Better diversity in venture capital investing might mean putting it in the contract
Hey, it's molly would hear one of the most uncomfortable things to talk about with your kids is money especially now. We've got you covered though with a new podcast for kids and their families million Brazilian for marketplace helping dollars make more sense subscribed wherever you get your pod tests. Bringing diversity into venture capital investing might mean you got to put it in the contract from American public media. This is marketplace tech I'm Ali would. This week, a group of venture capital firms announced that they're planning to make diversity a core part of their deals with startup founders. The ten firms committed to including new standard language in the contracts called term sheets that they make with startup founders. It's a diversity writer that says that the company and lead investor will make every attempt to include a member of an underrepresented group as a CO investor. It's not. Binding language but the idea is that it will create opportunity for underrepresented investors to participate in deals and also attract founders who prioritize a commitment to equity. The initiative was started by Alejandro Guerrero, a venture capitalist based in Los Angeles with the firm act one ventures I wanted funds to feel because, yes, this is important and everybody out here is talking about it and all the founders are trying to see more. That we're the ones signing up for it. We're actually going to be the ones that have the competitive advantage because founders are looking to work with individuals that are trying to do more. It doesn't have the teeth to see it is enforceable, but that wasn't the point. Right the point here is that all of us know what this is about all of us are making a commitment it's going to it's GonNa. Take some effort it's GonNa. Take a bit word particularly if you know maybe you didn't have the diverse network of potential investors to bring in but now it's reason to do that right it. It's a reason to go out and build more networks meet individuals that you know that you can invite and you'll get to know more, and then hopefully when you build that trust, you'll start seeing incredible new deal flow. I mean I guess I wonder why wouldn't affirm WANNA have diversity rider like this I can't speak to why they wouldn't want to do right. Every fund is different. The way that they're structured their make up their cash, their LP's I don't know. What will success look like I'm hopeful that yeah within. A few years year to that, we see this in the majority of venture funds, and hopefully we'll take it to further and say what you embed this in my term sheet. Yeah. Best case could you see a scenario where as this conversation becomes more prevalent? The push from founders right. The competition could incentivize firms to bring on more underrepresented partners. Yeah. Exactly. That's where I hope this is all GonNa go right like the matter what we do it's not enough right hire more people write more checks do the writer create officer programs, cohorts, all of it like not enough the gap is so wide right diversity is forever, and if we start thinking about it in that regard, then it won't become part of our. Normal behavior when we're out building networks when we're looking for companies when we're out doing deals, how we structure them, you know how advise our our founders to think about building their executive ranks their boards, all of it. Right. We'll give them off to a more equitable than just roll and that's the world that I wanna live in I'm an optimist and I'm hopeful that that's where we're going to see ourselves in and some in the coming years here. Alejandro Guerrero is the principal with the firm act. One ventures. And now for some related links as we mentioned in the interview, there are some notable absences from the diversity writer program big Silicon Valley names like sequoia Andriessen, Horowitz client of Perkins we asked all three if they had plans to join this totally non-binding voluntary inclusion of language and their term sheets with the goal of starting a conversation about diversity at all stages of the investing life cycle. Andriessen Horwitz pointed us to its cultural leadership fund and eighteen million dollars. So Fund made up of one hundred percent black limited partners whose primary investor is also black with one goal being to quote enable more. Young African. Americans to enter the technology industry. I should note that the LP's who've put money into the Cultural Leadership Fund are pretty much all celebrities, corporate executives and some athletes. So not the scrappy would be investors who guerrero says he's hoping we'll get a foot in the door with something like the diversity writer. And teepee insights piece from last month notes that the Cultural Leadership Fund has invested in sixty five companies and of those just three have at least one black founder and eleven have at least one female founder. To saying maybe more conversations wouldn't hurt. Cleaner and sequoia didn't get back to us in time for air. And here's what else we're watching in tech on Tiktok watch apparently, maybe you Walmart and Microsoft might team up to buy it and then Walmart would pivot Tiktok towards a more full on ECOMMERCE shopping experience. So creators and influencers could just. Sell you things which listen again privacy and data collecting are real concerns with Tiktok may be no more so than with facebook instagram. Google or Amazon, but considering the awesome and fun and diverse breadth of content on talk and the true love that people have for it. You ve kind of couldn't even engineer sadder fate. tiktok CEO Kevin Meyer who just took over a few months ago saw that Pale horse coming and promptly quit the announced the move Thursday Stephanie who produces marketplace? Tech. Alvarado our assistant producer Michael Lipkin our senior editor Becca Wineman, and Robin Edgar our engineers I'm Ali. Would that's marketplace tech. This is a PM.