The Axis of Inequality: How Elite Venture Capitalists, Pension Funds, And Endowments Subsidize Inequality

Jamarlin Martin
Written by Jamarlin Martin

My first job out of Morehouse College was working in the recruiting department at global management consultancy McKinsey & Company.

Applicants were carefully scrutinized for their college and graduate-level grades and test scores. I curiously looked in the database at how students at my alma mater came out in the recruiting process. Morehouse is a private Black liberal arts college in Atlanta. I was happy to see some Morehouse students made it through. Although one Rhodes scholar’s test scores were good enough to get to the interview process, he was rejected by one partner for “poor math.”

Later, my supervisor, “Penelope,” told me to throw the resume of one strong white applicant in the trash. I naively asked why.

The Kennesaw State University applicant had a 4.0 GPA and perfect SAT scores. I had thought test scores were supposed to neutralize the variance of education quality between schools.

She quickly shot back, “wrong school.” To keep charging clients high consulting rates, Penelope was signaling a white kid could be a genius but if they didn’t have the elitist clothes wrapped around their top grades and test scores, they weren’t a fit. You see this biased elitism displayed in the book, “The Hard Things About Hard Things,” by Ben Horowitz of the leading venture capital firm a16z. He talks about Marc Andreessen’s prior resistance to hiring a talented white executive as head of sales of Opsware, in part because the executive came from a “weak school.”


Source: The CB Venture Capital Human Capital Report: A data-driven look at the race, age, gender and educational backgrounds of entrepreneurs who receive venture capital funding.


To keep trafficking in elitism and charging people the highest rates, McKinsey had to throw really good people with perfect SAT scores in the trash.

How many Black entrepreneurs don’t have the right clothes wrapped around their creativity and ambition and are simply being thrown in the trash by liberal elites, similar to the white Kennesaw State kid?

At the 2008 National Venture Capital Association’s annual meeting, John Doerr — widely considered to be the father of venture capital — described the factors he associated with successful entrepreneurs:

“They all seem to be white, male nerds who’ve dropped out of Harvard or Stanford and they absolutely have no social life. So when I see that pattern coming in — which was true of Google — it was very easy to decide to invest,”

Doerr seemed to suggest that he uses race as a factor to determine who gets funded. It’s not absurd to suggest that venture capitalists use racial variables — whether they know it or not — based on who has made it before.

Institutional forces at the top of the food chain

The many complex diversity issues involving African Americans in tech have mainly focused on getting more Black engineers into the Silicon Valley ecosystem. There has been a noticeable improvement in cultural and corporate awareness about the issue; an increase in Black engineer recruiting outreach at Google, Twitter, and Facebook; new nonprofit startups focusing on engineering education access; and a few diversity-focused venture capital funds.

While these fragmented efforts are a positive step towards increasing diversity in Silicon Valley, there is a scarcity of focus on the institutional forces at the top of the food chain. Where do these venture capitalists get their money to invest in startups? Where does venture capital come from?

More than 50 percent of venture capital comes from:

  • Endowments at places such as Harvard, Princeton or Yale.
  • Public pensions from places like the California or the New York State teachers’ retirement systems.

These two sources of capital with billions of dollars under management invest annually in venture capital funds. These capital sources are attached to the diverse public in two ways.

First, they are using the public pension money to invest in startups. Some of this is African American pension money.
Secondly, endowments such as Harvard and Yale operate like big hedge funds without any taxes. Some researchers suggest the public subsidy per student is over $100,000 at the most elite Ivy League universities. These venture capital sources are directly and indirectly connected to funding by the public.


Source: The CB Venture Capital Human Capital Report: A data-driven look at the race, age, gender and educational backgrounds of entrepreneurs who receive venture capital funding.


Investing values

According to CB Insights, less than 1 percent of venture capital funding goes to Black entrepreneurs.

This means that less than 1 cent of every dollar that venture capitalists get from public pensions and endowments reaches one of many smart, ambitious, Black entrepreneurs.

Finding a moral conscience

I believe public pensions and untaxed university endowments must find their moral conscience and pair their investing values with their affirmative action values.

I don’t believe venture capitalists are intentionally contributing to inequality or locking African Americans out of the system.

These mainly white venture capitalists are fanatical and focused on cold performance metrics. They are broadly amoral, with biases largely informed by a pattern recognition system where they feel most comfortable by basing decisions on what they have seen before.

The elite hedge funds and Wall Street firms who were creative and smart enough to engineer mortgage bonds that had the lowest FICO credit scores and bet against them, were amoral as well. Their narrow job was to coldly make billions and that’s it. It was legal but amoral.

These smart hedge funds amorally trafficked in subprime bonds just as many endowments, venture capitalists and public pensions traffic in inequality during their elite path to profit. Any consequence in perpetuating an unsustaining inequality is an afterthought.

We must not accept that strong venture capital investment performance is mutually exclusive from broadening the range, connectivity, and depth of their relationship with Black entrepreneurs.

According to a Harvard Business School lecturer, about 75 percent of venture capital-backed startups fail. These failed startups produce a professional dividend of real world experience and a foundation in many cases for the next startup idea and business.

Peter Thiel, the co-author of “The Diversity Myth” and a Donald Trump supporter, has argued that multiculturalism is about learning less and admission standards are being “dumbed down” in America via progressive affirmative action policies.

Thiel is also known as Silicon Valley’s “Godfather” and “The Don” of the PayPal Mafia. His prominent data analytics startup, Palantir Technologies, was recently sued by the U.S. Department of Labor for discrimination against Asian applicants. According to the New York Times:

The government said Palantir’s behavior with Asian candidates included one example where software engineering jobs drew a pool of more than 1,160 qualified applicants. Of that number, 85 percent were Asian. Yet Palantir ultimately hired 11 Asian applicants and 14 non-Asian applicants.

“The likelihood that this result occurred according to chance is approximately one in 3.4 million,” the Labor Department said in its complaint.

Thiel sits on Facebook’s board and is considered by many to be one of the most influential thought leaders and investors in Silicon Valley. The pattern of evidence seems to suggest this influential figure in the Valley is anti-diversity so it’s not a surprise to see the systematic diversity issues in Silicon Valley. The leaders dominating the culture at the very top should be held accountable for contributing to perverse racial imbalances.

It’s also not a surprise that Thiel backed racist Hulk Hogan in the Gawker case after the site documented Hogan using racial slurs.


Source: The CB Venture Capital Human Capital Report: A data-driven look at the race, age, gender and educational backgrounds of entrepreneurs who receive venture capital funding.


With less than 1 percent of every venture capital dollar going to Black entrepreneurs, the elites in Silicon Valley are a feeder transmission mechanism of inequality and are amorally starving our society of the cultural dividend it should be getting from public pensions and tax-free endowment investing.

Comparable outcomes

If Black entrepreneurs don’t have a seat at the table to receive pension and endowment capital specifically targeted at young entrepreneurs, we shouldn’t expect comparable outcomes.

If Black entrepreneurs are at the very bottom of the venture capital ecosystem and aren’t getting capital proportionately to their population and talent, we should only expect optical progress without substantive change.

More research is needed on the “axis of inequality” and how it is likely one of the biggest feeder mechanisms of economic equality.

Here are a few ideas to track commitment to diversity

1. Public pensions must be transparent on their investment relationships and whether the venture capitalists they work with are aligned with their commitment to diversity. The public deserves to see the racial outcomes that involve public capital. Pensions must set a bar that they do better than less than 1 percent of their investment allocated towards Black entrepreneurs.
2. Endowments must recognize their contribution to inequality and set standards around diversity and their investment partners. If endowments don’t develop an investment mandate based on their diversity values, a public policy question should be raised. Specifically, Black organizations such as the Congressional Black Caucus, Urban League, Black Lives Matter, and NAACP should push for legislation to tax the investment returns of the largest and most elite endowments. The Black media can also assist in mobilizing the masses to tax the largest university endowments.
3. Diversity at the venture capital level: Similar to Google and Facebook being pressured to release diversity data on their employees, we must demand venture capitalists start to track key diversity performance indicators, such as who they are hiring, promoting to partner, and the racial make-up of their investments. Pensions, endowments, and entrepreneurs could make good use of this data while venture capitalists can better track their commitment to diversity.

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About Jamarlin Martin

Jamarlin Martin is the founder and CEO of Nubai Ventures. A pioneer and thought leader in digital media, he grew Moguldom Media Group into a multiple-brand digital media and entertainment platform, selling three brands to Urban One NASDAQ: UONEK. Ozy described Jamarlin as an “Emperor of Digital Media.” He won an EY Entrepreneur of The Year Award in 2015.

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