Get access to Protocol
It's been two years since All Raise launched with one goal in mind: to increase the number of female founders and funders in the venture capital industry. Rewiring an industry was always going to be hard, but trying to do so in a pandemic and a recession is a new, unforeseen challenge. Silicon Valley could easily fall back on its old biases and networks amid a crisis — particularly one that the U.N. warns will disproportionately affect women — but All Raise CEO Pam Kostka, who has been running the nonprofit for the last year, is trying to make sure the industry doesn't backslide, but actually moves forward.
On the two-year anniversary of All Raise's launch, Protocol spoke with Kostka about what progress the group has made, how they're moving Silicon Valley's network online in a COVID-19 world and whether anyone cares about diversity in the middle of a pandemic (hint: a lot of people do).
This interview has been lightly edited and condensed for clarity.
There's been a lot of movement to change the diversity of the venture capital industry. Are you seeing any progress?
We're seeing progress and lack of progress, too. It's kind of a mixed result. We're proud of our progress today, but we're still early in the marathon, and we can't let up on where we're going. Rewiring an entire industry obviously isn't done overnight.
We look at two major objectives as we always have, one of which is what is happening in the venture community with the representation of women as check writers in venture. We've seen positive progress there. The percentage of check writers and venture capitalists has gone from 9% in 2018 when we started to 12% at the end of 2019. So we're super excited to see that growth.
In January, we were happy to report that we had seen a record number of new female venture capital partners. There's 54 new women. So that was great progress to see on the venture side.
I'd say the lowlight there was just the lack of underrepresented women investors. We're still pretty light when it comes to women of color.
At the same time that we're celebrating the success of where the needle has moved, where we're running behind is really the funding to female companies with female founders, which, for all intents and purposes, hasn't really budged. It's just kind of a little bit. If we look at the PitchBook data, it went from 11.3% in 2018 to 11.8% in 2019. So that's barely moving, and it certainly stands out in a year where over $130 billion of venture capital was put to work. That's a really small sum of dollars going to female founders, so we clearly need to continue to focus aggressively on both of those sides of the equation.
What do you think needs to change for that needle to move?
We've always said this is an issue of focus. What I do think was really interesting this year was how many people came out to the mounting evidence of the economic benefits of having diversity at the table. And Morgan Stanley finally put a number on it at $4.4 trillion. California is the fifth-largest economy, and the opportunity for investing in and leveraging the diversity in the way that we fund, found and build companies is enormous.
This is the moonshot investment that somebody could make — and it's kind of guaranteed. All the evidence points to diverse teams outperforming and out-innovating nondiverse teams.
And then we need to be more conscious about breaking our pattern recognition. That pattern recognition is what often keeps us stuck in our old mode of behavior. Especially now, when we're looking at what's happening in the current environment, we need to be able to reshape that industry narrative and make sure that we're not back to old pattern-matching exercises that we've gone through that says, "This is what a successful company looks like. I'm going to only invest in existing relationships or experienced operators or people that I know."
We need to break that mode and make sure that investors are looking at the opportunities and that women feel like when they are coming to the table, that they have a great shot at making this happen.
In positive news, in the last year, there are more female unicorns than any other given year. So it is possible to look out and see these iconic founders of the future.
It's really important as we go into this economic recession that we are aware of our biases and pattern-matching recognition, but also this an opportunity for us moving forward to say that this is going to be the next generation. We're going to get through COVID-19. And there will be a boom on the next side of this bust — I've gone through two of them — so a change will come and we will fund and find the next iconic companies that will shape the future for us. And there's an opportunity for us to therefore make sure that there is diversity in the way that those companies are funded, founded and built and operated.
Diversity has been weighing heavily on my mind, because I've been seeing a lot of investors talk about doing deals, but there's acknowledgement that a lot of them are with people who are already in their networks. And I think there's a real concern that if Silicon Valley just reinforces its existing network, it could never get past that 11.8% number. Are you concerned? How are you thinking about trying to get past that or move the needle, even during this pandemic?
There's two ways that we do it. One is that we've always focused on changing what the representation is in venture capital. Not because only women can invest in women — that's not the point — but by having a more diverse firm, you have a more diverse network, you're attracting more diverse opportunities, more diverse founders. You're going to have the resources to be able not only to attract more diversity, but to evaluate these opportunities and see them more broadly, opportunities that you might not see if you were in your closed network environment. So one thing is maintaining that focus on diversifying the venture industry itself.
The other thing is all the programs that we have that are focused on female founders, which is a series of boot camps combined with office hours where we're providing a combination of guidance, support and access.
If women don't have the guidance, support and access that they need, then they don't have a shot at it. So what we're doing is creating boot camps that give them a lot of the guidance and support that they need. What is the roadmap for building an amazing company so that it's not just funded in this moment, but also has the metrics and objectives that it needs to get to the next phase. That includes both tutoring them and giving them kind of the insider's tips and tricks and capabilities that they need, but it also is about opening up relationship networks and getting them access to the functional expertise they need to actually build and grow their business quite aggressively.
The other piece that we do is to make sure that they have access, which is breaking up that concept of the warm introduction, and making sure that they have relationship access and financial capital access, so that they can go and widen the net of people that know them.
Do investors and firms you're talking to still seem interested in making diversity a priority both in terms of money and their time? Or is this back-burnered like many other things due to the current climate?
We've actually seen an acknowledgment that the current climate is going to disproportionately affect women, both on the venture side and on the founder side. We've seen a rallying of our community, a marshaling of our forces to double down and prevent any backsliding on the progress that we've made today and to continue to keep the focus going forward. That comes from both women as well as men in our network. We're seeing a marshaling of resources from the kind of webinars and information that we can share to people who are really going to stay focused on this issue with us.
You've clearly moved some of these webinars and stuff online to try to re-create some of that network. What else is All Raise doing to kind of adapt to this new environment when you can't have happy hours or networking things in person?
I think we're adopting the best practices like everybody in the industry, which is moving real life into a virtual forum, and we're experimenting with different ways to make that happen. I think the fact that everybody is in the same situation is creating momentum. We have a variety of different programs that we've set up that either broadly reach hundreds of women at a time or that we're doing in much more intimate settings. For example, we have a bunch of activities going on this week that match venture capitalists with founders, by stage and by industry area, like consumer versus enterprise. And we're trying to facilitate much smaller groupings and matchings where the investor gets to meet other founders who are up-and-coming and gets to impart their knowledge about, for example, what to expect in fundraising in the current climate.
When you and I talked last year, you said that some years you will gain ground and some years you are going to lose ground. Do you think this year that All Raise will end up losing ground just because of the circumstances?
Well, I wish I had a crystal ball, but the answer is that what we're trying to do is not lose ground. It's a very real concern for everybody, and you can't miss — if companies are laying off 20% to 30% of their workforce — that things are going to get affected. The focus is to not backslide, but to improve. In some areas, you can point to it and say for female founders, we have to be able to do better than that. There's capital to be deployed. There's great new businesses that are going to be funded. There's a lot of women entrepreneurs who are out there. We are focusing a lot on the early-stage investment, seed and A, because that is what is going to probably bounce back first, if other recessions and corrections are emblematic. In 2008, seed came back first and then the A came back. So we're really focusing on making sure that those women have the access, guidance and support they need to get funded and to build really strong business.
Have you found that venture capitalists are open to doing deals today? Are they actually getting deals done at this point?
It depends on the firm and, honestly, some firms are, understandably the last couple of weeks, looking at their portfolios and trying to assist their existing portfolios and navigating this kind of unprecedented crisis. I think majority-wise, the venture capital industry is holding back, but there are bright spots in this. There are companies that are doing well. There are companies that are closing new business, new deals, new rounds of funding. And there's more to come. There's a lot of capital that was raised and remains to be deployed, so we think things will open up. The terms, the valuations may look different, but there is going to be investing that's done.
Get in touch with us: Share information securely with Protocol via encrypted Signal or WhatsApp message, at 415-214-4715 or through our anonymous SecureDrop.
What gives you hope or optimism that the venture community can continue some of its progress toward diversity at the end of the day, even through tough times like this?
I think it's because of the opportunity that exists. Venture capital is a capital-driven business. It's here to make money, and the economics of diversity speak for themselves.
There's a lot of money to be made by investing in diverse founders and companies that build themselves with diversity in mind. Those companies are going to stand to do well, and the early movers who take advantage of that are going to reap the lion's share of rewards. I continue to believe that this is a change that's coming, as we're getting more and more of the Gen Z workforce engaged and activated. These are individuals who care about brands in different ways, care about diversity. We cannot ignore the voice of 25% of the purchasing power now in the marketplace. This is a strong force that's coming and changing. I strongly believe that because of the economics, and combined with who the ultimate consumer is in Gen Z, that there is a lot of opportunity moving forward and that we will continue to see progress.
Biz Carson ( @bizcarson) is a San Francisco-based reporter at Protocol, covering Silicon Valley with a focus on startups and venture capital. Previously, she reported for Forbes and was co-editor of Forbes Next Billion-Dollar Startups list. Before that, she worked for Business Insider, Gigaom, and Wired and started her career as a newspaper designer for Gannett.