Are VCs Racist? Explaining the Capital Gap

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A breakdown of the system from industry veteran bussgang.

Over the holidays, there was a bit of a firestorm on Twitter over comments made by venture capitalist Joe Lonsdale of 8VC regarding VCs and racism.

Lonsdale later deleted that tweet but followed it up with another two that I’ll include here in response to a thoughtful reply from Steve Ekechuku, a NY-based lawyer: The implications of this social psychology insight are powerful in the context of racial discrimination. Although the authors indicate that various studies show that we have seen explicit, overt biases decrease in America in recent decades , strong implicit biases remain. Specifically, the IAT has “revealed that approximately 75% of Americans display implicit preference for white relative to Black.

If these two books are right, we should see evidence of these unconscious biases in investor decisions. Not surprisingly, a few recent studies have shown exactly that. Black VCs and entrepreneurs don’t need academic studies to tell them what they experience day to day. Venture capitalist and entrepreneur James Norman wrote a compelling HBR article called, A VC’s Guide to Investing in Black Founders in which he discusses differences between Black and white founders. These differences can lead to different profiles, paths, cultures, and styles of communication.

 

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