As the nation celebrates Juneteenth, we're taking a closer look at the lack of diversity in the venture capital industry – and the numbers are shocking. According to CrunchBase, startups with at least one black founder have received only 1.2% of overall venture dollars invested in the U.S. so far this year. Marlon Nichols, co-founder & managing partner of MaC Venture Capital, discusses how to bridge the racial gap in venture capital funding.

Opening Bell

Closing The Racial Gap In Venture Capital Funding

we'll talk more all about this is Marlon Nichols co founder and managing partner over at Mac venture capital marlin. Such a pleasure to have you here. Thanks so much for joining us. So break down for us, the racial gap that we're seeing right now in, in the VC world, just how disadvantaged are black entrepreneurs who are seeking funding for their startups here. It's been a pretty significant problem for some time now and I think we're just seeing that, um, you know, that that problem accelerate, um, or, or get worse because, or it seems like it's getting worse. It's pretty much exactly where it always has been. The reason, it seems like it's getting worse is because, you know, following George Floyd and um, everything that followed that, you know, there are a lot of pledges from corporations and venture firms to, you know, really do a better job of spreading the capital around. Um, so that more black founders would receive it. Um, and now, you know, with the economic downturn, we're seeing, um, we're seeing it go back to normal and the reason for that is, um, you gotta look at their motives, right? So initially when, um, you know, when these pledges were happening and the checks were rolling in, it was more of a, more of a charitable, um, I'm going to do this because it feels like the right thing to do kind of a thing versus this is the thing that we have to do because we see the economic value and so, you know, once things start to go sideways, or um, you know, or like in this case, there's an economic downturn. You, you go away from the things that you don't view as essential to generating profits to, um, you know, uh, wealth and in, in a lot of these cases that that's what we're seeing. So let's talk Marlon the cost of doing nothing to close the diversity cap when it comes to venture capital. I mean, you could almost imagine billions of dollars in the business in business opportunities are essentially getting lost here as a result of all of this. Yeah, 100%. Um, you know, the black community, um, it's been well documented, um, has an outsized impact on popular culture and much of popular culture is what is what drives, um, you know, consumer behavior, consumer spending. And so if you ignore, um, you know, this, this demographic and you ignore the founders that are building solutions that you know, fit with with a lot of those social norms. If you would, you're essentially ignoring a big part of the population and leaving a lot of dollars on the table. So I think, you know, what, what folks are going to ultimately find is, you know, um, treating this as charity or treating this as the right thing to do versus the right economic thing to do is gonna turn around and, and you know, invite you in in the wrong place. Absolutely. You mentioned by the way funding the black startups quadrupled in the aftermath of the murder of George Floyd. But still those numbers are still incredibly dismal here. How can more attention Marlon be brought to this issue to ensure that the momentum doesn't die down here? I think, um, you know, if we're gonna attack any problem, you gotta hit it at its source and um, the sources, you know, where is the capital coming from? And are their mandates for that capital to, to be spread around evenly. And so if you think about the venture capital industry and you look at the fund managers, the folks that are making the investment decisions, they tend to be, um, for the most part white white men and it's human nature to want to invest in people that look like you in people that have, where you have shared commonalities, right. Either. You went to the same schools, you grew up in the same neighborhoods. Um, it's just easier. And so if black fund managers are, you know, are the folks that will have more in common with these black founders and they're not getting dollars from limited partners to go into business so that they can fund folks that look like them and folks that don't look like them honestly. Um, then we're always going to see this disparity. You're part of something that was really interesting, which is basically showing that these VC investors that this is that basically they need to invest in more parts of the pie. Not that this is a form of charity, but they need to look at other business opportunities here. So what can be done to encourage these VC capitalists to empower and also invest in these black founders here? Yeah, I think the the diversity in venture partnerships just has to become more more more diverse, right? And um, we have to see more LP dollars flowing towards more diverse fund managers. That's the only way I think you're gonna see it like you can have great intention, but if you don't, if you don't know what you're looking at, um, you're always gonna miss it, right? And so uh, the rooms where those decisions are being made, they have to get more diverse themselves. So let's talk about what happens to corporate America and really to the economy overall when you have more black owned startups receiving venture funding and grow into bigger corporations as a result of that, that is a healthy company and that's a healthy economy here. Yeah, absolutely. Um, you know, we did a search study with the Kauffman Fellows program a few years ago and we looked at the outcomes, um, meaning, you know, startups that actually ended in mergers and acquisitions or I. P. O. S. And the diversity within those startups and truly diverse startups. Outperform, um, non divers or all white male teams, I think something by like 3%. Um, so it's not, you know, this is not a um, it's definitely not not charity and it's a, you know, they're very real outcomes that that come from having these, um, these diverse perspectives which come from having, uh, you know, a diverse group of people within your company. Absolutely. We know the economy and businesses thrive when more people have a seat at the table. Marlon Nichols, co founder and managing partner of Mac Venture Capital. Such a pleasure to have you here, Marlon thanks so much for joining us.