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With a number of new efforts underway to bring more women partners into venture capital firms, there is a tendency to view an increase in female investors as an end unto itself.

But will gender diversity on its own fix a dysfunctional VC culture? Maybe, but probably not if it means nothing more than new investors sharing the same backgrounds, experiences and mindsets as the men who already dominate the field. As it currently exists, venture investors all too often:

  • Fund a narrow set of entrepreneurs — those defined by their pedigree rather than their skills,
  • Invest in companies that cater to affluent customers rather than solving real problems that affect most people, and
  • Push startups to create huge financial outcomes at the expense of the company’s long-term success.

First of all, simply bringing a few women in — even as VC partners — isn’t going to improve real diversity, especially when the women they are hiring share the same background and experiences as the men who already dominate VC. As Michelle Obama said about the concept of leaning in, “that shit doesn’t work all the time.” She’s right; it never did, especially for women who experience a multitude of barriers at the intersection of race, gender, sexuality, language, and disability, or those from low income backgrounds. Let’s not emulate that model.

Before Lean In came under more scrutiny, countless women quietly shared their stories of how those strategies didn’t work for women who were ‘outsiders’ — women of color, single heads of household — in other words, most women. Further, heads of diversity reported in frustration that Lean In efforts took all the budget and all the airtime at their companies, relegating all other initiatives to second class status.

Different Women — Different Experiences

Last Summer, the Kapor Center research team, in conjunction with Kapor Capital and Female Founders Office Hours surveyed a number of women entrepreneurs on the experiences they faced while pitching their startups.

We found that while all women entrepreneurs face gender-based biases and barriers, experiences of bias, harassment, and bullying differed significantly between Black, Brown, Asian, and White women. And sometimes the inappropriate conduct came from women VCs — not just men.

Notably, underrepresented women of color were nearly 10 times as likely to experience non-consensual touching as other women, and were significantly more likely to be stereotyped as too bossy or aggressive than women from other backgrounds:

A real movement for change will first seek to understand both the common and divergent experiences of all women and then implement specific strategies to address them. Mentoring, for example, means being able to empathize and then strategize about confronting or overcoming or sidestepping obstacles once you understand them. If you don’t even know that an obstacle exists — or worse yet, if you are the obstacle yourself — how can you be a good mentor?

We come at this from a research-based perspective; data underpins all of the work that we do at the Kapor Center. We’ve noticed that many “let’s start with gender” groups frequently cite the many rigorous studies that document how gender diversity is good for business and financial performance, but that is just one piece of what the data show. What’s also true is that some of the most prominent and far-reaching of those studies have repeatedly found that racial and ethnic diversity yields even better financial returns. These data would suggest that interventions must focus on both gender AND racial diversity.

There are also decades of research on the consequences of being an “only” in a company: the only woman, the only Latinx, the only African American, the only LGBTQ+, etc. These studies confirm that being an only takes a significant toll and can be a primary driver of isolation, dissatisfaction and turnover. At a 2015 conference sponsored by the Kapor Center, researchers described a team of 16 engineers across four teams — twelve men and four women. They found that women fared better — in terms of morale, retention and productivity — when two women were placed on two teams, even though that left the remaining teams one hundred percent male. These findings expanded on existing bias research that concluded that engineering teams made up of equal numbers of men and women produce far better outcomes in productivity and retention.

Data Matter

Across the tech ecosystem, there is growing evidence that companies who declare that they will “just start with gender” actually send an unwelcoming message to women and men of color, and set back their efforts to achieve real diversity. The untold secret of Employee Resource Groups (ERGs) confirms this. Women-focused ERGs at most tech companies include almost exclusively White & Asian women, while Black and Brown women often find race/ethnicity-specific ERGs to be more welcoming. The women in our study confirmed that they eagerly attend an ERG meeting or a conference or a summit promising to speak to all women but find themselves marginalized, the only Black or Brown woman on stage all day is talking about diversity or other key signals.

The tech ecosystem, including VC, has lagged efforts in other sectors. When Time’s Up holds meetings, Kerry Washington and Reese Witherspoon share the stage with Latinx farmworker women and make explicit connections between the experiences of privileged Hollywood women and those who are even more vulnerable. So far, women in VC haven’t shared the stage with the contract workers at companies they fund who live without benefits, or with the striking hotel workers who can’t afford to live in cities where tech flourishes.

The good news is that embedded in the culture of VC and tech is the notion that it’s ok to learn from false starts, to iterate, and do better; a more comprehensive effort to change VC would be incredibly powerful.

A Seat at the Table…or Build a Different Table?

Lack of true diversity in Venture Capital is a huge problem — but it’s far from the only problem. VC sits at the top of a fundamentally broken system.

While some are clamoring for a seat at the table, others, like a group of entrepreneurs described recently in The New York Times, are realizing that the table itself may be the problem:

[F]or every unicorn, there are countless other start-ups that grew too fast, burned through investors’ money and died — possibly unnecessarily.

At Kapor Capital we believe in a comprehensive approach to D&I and a comprehensive approach to VC. Taking a broad and encompassing approach to diversity is just part of our approach to rethinking the entire VC model.

By having a broad network and reaching out to a wide spectrum of communities of entrepreneurs (women, people of color, LGBTQ+, first generation college student, etc.) we see novel opportunities coming from the lived experience of those founders. These offer not only a competitive advantage for us as investors, but grow successful businesses that tackle deep social problems — homelessness, criminal justice reform, payday lending, and more — that haven’t budged much with the efforts of advocacy and policy groups alone. Market-based solutions that out compete predatory practices are another and often compatible approach to combating real world problems.

It’s time for a rethink. We see so many of the VC diversity initiatives that start (and end) with a focus on gender miss both the how — by leaving out the majority of women — but also the why. Real change would mean:

  • Funding a wide swath of entrepreneurs to take advantage of the broad range of their lived experiences that drives entrepreneurial insights
  • Measuring success in terms of the good or harm done along many dimensions, in addition to the financial outcomes; and
  • Investing capital to help companies grow sustainably, as opposed to hyper-growth. That means at a size and speed in the best interest of founders, their companies, and the customers they serve

So yes, women have the ability to save VC, but only if that means that all women have a seat at the table from the beginning to decide the best ways to reshape the entire sector. We’re not going to do it simply by adding a few more women in existing VC roles. We have an opportunity to achieve widespread change in tech and beyond. Let’s not miss this opportunity.

Freada Kapor Klein and Ulili Onovakpuri are Partners at Kapor Capital. Allison Scott is the Chief Research Officer at the Kapor Center.

Editor’s Note: This is the first of a two-part series focused on rethinking VC. Part II will outline a vision for “VC 2.0” to fix the myriad problems in the current system.

2019 marks the eighth year that Kapor Capital has focused exclusively on gap-closing startups. Later this year, we intend to make our own financial returns public, in an effort to hold ourselves accountable to this vision. Stay tuned!