Diversity Capital & the art of going back for more pie
By: Carol Tarr
Tags: Included Vc, Venture Capital, Diversity, VC, Startup

Carol Tarr

Included VC Fellow

Included VC was launched in 2019. Out of more than 1400 applicants, 30 were chosen for the 1st cohort that began in October with the first retreat in Berlin in November. The remarkably blind application process stripped essays and responses of any details of gender, sexual orientation, socio-economic indicators, educational background, religion, disability and ethnicity but the results still ended up being profoundly intersectional: 60% female, 56% Black, Asian or mixed, 10% neuro-diverse from 16 countries and 9 nationalities. We include immigrants, refugees, PhDs, human rights activists, global thinkers and game-changers; and I am proud to be included in this group, representing my own intersectionality and being empowered with the knowledge needed to demystify the VC process for others.

Included_VC Retreat, Berlin 2019

Paradise is an ancient Persian word, roughly translated as a well-tended garden with walls. For me, that’s what this Included VC fellowship is. It’s like a paradise in that finally I’ve found a place — a fellowship — where I can have thoughtful discussions with fellow cohort members and learn insider knowledge from our mentoring VCs; where I don’t have to constantly re-explain the inherent value in having a diversity of thought, experience and network in decision-making positions; and where everyone agrees that this diversity is critical to the future of venture capital and good for the economy as a whole. We learn, we discuss, we connect and it is an amazing experience: a paradise.

But hanging around in a walled garden talking to like-minded individuals is not the intent behind an Included VC fellowship. As fellows, we are expected to actually do something that makes a difference: to take the ideas and the knowledge we gain during our fellowship back into our communities and the world at large. An Included VC fellowship is not meant to be a walled garden or an ivory tower where we group-think: because outside of the garden there are business opportunities being missed, networks to form and ultimately diverse deal flow that needs to be created.

How did I get to this paradise? I followed the pie crumbs from Amsterdam.

Not too long ago, I was asked by a well-meaning colleague: “if our slice of the pie is so small, why do we have to share it?” She raised this question in frustration with my insistence that we needed to be aware that the plight of minority women entrepreneurs was significantly greater than for Dutch women, especially when it came to accessing investment to grow their businesses. This results in their businesses withering and dying at a higher frequency, directly due to this lack of funding opportunities.

“Then we need to go back and get more pie”, I replied rather undiplomatically which prematurely shut down the discussion. I wished the discussion had been able to continue but that would not have changed my core belief that the quest to go back to get more pie and to make more pie available for worthy entrepreneurs of all ethnicities, gender identities and backgrounds is just plain good for business. Not everyone was onboard with this — many were becoming downright frustrated with me as we focused our efforts on opening up new avenues for funding for more women entrepreneurs. But I knew many more were being missed and I knew it would take time to change minds. But changing minds has never been anything I’ve shied away from.

Please, walk with me along this trail of pie crumbs…

I’d already spent the last couple of years trying to convince Dutch businesses, investors and banks that investing in women-led business was a good idea and something they had a moral obligation to do. Faced with the barrage of shocking research statistics published almost daily, it was clear that figures — such as 1.6% of VC capital going to women-led companies in The Netherlands — were beyond unacceptable and matters could no longer be left for someone else to figure out. Among the risk-averse, common wisdom became that just investing small amounts in more women entrepreneurs, who would be found through running endless pitch competitions, could solve the problem. This modest approach had yet to produce significant results and there was clearly a need for a bigger solution.

In 2018 Queen Maxima of The Netherlands lent her voice in support to the growing calls for concrete solutions to remedy this rather embarrassing statistic around the Dutch female funding gap. The queen’s voice was a welcome catalyst precipitating a flurry of activity culminating in banks and social organizations collaborating on multiple projects over the next year. Examples were: the creation of scale-up programs for high-potential female entrepreneurs, unconscious-bias awareness training for bankers and the creation of a fund for investing in women-led businesses. The social pressure was on and the buy-in came from the director level albeit accompanied with a banker’s low-risk appetite. Still, it was a start and I was happy to dig in, hashing out ideas, bringing together bankers and female entrepreneurs for shared learning as programs came to fruition.

Problem fixed, right? Not so fast.

The focus on just women-led businesses has distracted from the fact that this is just one part of a much larger societal issue: the absence of equitable funding for out-groups. Women are part of a larger out-group, although Dutch women are less marginalized than non-Dutch women mostly due to their networks and resources. I’ve had numerous experiences confirming this, such as a woman investor remarking that she would not be comfortable investing in someone with an unfamiliar sounding foreign name. What??? Clearly more than just money is needed to solve what is a larger societal issue.

For most of Europe and the West, membership of an in-group is extended to those born cis-gendered male, European decent, middle-class (or higher) background, highly educated and extremely well-connected. Out-groups on the other hand consist of everyone else. Their challenges to accessing capital critical to growing their businesses are propounded by intersectionality: where someone acquires multiple labels of ethnicity, religion, disability, sexual orientation and gender identity. The more boxes you tick and the more labels you acquire, the more exponential your removal distance becomes from funding networks.

Fixing the problems of just women entrepreneurs, one aspect (or ticked box) of being in an out-group, will not solve the larger problems of inequitable distribution of investment funding among all groups. More than just a matter of morality, it is quite simply bad for business and stifles innovation: potentially brilliant entrepreneurs and their ideas are being sidelined from lack of access to funding simply because they are not male, not northern European white, not middle-class, not non-Islamic and not well-connected through higher education networks.

How about this: did you know that immigrants are twice as likely as non-immigrants to start a business?

Included-VC Berlin Retreat 2019.

We need an intersectional solution. In a meta way, we need to change the selection of the selectors. As a result, this would then holistically create a more inclusive process that would not exclude someone for superficial out-group reasons. It would no longer be a matter of roommates, neighbors and familiarity.

Fortunately, from deep inside the VC world, there has been a mounting call for increasing diversity within the decision makers. Spearheaded by Chris Tottman and Stephen Millard at Notion Capital in the UK and led by Nikita Thakrar, 10 major European VC firms have come together to initiate what would become Included VC, with the purpose of changing the make-up of European VCs.

Partners include such esteemed firms as Notion Capital, Point Nine, Mangrove, Creandum, Daphni, Erner, Seedbank, K Fund, Santander Innoventures, and Wilson, Sonsini, Goodrich & Rosati.

The program, Included VC, offers its own tangible solution: the idea of changing the make-up of the venture capital decision-making power to fund or not fund these varying entrepreneurs. More poignant is the emphasis on empowering the diverse new group of VC fellows with knowledge and a mandate to take this knowledge of the mechanics of VC back to their respective communities to demystify the process: countering bad info and misunderstanding of what VC investment really is, what it looks like, what investors are looking for and most importantly, if it is appropriate for your own business or not.

Berlin 2019 Included_VC Retreat

I have spent years teaching in business schools, developing entrepreneurship programs and mentoring startups. However this time, access to me is open beyond tuition and academic walls: I am no longer in the walled garden. Whatever I learn through my Included VC fellowship, I plan to immediately share “back home” and want to encourage people to ask me anything and talk to me about VC and how it might work for their businesses. (For what it’s worth, “back home” is wherever you can reach me be it a virtual or physical space.) Remember, it’s my job to not hang around in paradise but to bring all this good stuff I’m learning back outside of the proverbial walls.

So here’s your opening: I believe that there is no such thing as a stupid question when it comes to VC because the VC industry has been so esoteric and closed for so long. Let’s develop the hashtag #ThereIsNoSuchThingAsaStupidQuestionAboutVC (probably better to shorten that) to just to open up the dialogue and get the knowledge flowing. Either way, come find me and just ask away. What’s your question? If I don’t know the answer yet, I’ll put you in touch with someone who does. Or better yet, the teacher in me will recommend a good book for you to read.