Some 40 leading venture capitalists representing US$100bn invested in 7,000 start-ups as well as tech giants like Amazon, Box and Pinterest have joined forces with the White House to improve racial and gender diversity in tech.
They were joined by more than 100 deans of engineering from some of the most prestigious schools across America that have also committed to diversity.
Kicking off the first-ever Demo Day at the White House, where 90 entrepreneurs from 30 start-ups were presenting to President Barack Obama, the White House CTO Megan Smith said the time for action is now.
Smith said that while the US is the envy of the world in terms of innovation and access to capital, the tech industry hasn’t been as inclusive as it could or should have been.
‘Firms that embrace both race and gender diversity are statically more likely to achieve above-average returns. It is highly profitable to have a diverse team’
– MEGAN SMITH
She said the priority now is accelerating access to entrepreneurial resources like venture capital for all Americans.
“Just 3pc of American venture-capital-backed start-ups are led by women and only 1pc by African-Americans.
“Only 4pc of venture capital investors are women,” Smith pointed out, a fact that was also strongly highlighted at Silicon Republic’s Inspirefest 2015 event in June.
Smith said that there is opportunity in diversity and all evidence points out that firms that embrace gender and racial diversity outperform those that don’t.
“First Round Capital in their report on 29 January stated that, out of their own 340 portfolio companies, where they had at least one female founder on the team the company performed 63pc better than an all-male business.”
She added that in the top 10 performing companies there was a woman on the board.
She said companies that were in the top quartile for racial diversity delivered financial returns 35pc above their respective industrial medians.
Financial returns were 50pc higher among companies in the top quartile for gender diversity.
“Firms that embrace both race and gender diversity are statically more likely to achieve above-average returns. It is highly profitable to have a diverse team,” she said.
Actions on race and gender by White House and tech industry
Tom Kalil, deputy director for technology and innovation at the White House Office of Science and Technology Policy, outlined the key measures agreed by the White House and the US venture capital and tech industries.
He said that more than 40 leading venture capital firms, including Andreessen Horowitz, Polaris, Intel Capital and Kleiner Perkins Caulfield & Byers, have committed to specific actions to address diversity inclusion within the venture industry, including an industry-wide survey.
‘It’s not only the right thing to do, it’s the profitable thing to do’
– TOM KALIL
For example, Scale V Partners is adopting the Rooney Rule adopted by the NFL to improve the diversity of head coaches and will bring out a version for senior and entry positions, including a minimum of 20 hours per month for education programmes targeting women and minorities.
Institutional investment body New York Pension Fund is committing US$11m to emerging managers to increase diversity of fund managers and the portfolios they invest in.
More than 100 engineering deans across US colleges are committing to diversity in terms of greater gender and racial participation.
More than a dozen major tech companies – including Amazon, Box, Pinterest and Xerox — are committing to hiring diverse candidates for senior executive positions.
As well as this, a number of cities and states are participating in the president’s tech hiring initiative, where local communities partner with employers to accelerate people into tech jobs.
Describing the actions as “synergistic” Kalil added that the federal government’s small business administration will be announcing 115 winners of growth accelerators.
He said that federal government agencies, including the Department of Defense, will be helping to increase the rate of commercialisation of research from the lab.
“We already have a large coalition of leading venture capitalists, hi-tech companies, institutional investors, engineering deans, mayors and the heads of federal agencies stepping up to the plate for diversity.
“In weeks and months ahead we will see more organisations stepping up to the plate.
“It’s not only the right thing to do, it’s the profitable thing to do.”