The Opportunity Pledge
Increase investment to underrepresented founders and fund managers
10X by 2025
A Pledge for Tech Industry Investors
The Opportunity Pledge and its corresponding framework are designed to serve as a first step for institutional investors to analyze their role in and optimize their progress toward achieving tech funding equity. The Pledge targets primarily venture capital firms and limited partners (LPs) who invest in them. Angel groups and accelerators may also participate. Many organizations can benefit and support!
Income inequality makes it difficult for the majority of Americans to launch successful startups. This is especially true for underrepresented founders, particularly people of color, who are often less resourced due to systemic economic oppression and the resulting wealth gap. The U.S. Securities and Exchange Commission (SEC) further constrains capital formation by segregating investors based on income and net worth, making it legally and financially prohibitive for most underrepresented founders to raise enough capital from friends and family to achieve the milestones heuristically hailed as requirements for venture capital (VC) funding.
When underrepresented founders of color do make it to a venture-backable position, they receive less than three percent of total venture capital, despite data showing that diverse teams have higher returns on positive exits than their all-White counterparts. Female founders are likewise funded far less than their equitable share.
Why Do We Need an Opportunity Pledge?
Black and Latinx representation is also lacking among investors. Only six percent of venture capitalists are Black or Latinx (two percent at firms that are ten years or older). Less than five percent of angel investors are Black or Latinx. Several studies have indicated that this lack of representation is caused by and contributes to discrimination within the tech industry at all levels. According to research by Rate My Investor and Diversity VC, venture capitalists hire other venture capitalists and invest in founders who are similar to themselves. This creates systemic barriers to entry for both underrepresented founders and general partners which, in turn, impacts hiring and the economy at large. For instance, The Center for Global Policy Solutions found that investors’ discriminatory financing practices and bias toward companies primarily operated by White males cost the U.S. over 9 million jobs and $300 billion in collective national income.
Problem Solvers - Who Should Make the Pledge
To facilitate transparency, the Tech Funding Equity project will list the names of the venture capital firms and LPs that the project approaches to take the Opportunity Pledge. This may serve partly as an indication of which firms are committed to tech funding equity, and also to acknowledge that some firms may not be represented because they have not been approached. Priority outreach will go to those that have expressed a desire to invest more equitably in underrepresented founders and to increase opportunities for underrepresented emerging managers. This may aid in the “Entrenchment” component of the Pledge, whereby firms have an opportunity to share better practices.
About the Methodology
Modeled after the Mekong Club Business Pledge Against Modern Slavery, a methodology that enlists the private sector in supporting government efforts to eradicate modern-day slavery tied to labor exploitation, the Opportunity Pledge framework has four categories — Assimilation, Engagement, Execution, and Entrenchment — divided into subcategories:
Fundraising & Investment
Within each subcategory, companies can pull from suggested actions (or not), create their own actions, and optionally contribute to the list of suggestions. Not all companies need to adopt the same actions, but they should commit to undergoing internal analysis, determining actions, and remaining accountable to implement and track those actions.
Increase investment to underrepresented venture capitalists & founders
10X by 2025
Pledges are used for various causes, but seldom include a framework to support signatories in taking action and measuring the impact of their engagements. The Opportunity Pledge framework encourages companies to remain engaged by providing practical guidelines, external accountability, positive encouragement, and support.
We cannot assume that companies know which resources or information can best contribute to an understanding of the systemic barriers that create tech funding inequities. Past surveys, such as the LinkedIn member survey on the state of diversity in venture capital and startups, indicate there has been a lack of awareness and concern with diversity in the tech and VC ecosystem.
However, in response to the 2020 tipping point in the Black Lives Matter movement, following the deaths of George Floyd, Breonna Taylor, and Ahmad Arbery, even venture capital firms and limited partners are: 1) acknowledging systemic racism; 2) seeking to understand its persistent impact on underrepresented founders and emerging managers; 3) learning the business benefits of diversity; and 4) accepting the moral imperative to act now.
As the industry acknowledges the need for change, with some, as TechCrunch reported, “looking to create benchmarks and internal surveys to monitor their progress and find out where their firms and portfolios are falling short,” this framework serves as a resource informed by extensive research and past successes with similarly complex and multifaceted issues.
The Pledge also takes into account the Aspen Institute's Racial Equity Theory of Change (pdf), particularly the cycle of “progress and retrenchment,” a “structural racism system” that “works to maintain a steady state of white privilege wherever there is progress toward racial equity.” The framework and action steps included alongside the Pledge serve to anticipate and mitigate this cycle to sustain continued progress.
About the Framework
Congratulations on your decision to become a signatory of the Opportunity Pledge!
Click the button below to sign up. You will receive an email confirming your commitment that will include pdf copies of 1) the White Papere with the framework for implementation, 2) the Pledge, and 3) your certificate of acknowledgement. More than one member of your organization may enroll.
Instructions on adding your logo to the site and accessing other resources will follow.