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 and ecosystem builders to analyze their role in and optimize their progress toward achieving tech funding equity.
The Pledge serves primarily venture capital firms and limited partners (LPs) who invest in them. Angel groups, accelerators, and startup ecosystem-builders may also participate. Many organizations can benefit and support!
Signatories may also receive customized access to the Startup DEI Pledge and Assessment for portfolio companies.
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
The Pledge originated to serve venture capital firms and limited partners (LPs) who invest in them. However, corporations, accelerators, angel groups, colleges/universities, entrepreneur support organizations, and service firms may also benefit and participate.
Accountability & Transparency
The Pledge does not mandate quotas or specific allocation amounts for individual participants. Signatories may set/share their own goals or progress if they choose.
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. However, assessment results for individual firms are not published.
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 methodology has four steps:
Step 1: Pledge & Assess - Organizations commit and benchmark where they are.
Step 2: Implement - Organizations utilize the framework and Implementation Guide to formulate a plan of action.
Step 3: Track - Organizations meet internally on a quarterly basis to assess progress and complete an annual assessment provided by the TFE team.
Step 4: Measure - In response to the Tech Funding Equity Survey, each signatory is assigned a score based on whether the organization has taken action on each of the sub-categories. Learnings, shared in aggregate, can support organizations to develop better practices that may evolve over time as necessary.
How it Works
Effort, not effectiveness, is the criteria for the score assigned in Step 1 (pledge & assessment). Efforts are reflected by taking action in one or more subcategories of the Framework, and will be used to determine the effectiveness of the actions used in Step 2 (implementation).
Learnings, shared in aggregate, inform Step 3 (tracking) and Step 4 (measure). They also support organizations to develop better practices that may evolve over time as necessary. As with the Mekong model, the results of individual organizations will not be shared publicly, as the intent is neither to “name and shame,” nor to make a competition out of metrics (companies may evaluate their outcomes internally and make public at their discretion).
The Tech Funding Equity approach is to: 1) encourage companies to participate voluntarily; 2) establish a dialogue with companies; 3) gather insight; and 4) offer support and advice based on outcomes to optimize the efforts of companies that have demonstrated their commitment to accelerating tech funding equity.
About the Framework
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 access to support. The operationalization of the pledge framework is four-parts:
Assimilation - Facilitating an understanding of information or ideas related to tech funding equity.
Engagement - Shaping policies and practices internally and externally, setting goals toward achieving tech funding equity, and putting governance structures in place to support tech funding equity goals.
Execution - Recruitment, internally and externally; creating, allocating, and disseminating resources; building capacity; and monitoring progress.
Entrenchment - Anticipate and serve to mitigate retrenchment with a focus on ensuring that outcomes are established.
Between these categories, there are nine subcategories and various suggested actions. 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. On an annual basis, an Opportunity Pledge survey go out to evaluate what actions companies have taken, and the effectiveness of these actions.
About the Framework
Companies that have participated in a similar framework with the Mekong Club reported two useful benefits:
Company-wide, inter-departmental conversation on the issues; and
Helping companies anticipate and prepare for compliance as governments consider legislation mandating greater accountability.
We anticipate the following additional benefits:
Helping existing managers tap into extended deal flow networks of underrepresented founders to achieve alpha.
Accelerating diverse emerging managers' ability to establish an investment track record to launch their careers.
How it Works
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 and economic imperative to act now.
While this project precedes the events above, it offers a timely resource to builds upon heightened awareness. The antithesis of "assimilation" understood as conforming to a homogenous or dominant culture, the activities listed under Assimilation involve the process of taking in and fully understanding information or ideas related to tech funding equity. Our partners and resources support both Engagement and Execution.
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 [and other manifestations of caste] wherever there is progress toward racial equity.” The methodology, framework and action steps oriented around Entrenchment serve to anticipate and mitigate this cycle to ensure outcomes are sustained.
Congratulations on your decision to become a signatory of the Opportunity Pledge!
Click the button below to download the Pledge and begin the first step. You will receive an email with your personalized Certificate of Participation
Instructions on adding your logo to the site and accessing other resources will follow.