DIVERSITY IN VC IN OC: Key Opinion Leaders Discuss Their Thoughts of How to Increase Diversity

Diversity is the buzzword these days, and rightfully so, as more and more key players in the VC industry honor it. Here are the thoughts of key leaders in OC about diversity in VC.

Okapi Venture Capital in Newport Beach. One of the founding partners of this VC firm is Sharon Stevenson. (She founded it in 2005.) She did not respond to requests for comment. These comments are from Jeff Bocan, a partner with the firm:

We are committed to increasing our diversity of both gender and race in the future. We lack in racial diversity at present and it is something we are very conscious of and intend to address in future hires to our team.

Okapi is always assessing potential businesses and making tough investment decisions between many intriguing opportunities.

In making our decisions, we are very proactive in getting the viewpoints of a diverse array of perspectives – not only gender and racial, but also age and socio-economic.

We engage with folks across the spectrum to be able to look at our investment decisions from as many perspectives as we can.

Our network gets extended by our portfolio companies, which tend to have much greater diversity of all kinds. We have a very small team (only four of us), and we won’t be making lots of hires in the future, but those hires we make in the future will further diversify our firm.”

In terms of increasing diversity in VC teams nationwide, this is a hugely important area to address, but it will take some time to do so and it will be driven by the larger VC firms that are the most active in hiring and have the most employees.

Fortunately, more institutional investors are looking to back first- time managers from a diverse background, and that is a big help, but again, it will be several years before there is a feeling of scale to this approach.

One trend that will help accelerate the diversity in the industry is having more institutional VC money invested in firms outside the SF Bay Area, Boston and NYC.

Regions like SoCal are naturally diverse, and other urban markets offer diverse pools of investor and entrepreneurial talent in under-invested markets,” he said. “(So), having capital go into funds in these other regions are likely to be the greatest (accelerator) of diversity in our industry.”

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VC Collaboration, UCI Beall Applied Innovation

From Luis Vasquez, associate director, Venture Capital Collaboration.

Vasquez is the only person on the UCI Beall Applied Innovation Venture Collaboration team. He’s a first-generation immigrant from Latin America.

This VC division of UCI’s innovation platform does not make investments. Rather, it engages with VC firms throughout SoCal and connects investors to founders.

Many firms and funds have realized the value of having diverse teams and diverse perspectives as part of their investment process. By my count of firms that have at least one partner in OC, more than half now have a woman or person from an under-represented group on their investment team or firm management team.

With that, there is still room for more inclusion. We believe in the importance of diversity in all VC firms and specifically look for opportunities to engage with firms and funds that prioritize women and under-represented founders.

From Richard Sudek, executive director at UCI Beall Applied Innovation and chief innovation officer at UCI:

Recognizing that we needed to do more for under-represented communities, UCI Beall Applied Innovation began building the Opportunity, Wayfinding and Networking (OWN) Initiative in 2018 to enhance outreach, engagement, access, programming, mentoring, networks and outcomes for our large and growing number of low-income, first-generation and under-represented students.

The vision for OWN is that UCI and its partners lead OC and SoCal to being the model for the success of these students in scalable entrepreneurship.

The OWN Initiative includes, and partners with, other programs such as:

– the Student Startup Fund (providing micro-grants to low-income student entrepreneurs)

– the Growth Accelerator Fund Competition grant supporting federal grants applications for women entrepreneurs,

– W.SparkSBIR (women-focused events and workshops geared toward increasing women participation and success in SBIR/STTR grants)

– the ANTrepreneur Center (UCI’s campus-based hub for beginning entrepreneurs)

– UCI’s Student Success Initiative for low-income, first-generation and under-reprsented students

– UCI’s Creativity & Entrepreneurship Scholarship

– our Wayfinder Incubator

– and our Small Business Development Center, which provides free resources for budding entrepreneurs

We are committed to the success of all entrepreneurs, from all backgrounds, with programs and a full community of mentors and investors supporting them at every stage of their journey.

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Auctus Global Capital Group in Irvine. From Shiv Grewal, co-founder and managing member:

I am of South Asian descent and so is my partner, Mike Colaco, therefore, we epitomize diversity. A lot of the emerging growth entities we look at have founding members who are women, or are led by founder CEO’s from other parts of the world. Frankly, in California, it would be the exception to find a founding team that is not “diverse.”

At last count, there were approximately 270 VC firms nationally that were led by women – that’s a sizable increase from just a few years ago. I think the issue is front and center in the public consciousness and there appears to be a national effort to increase diversity in all sectors of industry – venture firms/funds will also follow suit. This is a process, but it is well under way.

According to this article from Fast Company, there are 275 new VC funds started and led by women. But, the caveat is this: “However, the durability of these small, first time funds is still very tenuous. Ninety percent of all women-led funds are considered “emerging” managers, with 73% of them founded in just the past five years, 23% currently raising their first fund, and 44% deploying it. These new funds have not been investing long enough to establish a track record. They need years for their portfolios to mature, for companies to exit, and for their investors to realize returns.”

Plus, according to the article, a new study released by Women in VC, the largest global community of its kind, finds that of all U.S.-based VC partners, only 4.9% are women, with 33% of them being women of color. Less than half (2.4% of the total) are founding partners, who control an outsize proportion of a firm’s investment decisions.

Link to full article here: https://www.fastcompany.com/90567387/women-in-vc-growth

Regarding diversity riders, for early stage investors, I think it is difficult to commit to them. When the financing round is smaller, the investors are generally selected for strategic reasons. It is entirely possible that the investors we look for fit the profile highlighted in the rider, however, one would hesitate to make a written commitment.

With a larger financing round, and with larger investors involved, I think it would be easier to execute such a rider. See related article on diversity riders here.

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In partnership with Dot.LA, here are three recent articles its team did on diversity in VC:

Can VC Solve Its Whiteness Problem?

Navigating the VC World as a Black Person

Pension Funds Could Be Key To Adding Diversity in the VC realm

 

About The Author

Deirdre Newman is a long-time journalist, who's covered OC startups for a few years.

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