The death of George Floyd has sparked nationwide protests against police brutality and racial injustice. But racial injustice goes beyond police brutality, inequality is deeply rooted in many institutions within this country.
This inequality is especially apparent in the world of venture capitalism. Research shows that only 1 percent of VC-funded founders are black, and only 0.2 percent are black women. Part of the problem is that VC firms themselves don’t employ many black people. A 2018 study surveyed over 200 VC firms and found that only 4 percent of VC employees were black — compare that to the national population, which is 13.4 percent black.
VCs have to take tangible steps if they want to address this issue. One Colorado-based VC firm, Matchstick Ventures, shared what it plans to do to strive for equality.
In a blog post published last week, Matchstick refers to its commitment to address racial inequity as “Wire and Hire.” At its core, this involves investing more money into black entrepreneurs as well as adding more black people to the companies and boardrooms that Matchstick plays a role in.
For the “Wire” step, Matchstick, which has VC partners in both Minneapolis and Colorado, pledges to develop five new relationships with networks, organizations and groups that can connect it to black founders looking for funding. By building these relationships, the company hopes to build a pipeline where black founders know they can come to Matchstick to raise capital. It hopes to achieve this goal by June of 2021.
For the “Hire” step, Matchstick plans to add a black advisor to its fund’s advisory board. This advisor will help the VC determine where to distribute its funds. Matchstick also pledges to help 30 percent of the companies in its current fund add black members to their boardrooms or advisory boards, and also as C-level executives. This 30 percent ratio is meant to be three times larger than the racial proportion of black people in Minneapolis and Colorado, which sits at about 10 percent. Matchstick also hopes to direct more black applicants to the job openings in the firm’s portfolio of companies.
“We hope to provide more access and resources to the black startup community as a first step toward more equality,” Matchstick Ventures Partner Natty Zola told Built In. “[We also hope to] increase our understanding of the systemic issues of racism in our industry and society and how we can help, [and] show other VC funds that it’s possible to make a difference and powerful to make specific public commitments — not just statements — to catalyze change.”
Matchstick Ventures specializes in investing in early stage startups in the north and around the Rockies, regions of the country that don’t always feel the effects of the Silicon Valley and East Coast VC bubbles. The firm also has close ties to the Techstars network, which originated in Boulder.
Currently, 7 percent of the companies Matchstick Ventures has invested in are led by black founders or founding team members. While this is better than the national average, the company will work to continue to bring this percentage up. Two of those companies are Curu, a Denver-based fintech startup, and Upsie, a Minneapolis company that sells warranty plans for electronics and consumer goods.
David Potter, co-founder and CEO of Curu, told Built In he was “largely supportive” of Matchstick’s action on diversity in VC funding. His company recently closed on a $3 million seed funding round that counted Matchstick among its investors.
“With all going on lately, it really brings to light many of the issues faced in society. As I educate myself, I realize how powerful anti-racist actions and awareness can be,” Potter said. “I think the Matchstick [plan] embraces both education and anti-racist actions to address this problem.”
As a company, Curu works with banks and lenders to help more borrowers qualify for loans. Potter says the goal of his company is to help out people who have marginalized by economic or credit institutions, so there are parallels between what Curu does and Matchstick’s new efforts.
Upsie CEO Clarence Bethea told Built In he was “encouraged by those that are stepping up with specific, quantifiable steps to drive meaningful change.” As a black founder, he said he understands the struggles founders of colors face when they seek funding and welcomed actions like Matchstick’s to address the problem.
“It’s time we all do our part to build equitable access to funding and support for underrepresented black founders and entrepreneurs,” Bethea said. “I am proud to see them taking this approach, holding themselves accountable with specific actions. I hope others will follow suit by opening up more doors for black entrepreneurs through mentorship, funding, employment and community activism.”
