(Part 1 of a series)
“If your implicit bias makes you under appreciate founders that are different, you will have worse returns. So it’s very good business practice to get trained in unconscious bias.”
The protests over systemic racism that have rocked the United States in recent weeks have triggered a reckoning in American business, as industries across verticals have been forced to confront racial disparities in their ranks.
The tech sector is no exception. Although “diversity” has been a buzzword in Silicon Valley for years — along with corporate diversity initiatives and chief diversity officers — by any measure, black Americans are still locked out of the wealth and professional opportunities afforded by participation in the technology ecosystem.
Eighty one percent of VC firms don’t have a single black partner, according to BLCK VC, an organization that helps VC firms incorporate diversity and inclusion practices in their recruitment processes. Only 1 percent of venture capital-backed tech companies were founded by black entrepreneurs, CB Insights reports.
Although there is no data showing how many freight tech companies are led by black founders, anecdotally, the numbers clock in under 5, several industry insiders told FreightWaves.
Over the next week, FreightWaves is posting stories on a few of these founders and investors, who shared insights about actionable steps companies and VC firms can take to close the racial gap in the freight tech ecosystem.
Adeyemi Ajao: co-founder and managing partner at Base10 Partners
Base10 targets early stage artificial intelligence and automation startups, with a mission of investing in companies “solving problems for the 99%,” said Ajao, a longtime entrepreneur and investor of Nigerian and Spanish descent. His previous experience includes founding investor of Cabify, the largest ridesharing company in Latin America, and the launch of Workday Ventures, the first fund focused on applied AI for enterprise software.
Among Base10’s freight-tech portfolio companies are RoadSync, a digital payment platform for logistics companies, Nowports, a digital freight forwarding outfit and Shipwell, an online freight logistics platform.
Ajao kicked off the conversation by discussing the well- documented structural barriers — reflecting entrenched inequities in American society — that prevent black entrepreneurs from accessing venture capital.
VCs tend to select founders from elite professional and educational backgrounds that don’t reflect the experiences of many underrepresented minorities, “so if you start with a funnel that structurally makes the opportunities for people of color, minorities more difficult to get into those places, then naturally you are going to have less people that come out of it.”
The psychological hurdles are equally concerning. Much has been written about implicit bias, the unconscious attribution of particular qualities to a member of a certain social group, race or gender. The venture capital business in particular is “a pattern recognition industry,” said Ajao, in which VC brains are hardwired to recognize patterns that reinforce prejudice against entrepreneurs from non-traditional backgrounds.
“VCs don’t have a lot of cases in which they have had big wins in the past with founders that look a particular way,” he explained, “so it’s difficult when they see new founders that look a particular way.”
To begin the hard work of unmaking those patterns, Ajao pointed to the work of Daniel Kahneman, the Nobel Prize-winning psychologist who argued that human reason is actually not so rational, and that intelligent people routinely engage in fallacies and systematic errors. People need to be aware of these biases and seek workarounds, according to Kahneman, yielding better decision making and leading to a more just and equitable society.
“That can be applied to venture capital and race,” said Ajao, whose team enrolls in unconscious-bias trainings through Illumen Capital. “To be great in investing, you have to be right but also non-consensus,” he explained. “So if your implicit bias makes you under appreciate founders that are different, you will have worse returns. So actually, it’s very good business practice to get trained in unconscious bias.”
At least half of Base10 founders are minorities, and a large portion are underrepresented minorities, according to Ajao, not because the firm has a quota but because “we think that is part of the opportunity, to recognize the unique perspective of those backgrounds.”
Other concrete actions VCs can take to diversify their portfolio companies relate to time-honored practices: networking and tapping into existing resources. Many investors lean on their existing networks for referrals to promising startups, thus reinforcing the homogeneity of the companies that secure funding.
To break that cycle, Ajao advises VCs to reach out to firms like Kapor Capital and 645 Ventures, entities that invest in early stage companies and have made racial equity central to their mission. Investing in those fledgling startups will “dramatically increase the number of black founders,” he said.
To open up the ranks of VC firms, Base 10 recently started an internship for underrepresented minorities in partnership with the Black Venture Capital Consortium, and now has its first intern from Howard University. Code 2040 is another organization that specializes in finding internships for gifted black and Latin engineering talent.
Closing tech’s race divide requires a three-pronged effort: investing in minority founders, hiring tech and investment talent from underrepresented backgrounds, and educating investors on unconscious bias, Ajao summarized. “When it comes to the problem of diversity in tech, everyone has to band together in a powerful way,” he said.