The ‘Great Rollback’ marks the alarming backslide in progress to level the playing field in tech

With DEI programs getting slashed or falling short on promises, the backslide in progress to level the playing field in tech is being dubbed the “Great Rollback.”

In 2020, DEI efforts rose in response to the police murder of George Floyd. The move was championed by major players and billionaires like Elon Musk and Bill Ackman, who are now backtracking on their support. At the same time, tech giants like Google and Meta have defunded programs, lawsuits are targeting initiatives, and funding to Black founders has reached its lowest since 2016.

According to research by Columbia Business School professor Emmanuel Yimfor, less than three per cent of startups receiving VC funding are led by a Black founder. In addition, Black founders raise only a fraction of the capital compared to their counterparts despite having notable experience, a sizable team, a patent, and academic prestige. 

“If fewer Black founders are able to fund and sell their startups, fewer Black investors then sit on VC boards and, therefore, fewer VC funds invest in new Black startups,” Yimfor shared in an interview, adding that his research shows diversifying partners on VC boards can improve funding by nearly 50 percentage points.

Marlon Thompson, an investor and the former chief experience officer at VC firm Spring, has long advocated for closing the racial wealth gap in VC. In the year of George Floyd's murder, Thompson started Future Capital as a VC and entrepreneurship training ground for underrepresented individuals in these spaces. Three years later, Future Capital was acquired by Spring’s educational and networking arm for those interested in impact investing.

Now, Thompson remains focused on supporting more underrepresented individuals to become leaders in VC. He sat with the Vancouver Tech Journal to share some of the longstanding challenges, what could lead to a step change, and what support Spring offers.

Challenges are ‘deeply systematic’

With the challenges in widening the racial wealth gap being deeply systemic, tackling them requires a consortium of partners across the government, public, and private sectors, said Thompson.

“We really need a super collaborative approach to make sure that initiatives like the BKR VC fellowship and the ALA Angel investor program are not just sustained but really optimized,” added Thompson.

One of the challenges is the intrinsic ability of some underrepresented individuals to really see themselves in leadership roles.

“I think that's hard to solve because it's different for every person,” noted Thompson. “If you don't see an example, it's really hard to chart your course into leadership roles or even allow yourself to think about what it would look like for you to be an investor or entrepreneur.”

Another challenge is that some underrepresented individuals have a different starting point for financial literacy than, say, those who come from generational wealth.

“This is really the reason I started Future Capital,” shared Thompson. “A lot of folks who are successful have a level of financial literacy that isn't available to everybody. From my perspective, financial literacy isn't just understanding how to build a financial model. In a lot of ways, it’s understanding the language and what you know and don't know, which is really hard to do when you're not having those conversations at the dinner table or they’re not coming up in your social life.”

Thompson added: “I think there's a cultural shift that we're in the middle of where many in North America are waking up to the fact that there's learning that needs to happen to participate in the economy in a way that really benefits you. We're just one small part of that bigger shift.”

VC firms need to ‘put skin into the game’

A step change in closing the racial wealth gap can be led by VC firms through doubling down on commitments and creating and seeing through solutions, rather than just sponsoring or showing up to events, said Thompson.

“We need to see more VC firms actually put skin into the game,” highlighted Thompson. “They're the decision makers oftentimes in terms of what companies and founders get back. So they need to be a part of the solution, otherwise the solution will be watered down.” 

Thompson suggested that firms approach efforts programmatically, like Spring, in their investment thesis, and by systematically prioritizing numbers of underrepresented groups.

Should efforts not be taken as quickly at the pace needed, we all risk being economically behind than where we could be, said Thompson.

“What I mean when I say that is one of the beautiful outcomes that come from actually having a more diverse swath of society participating as founders or investors is you get products and services that actually meet the needs of a broader swath of society,” explained Thompson.

Thompson added: “To give you an example of what happens when we don't support diverse founders and when we don't have capital coming from diverse investors is that we're missing economic opportunities across the board. When companies like Helix Hair Labs can exist, there's more jobs and better products and services for every person. We want to see what gets created when we have ideas from every corner of our community supported and funded.”

What can be expected next from Spring

On what can be expected next from Spring in helping to close the wealth gap in VC, he shared, “I think what we've built at Spring and what we've integrated from Future Capital has a really high level of efficacy. So, we're going to continue to focus on financial literacy [and] there’s going to be a lot of emphasis coming from us down the pipe this summer and in the fall, working with our growing community of investors.”

Already, Spring has educated over 900 investors through its program. The firm will continue to connect these investors into their network of angel investors and providing deal flow to get them “out of the theory and educational space and into action by investing into companies from underrepresented founders.”

Editors’ note: This article has been updated to reflect that Marlon Thompson is the former chief experience officer at Spring.

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