Venture capital’s quest for diversity and equity remains a work in progress

Nearly a year ago, as the nation reckoned with the horrifying video of George Floyd’s murder in Minneapolis, Alejandro Guerrero, a general partner at early-stage venture capital firm Act One Ventures, sat alone at his home in Los Angeles, coming to terms with what he had just seen and bracing for the fallout.

“All the signs were that L.A. would go up in flames,” Guerrero recalls of a city already on edge from the stress of the coronavirus pandemic, pushed further to the brink amid racial tensions. “I was at home, in the dark in my living room, watching the footage and just crying and processing.”

A first generation Mexican American, Guerrero is the child of immigrants who had dropped out of school as adolescents to earn a living, in the hope of one day creating a better life for their own family. Guerrero had his own challenges growing up in Southern California, but he worked hard to ensure their sacrifice wasn’t in vain. He earned a degree at UCLA and founded his own tech startup, Uniq Apps, before eventually pivoting into the highly competitive, white-dominated realm of venture capital funding.

As he sat transfixed before his TV, Guerrero found himself reflecting on the inequities he had witnessed and experienced as a person of color in his chosen field and pondering how he could make a difference. It’s well documented that startup founders of color are at an inherent disadvantage when it comes to raising the capital they need to grow their companies; Black and Latino founders accounted for less than 4% of all venture capital deals and only 2.3% of all venture dollars raised in the U.S in 2019, according to Crunchbase data provided to Fortune.

“I know the brutality of trying to raise capital when someone looks like you,” Guerrero says of raising money as a founder of color. He had witnessed the other side of the equation as a venture capital investor, where he quickly came to terms with the unwritten rules of “access and privilege” that govern the checks that get written, and the funds—and, in turn, the portfolio companies—that they go to. “Just by riding shotgun into a world unbeknownst to people like myself, you start to see how it works."

Spurred by his experiences, as well as the collective reckoning with the systemic injustices that had led to Floyd’s death, Guerrero was determined to do his part and try to change the way the VC industry operates. In August, Act One unveiled its Diversity Term Sheet Rider for Representation at the Cap Table, a “call to action” for VC firms to include underrepresented groups—including Black, Latino, women, and LGTBQ+ parties—as coinvestors on their deals.

 

By Rey Mashayekhi. This article is from MarketWatch.

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