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Some of my fellow venture capitalists are racists. Here is how you fix it.

We are living through two pandemics. COVID-19 and the disease of racism. One we are protecting ourselves from, and the other we seem to ignore until it gets to the point of civil unrest. It does not have to be this way, if we lived our lives fighting racism at home, in government, and in the workplace, we would not have the unrest that we see in the streets now. I can’t control what people do in all of those areas, but economic freedom is a key to solving the problem. Venture capital can play a huge role in that economic freedom. I’m struck by the lack of action by venture funds to make more diverse investments. This problem has been talked about for a decade with little progress. One reason is simple. Some of my fellow venture capitalists are racist. It’s an uncomfortable truth, but one for some reason we refuse to build processes around. It’s all around us, like a virus, yet we won’t protect ourselves or our businesses from it.

Bessemer Venture Partners is one of the few venture firms to offer a strong statement. There certainly have been others, yet most VC’s have continued tweeting about IRR and using Clubhouse vs working towards social justice.

Racism and Sexism are diseases. It’s a cancer of ignorance and intolerance. Like COVID-19, sometimes it shows symptoms, but often carriers are asymptomatic to the outside eye. When we go to the investment committee, we are sitting at the table with some people who are racist or sexist. That’s an uncomfortable thing to say, but we know it’s true. Then, we ask the entire committee to vote on the underrepresented founder’s deal. Not surprisingly, one of the committee members “Just can’t get comfortable with the (black) founders deal”. They ask about “culture fit”, they wonder aloud “If Jill gets pregnant what happens to our investment?”, they ponder “What happens if his green card is not approved?”. With COVID, we wear masks to protect ourselves from the disease. We stay distant from others, if they have the disease or not, because we want to be safe. Why do we not do this in VC?

By not requiring unanimous votes in an investment committee we can protect ourselves, the firm, and underrepresented founders from the diseased racist. Say you are at a mid to large firm, and your committee has 12 voting members. Does the quality suffer if you require 11 of 12 yes votes? Purely mathematically it is nearly 92% vs. 100%. Is a potential investment that holds 92% of the committee's support a bad firm? Is that lowering the standard? Of course not.

Look beyond the false bravado of promising LP’s “We require unanimous votes before making an investment”... You would see how flawed the concept of unanimity in investment is on it’s face.

Essentially firms that require 100% votes are introducing more risks to LP’s than those that do not. This is because if you require unanimous votes then that committee can, by rule, only be as good as the worst person on it. That worst person will drag down the firm to HIS level (gender intentional). Also, firm associates will spend hours and hours trying to coach up and influence that individual before the meeting. It’s painful for everyone involved and it does not make the firm better, it makes the firm worse.

That’s why today we are releasing and signing “The Underrepresented Pledge”. (UP) The UP is designed to show the world that your firm is trying to change the problem beyond just talking about it. It’s designed to directly address the problem, and will keep underrepresented founders safe from the asymptomatic individual that may be on your team.

The UNDERREPRESENTED PLEDGE (UP)We at _________ (firm name), promise to remove the unanimous vote provision from our fund management policies as well as any agreements with our limited partners. We are doing this to promote better diversity in our investments. We believe that this best serves our team, our investors, our portfolio CEO’s, and society. We encourage other firms to do the same.

Brian Brackeen is a General Partner at Lightship Capital — the fund investing in women, LGBTQ+, minorities, and all underrepresented founders in the midwest and beyond.

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