneurship and venture capital. For example, students at my alma mater participate in student-run venture funds to get experience in the field.

“It wasn’t until I began actively working with the Wolverine Venture Fund and began considering VC as a post-grad opportunity did it became clear how wide the diversity gap truly is,” said MacCalvin Romain (Michigan ’17).

And how wide is the gap? Hispanic and black employees combined only comprise 6 percent of Facebook’s U.S. workforce. The Information points out that some companies are doing better than others, citing LinkedIn’s leadership at 35 percent female, while Microsoft’s leadership is only 18 percent female.

 

When we look at similar data on gender distribution in venture capital, we see a much greater disparity. Underrepresented minorities have even less representation at top venture capital firms when it comes to senior investment leadership positions (that role distinction is important because many venture capital firms employ non-investing roles such as marketing or HR).

Social+Capital and The Information pulled data on 72 firms and broke out the racial and gender mix of the investment leadership. They found that about 89 percent of investment decision-makers were male, and 75 percent were white, while only 21.9 percent were Asian, 1.9 percent Hispanic and 1.2 percent black. Also, women only represented 10.7 percent of senior investment roles.

“Often times, the lack of minorities is a result of many VC founders relying on their friendship circles and not actively searching for diverse talent,” speculated Kae Bradford, a first-year MBA student at Ross. She works with Ross’s Zell Lurie Commercialization Fund. “Given the lack of diversity within VCs, I feel more driven to educate minority owned businesses about ways to gain capital through VCs.”

In 2015, Megan Smith, President Barack Obama’s chief technology officer, claimed that only 3 percent of venture funding is going to women and less than 1 percent to people of color.

What is being done to address this issue and what could be done? Big technology firms have been publishing their diversity metrics and a small number of investors have been following suit.

Also, this past summer, the National Venture Capital Association (NVCA) published its first report on diversity and inclusion, where the association highlights some of the activities and efforts focused to address diversity in venture capital. Some activities from the report include:

• 40-plus venture capital firms with more than $100 billion under management joined NVCA Diversity Task Force members in making a commitment at the first-ever White House Demo Day to develop initiatives that encourage an inclusive innovation ecosystem in the United States.

• Highlights from investors, nonprofits, government entities and organizations that have collaborated with NVCA and are dedicated to fostering opportunity for underrepresented minorities and women.

• Research from the entrepreneurial ecosystem on diversity, which includes reports on female founders, diversity data in venture capital and minority businesses.

Furthermore, minority-focused funds have been popping up. Intel and Comcast have funds dedicated to diverse founders, and I have met several new fund managers who are starting funds focused on female entrepreneurs.

There are many reasons we have all heard that there is such a low representation among minorities and women in STEM (science, technology, engineering and math) industries. Some attribute it to pipeline issues. Others say that gender and racial bias is so ubiquitous in tech that it discourages potential female and minority employees to enter the industry and current employees to leave.

I don’t know the answer or real cause, but organizations like The Consortium can certainly help.

The Consortium has been focused on developing relationships with corporate partners in the tech industry. HP Inc., Hewlett-Packard Enterprise and Google have been partners for several years. Facebook, Amazon, Expedia, Yahoo have come on board in recent years.

Driven by the demand among students, The Consortium is creating a tech track at its annual Orientation Program & Career Forum in Atlanta in June 2017. That track, on Monday, June 12, joins career tracks that day, including marketing, corporate finance and general management.

The Consortium is continuing to reach out to the tech industry, encouraging leaders there to consider our community of promising MBA graduates for careers in the field.

Both Romain and Bradford are interested in pursuring either venture capital or entrepreneurship as a career after business school.

“Many minorities are unaware of the roles that VCs play in business and entrepreneurship and those who are aware do not typically have the opportunity or relationships that will position them to get into roles at highly competitive firms,” Bradford said.

Romain agreed, adding: “Over time, venture capitals’ lack of diversity and homogenization have hurt their bottom lines as a consequence. Venture capitalists have begun to realize they risk becoming dangerously out of touch with the majority of consumers, but there is much more work to do.”

PICTURED ABOVE: Mark Linao, a 2014 MBA graduate and Consortium member from the University of Michigan-Ann Arbor, now works as a venture capitalist.