Diversity In Venture Capital: 10 VC Firms Best Positioned For The Future
Venture capital firms got a little more diverse in the past year-and-a-half, but many all-white male firms stayed all white, according to an updated study published by The Information and venture capital firm Social Capital.
Overall, diversity in the VC industry barely improved. About 89 percent of the people making investment decisions at the top 72 firms are male and 75 percent are white. A year-and-a-half ago, those numbers were 92 percent male and 78 percent white.
A survey, published in October and recently updated, polled 72 firms with 581 people. The resulting report, labelled The Future List, is so called because these are “venture capital firms best positioned for the future,” according to The Information:
“For the technology industry to thrive, investors need to find entrepreneurs in more places. And the talent pool is diversifying far faster than investment firms are.”
During the survey and update period, the number of black people making investment decisions at venture capital firms rose from four to seven. The number of Hispanics rose from seven to 11. The number of women rose from 45 to 62.
Firms were chosen for this list if they were actively focused on early stage technology, had $275 million minimum in assets under management (according to data from Pitchbook and Mattermark), or they ranked highly in Mindshare, even if they ranked below $275 million.
Diversity scores on the list are based on age, gender and ethnicity — the lower the score, the lower the diversity. The age of team managers also was scored, according to The Information:
We based the score on how the age of individual team members compares to the “power alley,” the age range of 35 to 46 where our analysis shows VC investment team managers are most effective. (We) decreased the value of scores allotted below 35 linearly and the scores above 46 exponentially.
The overall score was calculated by averaging gender, ethnicity, and age — “equally relevant variables in evaluating a firm’s future relevance,” according to The Information.
Collectively, the 72 firms represent more than $170 billion in assets under management.
We’re shining a spotlight on the 10 venture capital firms that ranked highest on The Information’s list.
10. 500 Startups, Mountain View, Calif.
With Asians representing 82 percent its investment decision makers, 500 Startups — it really has invested in 500 startups — is considered one of the world’s most active investors in very young tech companies, according to Tech In Asia. Started in 2010 in Silicon Valley, the firm has 1,800-plus tech startups in its portfolio doing business in 60 countries. Three of them grew into “unicorns” worth over $1 billion, and 40 are valued at more than US$100 million. Some of its venture capital helped create these firms: Twilio (NYSE: TWLO), Credit Karma, Grab, Udemy, Ipsy, TalkDesk, Intercom, MakerBot (acqired by SSYS), Wildfire (acqired by GOOG), and Viki (acqired by Rakuten).
The remaining 18 percent of 500 Startups is white, 55 percent is male and 45 percent is female.
9. Y Combinator
Considered Silicon Valley’s premiere startup school, Y Combinator has a senior investment team that’s 61 percent white, 33 percent black and 6 percent Asian. The team is 67 percent male and 33 percent female.
Y Combinator says it has created a new model for funding early stage startups, twice a year investing a small amount of money ($120,000) in a large number of startups (recently 105).
The startups move to Silicon Valley for three months, during which we work intensively with them to get the company into the best possible shape and refine their pitch to investors. Each cycle culminates in Demo Day, when the startups present their companies to a carefully selected, invite-only audience. At Y Combinator, our goal is to get you through the first phase. This usually means: get you to the point where you’ve built something impressive enough to raise money on a larger scale. Then we can introduce you to later stage investors—or occasionally even acquirers.
PayPal co-founder and Trump supporter Peter Thiel is a part-time Y Combinator partner, a connection that prompted some diversity organizations to cut ties with the venture capital group, Inc. reported.
That didn’t stop the American Civil Liberties Union from being a part of the VC group’s startup school. The ACLU is included in Y Combinator’s latest batch of companies that will graduate in March, Business Insider reported in January.
8. Social Capital
When you click on the “vision” button at Social Capital’s website “vision” button, the opening line says, “If life were a race, it’s fair to say that the starting lines at birth are unevenly distributed.” Diversity among this venture capital’s decision makers breaks down like this: 50 percent white, 50 percent Asian, 75 percent male, 25 percent female, landing it the No. 8 spot out of 72 firms for diversity.
Founder Chamath Palihapitiya was part of the team that helped Facebook go from campus phenomenon to global movement, and he become very wealthy thanks to its IPO, Fortune reported. Palihapitiya launched Social Capital in 2011. He’s also part owner of the NBA’s Golden State Warriors. In 2015, Palihapitiya sold his stake in Tinder at a $500 million valuation.
Business Insider in 2015 named Palihapitiya on its list of 100 most amazing and inspiring people in tech. He’s been called “the future of venture capital.” Social Capital has $1 billion-plus under assets. Palihapitiya has promised to give away his money to other world changers when he dies.
7. Ribbit Capital, Palo Alto, Calif.
Ribbit Capital says it has one single, relentless mission: to change the world of finance. Founder Meyer ‘Micky” Malka was born in the U.K. and earned a degree in economics in Venezuela before taking off as a financial services entrepreneur. In 2003, he co-founded Banco Lemon which was acquired by Banco do Brasil, Latin America’s largest bank. On his LinkedIn page, Malka is self deprecating: “Specialties: None…. I am better finding team players who are.”
This month, Ribbit launched its fourth fund with a target of $300 million, FinSMEs reported. Past Ribbit managed funds were backed by institutional investors including Spanish banking group Banco Bilbao Vizcaya Argentina SA, Silicon Valley Bank and numerous high-net-worth individuals.
Ribbit’s ethnic make-up on its investment team is 75 percent white, 75 percent male, 25 percent Hispanic, and 25 percent female.
6. BlueRun Ventures, Menlo Park, Calif.
67 percent white, 33 percent Asian, 67 percent male, 33 percent female
BlueRun Ventures focuses on mobile software and services opportunities. Founder John Malloy has been part of the explosive growth phases of companies including Friends & Family, Nokia, PayPal and Waze. Some of his current investments include Banjo, SoundWall, HumanAPI and Kitman.
BlueRun is 67 percent white, 33 percent Asian, 67 percent male and 33 percent female.
“We look at technologies that are data driven,” said Cheryl Cheng, a partner at BlueRun, in a Viator News interview. “We believe that data is the currency for the future in terms of creating value within companies, and for companies. We look at technologies that are either creating new streams of data or leveraging existing streams in a unique way so that you can improve decision making, either for the consumer or for the enterprise.”
5. Aspect Ventures, Palo Alto, Calif.
With two females as its founding partners, Aspect Ventures is 60 percent female, 20 percent black, 40 percent white, 40 percent Asian, and 40 percent male
Jennifer Fonstad and Theresia Gouw are the rarest of finds in Silicon Valley: cofounders of a woman-run venture capital fund, Entrepreneur reported. “As an investor, ( Fonstad) avoids divas at all costs, and don’t expect her to write a check and then disappear; collaboration makes her tick. Her primary focus is the $150 million fund: Series A rounds — about $1 million to $6 million, and mainly for small cybersecurity, digital health and mobility businesses preparing to be huge.”
In a Forbes report, Fonstad said this about venture capital investments in the Trump era:
“I think that businesses that are performing real needs, offer things that are ‘need to have,’ not ‘nice to have,’ are the things that will get more attention and more traction in the marketplace. Nobody can predict the next economic downturn. We do know that in the U.S. and other significant parts of the world there is an ‘anti safety net’ kind of moment, and every void that this leaves is an opportunity for startups. Startups that are focused on safety net, on streamlining things that have otherwise been government services, are going to do extraordinary well. This trend is sector agnostic, as it can be edtech, fintech, healthcare or IT, because all of those are safety net-related kinds of fields.”
4. SoftTech VC: Palo Alto, Calif.
Jeff Clavier is the founder and managing partner of SoftTech VC, one of the original seed venture capital firms in Silicon Valley. The firm focuses on the consumer Internet space with 175-plus investments since 2004 including Mint (Intuit), Kongregate (GameStop), Brightroll (Yahoo), LiveRamp (Acxiom), Milo (eBay), Wildfire (Google), Bleacher Report (Turner), Gnip (Twitter), Fitbit (NYSE:FIT), and Curse (Amazon).
SoftTech saw its biggest exit ever when wearable fitness company Fitbit went public in 2015, Telecrunch reported. Other SoftTech exits include Gnip, a data company that was acquired by Twitter for $134 million in 2014; Brightroll, a video ad platform acquired by Yahoo for $640 million in 2014; and LiveRamp, a maker of data onboarding software that was acquired by data management firm Acxiom for $310 million in 2014.
The firm aims to secure 7-to-10 percent ownership of the companies it funds, making Initial payments of $750,000 to $1 million.
In June 2016, SoftTech announced that that it has raised $100 million in its fifth seed-stage fund plus another $50 million in capital commitments for a “breakout” fund to invest in 12 to 15 deals involving its successful portfolio companies.
The firm’s investment decision-making team is 75 percent white, 25 percent black, 75 percent male, and 25 percent female.
3. Floodgate, Palo Alto, Calif.
With an investment decision-making team that is 40 percent white, 60 Asian, 60 percent male, and 40 percent female, Floodgate says it looks for prime movers. That’s people who, “through their vision, talent, and will — create massive outcomes from nothing. Equally important, they are brave enough to defy conventional wisdom. Walls and barriers and ‘rules’ accepted by others don’t stop them.”
Cofounded by Mike Maples Jr. and Ann Miura-Ko, Floodgate focuses on investments in technology companies in Silicon Valley and Austin, Texas.
Before becoming a venture capitalist, Maples cofounded Motive, an Austin, Texas-based software company that he took public. Ann Miura Ko, a former analyst at CRV, joined Maples as a cofounding partner in 2008. Other investors at the firm include Iris Choi, Arjun Chopra and Ryan Walsh, Telecrunch reported.
Floodgate usually backs very early-stage companies. Among others, it has invested in ride-hailing company Lyft; digital lifestyle media company Refinery 29; the freelance labor force app TaskRabbit; Demandforce (which sold to Intuit for about $420 million in 2012); and Twitter, which went public in late 2013.
2. Felicis Ventures, Palo Alto, Calif.
Before founding Felicis Ventures in 2006, Aydin Senkut was a senior manager at Google, responsible for strategic partner development and account management in Asia Pacific.
After he left Google, “people gave me zero chance of success,” Senkut said in a Telecrunch interview. “I had zero deal flow. I had no network outside of Google, which had no alumni at that point. So I did whatever it took to build that network.”
Today the fund focuses on five main areas – mobile, e-commerce, enterprise, education and health – and on what it believes are groundbreaking technologies such as artificial intelligence, 3D imaging, bio informatics, and connected devices. “We have a passion for product and out-of-the-box thinking,” its website says.
“Our portfolio founders originate from well over 30 different countries across a multitude of continents. We have invested in companies with operations in 13 countries including Brazil, Canada, Estonia, Finland, Germany, Israel, Netherlands, Turkey, U.K. and the U.S.,” said Felicis managing director Sundeep Peechu in a blog.
Senkut’s name is on the Forbes’ 2014, 2015 and 2016 Midas Lists. In March 2016 he was named one of the New York Times’ Top 20 Venture Capital Investors Worldwide. He was an early backer of iconic companies including Shopify, Fitbit, Adyen, Diffbot, Greenhouse, Credit Karma, Rovio and Vicarious. More than 60 Felicis companies including Brightroll, Climate Corp, Cruise, Dropcam, Twitch, and Meraki, have been acquired by industry leaders such as Google, Amazon, Cisco, Apple, Microsoft, General Motors, AT&T, Disney, Yahoo and Ebay.
The Felicis investment decision-making team is 50 percent white, 50 percent Asian, 75 percent male, and 25 percent female.
Everyone on the Felicis staff travels extensively, and “everyone here speaks multiple languages,” Senkut said in a Telecrunch interview. Senkut was born in Turkey and other managing directors were also born outside the U.S., including Renata Quintini (Brazil);Peechu (India); and Wesley Chan (Hong Kong), who joined Felicis from Google Ventures in 2015.
”One of the core aspects of what we’re trying to do is . . . go against the status quo,” Senkut said. “We have common (investments) with 50 venture firms but everything we do is different, including investing across stages and geographies. People thought that was crazy.”
1. Lowercase Capital, Coalinga, Calif.
Led by Christopher Sacca, a former lawyer, Lowercase Capital invested in seed and early-stage technology companies such as Twitter, Uber, Instagram, Twilio and Kickstarter. He has appeared as a guest shark on ABC’s “Shark Tank.”
Lowercase Capital may be the best-performing venture capital fund ever, according to a January 2015 Fortune report:
Lowercase Ventures Fund I closed an $8.4 million seed fund round in 2010. Active portfolio companies include Uber, Docker, Optimizely and StyleSeat, while exited deals include Instagram (sold to Facebook) and Twitter. This would appear to be the winner, at least from a return multiple perspective.
In 2014, the fund’s overall return multiple on committed capital reached 216x. Or, in real dollars, nearly $1.3 billion on just under $6 million in call-downs (including approximately $23 million in cash and stock distributions for exited companies).
On its website, Lowercase says “We are grateful for the companies who have chosen us, feel lucky for the chance to collaborate with such brilliant and happy people, and we are proud of how hard they work to bring smiles to their users and customers. Our approach isn’t exactly customary, and our partners don’t act like traditional VC/private equity guys.”
Sacca joined Google in November 2003. As legal counsel, his first mandate was to find an infinite amount of data space, negotiate and sign agreements around the world. He was one of the first Google employees given the Founders’ Award, the company’s highest honor. After becoming fully vested, Sacca left Google in 2007.
He worked as an advisor for Barack Obama’s 2008 presidential campaign in telecommunications, media, and technology. He also served as co-chairman of finance for the Presidential Inaugural Committee, and served again on Obama’s 2012 reelection campaign.
En route to a speech, Sacca once impulsively bought a cowboy shirt at an airport in Reno. He got so much reaction during meetings that on his return, he bought out half the store, according to Forbes. “Entrepreneurs get disappointed when I show up without one of these,” he told an interviewer, donning a black shirt with silver stitching.
Lowercase investment decision makers are 67 percent white, 67 percent male, 33 Asian and 33 percent female, according to The Information.