Adeyemi Ajao, co-founder and managing partner of Base10, said the equality movement sparked by the death of George Floyd demanded an urgent response.
By Lizette Chapman | Bloomberg
The world’s largest Black-led venture capital firm, Base10 Partners, just got bigger, raising $250 million to invest in startups and back a handful of initiatives designed to diversify the mostly-White industry.
The San Francisco-based firm plans to announce its second fund Friday at nearly twice the size of its previous one. Base10 also pledged to immediately and permanently donate 1% of management fees and 1% of the firm’s future profits to organizations focused on increasing racial justice and representation in tech.
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Adeyemi Ajao, co-founder and managing partner of Base10, said the equality movement sparked by the death of George Floyd demanded an urgent response. While the contribution is relatively modest, Ajao said he’s hoping if others join the effort, it could be significant over time. Base10 estimates the venture industry could collectively contribute more than $200 million annually toward the cause.
“If there’s ever a time to step forward, it’s now,” said Ajao. “For years, we’ve been hoping to prove that investing in diversity was good business, and we thought that would be our contribution, but it has become clear in recent weeks that that is not enough.”
The global reckoning with racial injustice has reignited conversations about racism in the homogeneous industries of venture capital and technology. Black people make up more than 13% of the U.S. population but represent only 3% of investment partners at venture firms, according to a survey by the trade group the National Venture Capital Association.
Black founders fare even worse, representing just 0.4% of people who received venture investment from 1990 to 2016, according to a study by Harvard University.
The efforts of Base10 and other firms to support Black people in the industry could be a sign that longtime calls for change are translating into action, said Pam Kostka, chief executive officer of All Raise, a women’s advocacy group in tech and venture.
“There is a spark and now a movement,” Kostka said. She compared the industry’s renewed energy to combat racism to the #MeToo movement, which prompted her and others to start All Raise.
“Some of this is morally motivated and some is economically motivated,” Kostka said. “Either way, there’s no going back.”
Other VCs making efforts to promote diversity include Lo Toney, who left Alphabet Inc.’s GV to start Plexo Capital in 2018. At the new firm, Toney pledged to donate more than 1% of his future profits to his alma mater, Hampton University, a historically Black school.
“It has a long-term benefit that increases the size of endowments,” he said, and can expose historically Black colleges and universities “to the power of the venture asset class.”
Toney said he is speaking with several large firms about making a similar commitment but declined to say which ones. “We need to start the flywheel doing what is both transformative and sustainable,” he said.null
Some in the industry point to the business case for adding more Black people and minorities to leadership roles. The U.S. Census Bureau has projected that more than half the country’s population will be minorities in 2024. Daryn Dodson, managing director at Illumen Capital, which focuses on impact investing and holds stakes in various venture and private equity funds, said he advises investors on how to reduce unexamined biases. “We help them understand that unless they reduce their bias, they are in breach of their fiduciary duty,” Dodson said.
Beyond the business imperative, there are moral reasons to work toward bringing the industry closer to reflecting the racial makeup of the country. “I just want it to be a normal thing to see Black people across the table,” said Charles Hudson, a managing partner at Precursor Ventures. “I’m hopeful. This time, the pressure is different.”
Read from source Bloomberg