CINCINNATI -- Natasia Malaihollo, founder of the survey startup Wyzerr, has made pitches for funding to nearly 30 venture capital firms all over Kentucky, Cincinnati, Silicon Valley and New York City.
Only once -- when making her pitch to Covington-based Connetic Ventures -- did she not face an audience entirely made up of white males.
That’s not a big surprise, if the results of a recent survey from the National Venture Capital Association are any indication. The Washington, D.C.-based nonprofit looked at the lack of diversity among venture capital firms.
Done in conjunction with Deloitte, the survey found that women made up only 11 percent of investment partners, or the equivalent, on venture investment teams. None of the 217 firms that participated reported having an African-American investment partner.
“The survey results reinforce what we already know, which is that the venture industry is not representative of the overall population of the U.S.,” the association’s president and CEO Bobby Franklin said in a news release. “Research shows that diverse teams make better decisions, and with this baseline measurement in hand, we now turn to developing the tools and resources that will empower all venture firms to take action.”
Generally speaking, what holds true for the nation’s VC industry also holds true in the Tri-State region. WCPO.com could find no African-American investment partners listed on the websites of venture capital firms here. Mike Venerable, the president of local VC firm CincyTech, said he didn’t know of any African-American investment partners at any local firms.
There have been, and still are, a handful of female investment partners at local VC firms. When Malaihollo pitched Wyzerr to Connetic Ventures, that firm still had Mina Maddali as an investment partner.
Maddali left Connetic in September to pursue other endeavors, said Connetic founding partner Brad Zapp. He and Kyle Schlotman, both white men, are now the firm’s only partners.
The firm’s advisory board consists of three white men, he said, but also three women. And some of the companies it invests in, which include Wyzerr, have diverse ownership.
Diversity’s good because it brings different ideas to the table, Zapp said, and it’s something the firm will continue to pursue.
Another local firm with female investment partners is Triathlon Medical Ventures, which has four managing partners, two of them women, said managing partner John Rice. But that firm stopped investing in new companies in 2009, he said, and is winding down its fund.
The national survey found that women make up 45 percent of the total workforce at venture capital firms, but the jobs they get don’t typically involve making investment decisions. Minorities make up about 22 percent of the VC workforce nationally, but the best-represented minority group is Asians/Pacific Islanders, who make up 14 percent of the VC workforce. African Americans make up only 3 percent, and Hispanics/Latinos only 4 percent.
The picture at local VC firms looks similar. For example, River Cities Capital Funds lists 14 team members on its website. Four of them are women: one works as the CFO, another as controller, one as manager of administration and one is vice president for marketing Britney Hamburg. The firm’s three managing directors are all white males. Hamburg didn’t return a call left for comment on this story.
Another local VC firm with a fairly large staff is Blue Chip Venture Company. Its website lists eight team members, four of them women. However, the three managing directors are all white men. Managing director Jack Wyant did not return calls left for comment on this story.
Why the lack of diversity among national and local VC firms? It’s a pipeline problem, said Triathlon’s Rice.
Most people who become partners in venture capital firms don’t start their careers in VC firms, but as startup owners themselves, he said. When they become successful, the venture capitalists who invest in them start seeing them as partner possibilities.
Although it’s changed in recent years, he said, in the past, most successful entrepreneurs have been white men.
CincyTech’s Venerable agreed that the pipeline is at fault.
The people who can raise money from venture capitalists are most often successful tech entrepreneurs, Venerable said -- and therein lies the problem.
“There’s a clear problem with diversity in the tech industry,” he said, as well as in the financial industry, another source of venture capital employees and partners.
CincyTech itself has 13 team members, Venerable said, with six of them being women. Investment decisions are made by Venerable, Doug Groh and John Rice, all of them white males.
However, several of the companies that CincyTech has invested in have diverse ownership, he said, and CincyTech also has a diverse group of co-investors.
The VC industry needs to devise solutions to its diversity problem, he said, possibly by getting women and minorities interested in entrepreneurship at an earlier age. “We need to get kids thinking about entrepreneurship or tech as a career path … and they need examples to show them that it’s possible,” he said.
The lack of diversity among VC firms is a problem, he said, because it can make it harder for female-owned and minority-owned companies to get funding. “I’ve seen this happen,” he said.
“I worry about the ideas and concepts we’re missing because we’re not connected with a large part of the population,” he added. “The fact that we’re having this conversation means that we, as an industry, understand the there is a problem.”