3 Black investors talk about what they’re looking for in 2023

Founders and investors alike are bracing for a tough 2023 as the economy shows few signs of improving. But there are a lot of questions up in the air: Will the truckload of dry powder VCs have make its way to the market? Are there going to be more layoffs if the pressure on valuations persists? What’s in store for AI?

We can answer some questions, though: Some trends are bound to stay, like interest in artificial intelligence, and crypto will continue to be under scrutiny, even as the market looks to the future. There are other aspects of the venture world that will probably not change, like the lack of funding for minority and women founders.

To find out how minority investors are planning for 2023, we spoke with three active Black investors. For Xfund’s vice president, Jadyn Bryden, the creator economy is one hot spot worth watching in the coming months. “I’m expecting to see continued movement in the creator economy as more people venture out to build their own brands and rely on new tools for content creation and monetization,” she said.

Alexis Alston, principal at Lightship Capital, feels the future will be favorable for companies that build tech to help others do business and cut costs: “As fast-growing tech darlings begin to cut back on overhead expenses, I think we will see a strong shift toward companies relying more on sales optimization and content creation tools as a substitute for previously heavily redundant teams.”

But the investors were pessimistic about capital allocation to Black founders improving next year.

Richard Kerby, general partner at Equal Ventures, is hopeful that more diverse founders would get funding next year, but doesn’t expect a huge change. “I think a lot of the narrative that many investors put out there about investing in more Black founders was mostly just talk and not a lot of substance or actual dollars flowing to Black founders.”

We spoke with:

Alexis Alston, principal, Lightship Capital

Which sectors will you continue to keep an eye on, and which trends do you expect to take off next year? Why?

I’ve always been interested in the increasingly expanding applications of AI, including generative AI, natural language processing and deep learning. I’m looking forward to seeing how AI can contribute to scaling previously human-led areas of business, such as sales, social media, marketing and content development.

As fast-growing tech darlings begin to cut back on overhead expenses, I think we will see a strong shift toward companies relying more on sales optimization and content creation tools as a substitute for previously heavily redundant teams.

What is the most pressing political issue you are keeping tabs on, and what impact does it have on you as an investor? Would you back a startup that addresses any of these issues?

There is a deep undertone that is reverberating right now around the expectations of or the lack of political oversight for more nascent tech and financial products. Around everything from crowdfunding to crypto, there is a deep lack of oversight that is only now beginning to cause a ripple effect for many of our institutional and consumer investors.

As an investor, the lack of oversight has led to ultra-heightened valuations and unrealistic expectations of exit potential within these nascent markets. Ultimately, the everyday angel investor (who tends to be more representative of the general population than institutional investors) gets the short end of the stick every time.

Given that the percentage of venture capital going to Black founders has rarely exceeded 1%, do you feel next year will be any different? Why or why not?

I am not confident that next year will be any different. If anything, I am very concerned that the number will drop in 2023 as institutional funds either tighten their purse strings or begin to seek criteria for founders that often exclude Black founders.

3 Black investors talk about what they’re looking for in 2023 by Dominic-Madori Davis originally published on TechCrunch

Fearless Fund’s Arian Simone on why a downturn is business as usual for minority founders

Arian Simone sat poised center stage at the Embrace Action Summit to share words that many entrepreneurs in the audience understood far too well.

“Women of color are the most founded, entrepreneurial demographic,” she said at the biannual business conference hosted by the Tory Burch Foundation. “They are just the least funded.”

Simone is the co-founder of Fearless Fund, one of the first funds launched by women of color that aim to only invest in women of color. At the event, her words rang true for the audience, many of whom are women entrepreneurs and know very well the daunting journey of fundraising that leaves them with only about 2% of all venture capital investment.

“It’s going to take trillions of dollars to move these statistics,” Simone said.

“When we first started the Fearless Fund, people looked at us like we were crazy.” Arian Simone, co-founder, Fearless Fund

The current market downturn might drastically hinder any progress being made on this front. Valuations have plummeted, and total funding at all stages has declined. In May, Sequoia warned its founders that the financial recovery could be long, and Y Combinator told the companies in its portfolio that their chances of successfully fundraising were “extremely low” in this downturn.

However, the situation for diverse investors and founders ironically has a silver lining. While minority, women-led businesses need to be supported at this time, Simone said, these founders are used to weathering harsh economic conditions due to systemic barriers that have already excluded them from fundraising. There might be an increased dearth of capital this year, but access to the money wasn’t necessarily promised to these founders anyway.

As a result, Simone and her portfolio have a simple plan for navigating this time: Conduct business as usual.

The goal is to persist

What 7 combined decades in tech taught us about perseverance and reinvention

Women in the workplace have historically been undervalued and underrepresented. That’s no secret, but it rings especially true in tech. In the United States alone, women make up less than 40% of the global workforce and only fill 25% of professional computing jobs. Furthermore, a new report found that 45% of surveyed women in tech said men outnumber them at work at ratios of 4-to-1 or greater.

Between the two of us, we possess nearly 70 years of experience working in tech(!), and if you ask us to recount our journeys, we’re likely to recall both great and not-so-great memories. For instance, one of us distinctly remembers being told by an eighth grade math teacher that she wasn’t good enough to take algebra. But in a fortuitous act of youthful defiance, she elected to major in math before landing her first post-grad job as a programmer for a NASA contractor. This would go on to launch a thriving, 50+ year career in tech.

A few decades later, the other remembers serving as the only woman on her company’s leadership team, often feeling isolated and alone. Again, defying the status quo, she instead used this as a catalyst to build a platform focusing on advancing women in the workplace, helping to identify and bring more female leaders to the table.

What these stories illustrate — and what the two of us agree about — is this: While many organizations and allies are making a more concentrated effort to help women progress in their careers and thrive in a male-dominated tech world, much of the onus on driving change and making improvements rests squarely on our shoulders as women. Women are resilient, and they are showing a fresh perspective, energy and dedication to ensure they rebound and regain influence, power and capital after being disproportionately affected by the pandemic.

Whether you’re a woman considering a career in tech or a seasoned professional, we all share in this mission and have a role to play in mitigating the gender gap and supporting one another.

Here are a few things that have worked for us over the years:

Acknowledge the challenges and face them head-on

If you like country music, you’ve likely heard the song, “Same Boat,” with the chorus singing, “We’re all in the same boat, fishing in the same hole … ” Well, we may be fishing in the same hole — or, in the case of the past two years, riding out the same storm — but we’re still in very different boats.

Hiring women returning from a career break can bolster existing talent pools, and these “returners” are often highly motivated, educated and more than qualified to take on a variety of roles.

Skillsoft’s 2021 Women in Tech report shows that women, particularly those in technical fields, continue to face many of the challenges in the workplace that have long existed. The largest percentage cites their biggest issue as lack of equity in pay, followed by work and life balance, lack of opportunities and lack of training.

Additionally, in the United States during the pandemic, 34% of men working remotely with children at home received a promotion compared to 9% of women in the same situation, and 26% of men received a pay raise compared to just 13% of women, according to a study by Qualtrics and The Boardlist.

Yes, the gender gap faced by women has shown slight signs of improvement in recent years, but this is a reminder that the road to equality is long and winding. It’s essential to remain persistent and not lose sight of your aspirations in the face of adversity. Even if you were an average student, you may soon find yourself in a meeting and realize you’re one of the smartest people there.

Learn from your mistakes, and when things are not going your way, find a way that works. This held true in the 1960s, and it still does today.

Don’t be afraid of reinvention

Life throws curve balls. For many women, taking a hiatus from work to have and care for children (or others, like aging parents) is inevitable. From personal experience, it can be difficult finding an employer willing to take a chance on women returning to the workforce. That’s why being persistent and willing to reinvent yourself is so important.

Maintain a mindset of curiosity throughout your career. That’s critical to ensure you’re able to adapt and pivot in any given situation. Perhaps after leaving the workforce, your previous position in product marketing is no longer there, or maybe you’ve reached a certain point in your career and no longer enjoy the work. Are your existing skillsets transferable to another role? Are there skills you’ve learned along the way — or could acquire — that allow you to shift to another path, such as development?

While pivoting and reinventing your career can be daunting, it can also pay major dividends in the long term.

For organizations, embracing this approach is good business. Hiring women returning from a career break can bolster existing talent pools, and these “returners” are often highly motivated, educated and more than qualified to take on a variety of roles. They want to put their best foot forward and bring mature and diverse perspectives, many of which they may have gained during their hiatus.

At a time when the tech workforce has a dire need for more skilled individuals — especially women — now is the time to enlist and empower this motivated group.

Master the most important skill of all: Flexibility

Change can be disruptive, but embracing and adapting to change can open a new world of possibilities. In order to come out ahead, it’s important to not just survive organizational change, but understand and learn how to thrive in it.

For example, several years ago one of us led a team that was bringing a new product to market that was tremendously exciting. Her company, however, decided to go a different route and bought a business that was already successful in this space. She could have worried about her job (and did, briefly), but instead, realized that the company needed help moving customers from the existing product to the acquired one. So she raised her hand, let them know that she could help and was subsequently assigned to the new team.

She’s now been with this company for nearly 20 years.

On the flip side, if an organization is asking such a drastic change of an employee, they must also provide the tools and resources needed for them to be successful in their new role. Here’s where creating a culture of learning, in which every employee is given the opportunity to develop new skills and capabilities, comes into play.

We all aspire to something bigger, to finding our place in — and contributing to — the world. Women’s careers are journeys made up of diverse and interwoven learning experiences that build leadership, power, influence, grit and resilience. We’ve made some good choices and faced some tough challenges during our combined 70-plus years in the tech workforce.

What have we learned? What you do with those learning lessons and how you build your story of perseverance, resilience and success as a female in technology is what matters most.

Potential down market could temper VCs’ promise of more diversity

Venture hiring by definition is exclusive. Legally, investors have to be able to fork out their own capital, ranging from hundreds of thousands to multi-millions, to join as a partner of a fund, meaning to be a senior partner typically requires some personal wealth. The industry is exceedingly gender imbalanced, with data showing that 84.6% of senior investors are male. The vast majority of VCs, too, come from very similar — and privileged — educational backgrounds from institutions like Harvard or Stanford. And they happen to be white.

There has been progress in recent years, with more women joining venture firms as well as starting their own shops. In February, the advocacy group All Raise released data showing that U.S. firms added 52 female partners or general partners in 2019, compared to 38 roles the year before. People of color have incrementally made progress too, which many say is not enough. Only 2% of VC partners are Black, per Richard Kerby, a partner at Equal Ventures,

The momentum for diversity efforts has been further revitalized lately as firms rally behind Black Lives Matter with donations and commitments to increase diversity in their pipelines. The phrase “make the hire, send a wire” has risen as a mantra for what steps non-Black VCs can enact to be better, like hiring a Black associate or investing in Black founders.

Still, because of the potential economic impacts of the pandemic, the already slow-moving advancement of women, Black people and other underrepresented groups in the venture industry is now being threatened. To not lose the progress of recent years, and to grow it going forward, the entire venture industry needs to intentionally and aggressively approach hiring.

The new new

The newest firms in the industry are beating their more established predecessors when it comes to diversity. In order to join a venture firm you don’t have to be a “lifelong capitalist,” said Monica Desai Weiss, a newer investor at Kleiner Perkins. Instead, you can be an operator, like Desai Weiss, or sometimes even a journalist.

However, faced with an extended recession, the venture world is at risk of losing many of its younger firms. Unlike legacy firms, newer firms don’t have decades of track records to back up their intelligence or gut instinct. Young firms also don’t have deeply embedded relationships with institutional investors, who have deep ties but also remain homogeneous. It means that a more diverse generation of VCs who have popped up over the past decade, some founded to invest in diverse entrepreneurs, are at risk to leave the ecosystem they finally broke into.

“The new boss will be the same as the old boss,” says Chris Lynch, a former partner at Boston-based Accomplice, who fears there will not be a changing of the guard within the VC world if the economy doesn’t recover sooner than later.

Newer VCs, he notes, will be impacted because venture capitalists depend on eight to 10 years to get any kind of liquidity and thus prove that they are good at their jobs. If the market becomes more conservative, LPs are going to return to legacy funds versus betting on new funds with no proven track record.

These investors — who are often managing the assets of pension funds, universities and family offices — and who determine which investors, and firms, ultimately get funded — have already warned that they’re less liable to fund newer fund managers, given the current economic environment. They’re trying to protect their assets by not taking risks on newer players in the space, but sticking with investments such as legacy firms that have proven returns.

For those limited partners, diversity may be a distant concern at the moment. It’s partly for this reason that my colleague, Connie Loizos, recently argued that LPs with public funding require as a legal mandate that the venture managers they fund invest a certain percentage of that capital into diverse startups.

Without any similar mandate, former Accomplice partner Lynch is dubious that LPs will become innovative in a downturn. “With limited partners, it is all old institutional money,” he says. “They have the muscle memory of everyone they have funded before. They don’t like change.”

Jon Holman, a long-time recruiter for tech CEOs and venture capital firms, also fears that up-and-coming venture capitalists will struggle if there is an extended recession similar to 2000, which had socioeconomic impacts for the venture community for at least five years.

In the 2000 collapse, Holman observes, limited partners (institutions, pension funds, universities, life insurance companies) saw that there was no economic opportunity within venture capital because the returns got so bad. So the money was taken out of VC and put into other investments like real estate or gold, he recalls.

“The weaker venture funds that had come into existence and never had a return yet were never able to raise a second fund,” Holman said. “The population of venture capitalists went down pretty dramatically.”

Therefore, if an extended recession, or depression, hits the U.S. economy, venture hiring itself might go on pause. There is no progress if there is no movement.

“Sequoia isn’t going to go out of business, Accel isn’t going out of business, Andreessen Horowitz isn’t going to go out of business,” Holman says.

In a worst-case scenario, it means that the onus will be entirely on these more established players to ensure they invest in Black and underrepresented talent — as well as continue to diversify their own ranks. This is not an excuse for venture capitalists. If only the strong survive, the strong need to show up with commitments.

Tiffani Ashley Bell, a founder and executive director of Human Utility, wrote a Medium post on Friday titled “It’s Time We Dealt With White Supremacy in Tech” outlining a number of ways venture capitalists can support Black investors.

“If you run a VC firm without Black partners, will you commit to adding at least one Black partner before 2022? If not, why not? They will see opportunities in places and spaces you won’t. And let me stop you right there: Not every white or Asian partner at a VC firm now was a spectacular operator or had an exit, so that’s no excuse. If you are a non-Black investor committed to doing better, are you willing to hold your colleagues accountable? Will you call them out for talking more than doing?”

Bell also recommended investors become limited partners in a Black-led VC fund. Plexo Capital, a GV spin-out, approaches this as a hybrid venture capital firm that both invests in firms led by diverse investors and early-stage founders.

Sarah Kunst, the founding partner of Cleo Capital, says that “investing in black talent is not an intractable, insolvable problem. Funds just need the desire to solve it.”

“The way to find, hire and fund black people in tech is the same as finding, hiring and funding any other group,” Kunst says. “You build relationships with people in that group, you seek out thought leaders from the community and learn from there. You tell your hiring and investing teams that there’s a hole in the fund’s expertise stack, and you fill it.”