I’ll break that into three parts.
First is the network bias. This is the requirement that you must already be in the circle of a VC – a group of people who are mostly all-white guys – in order to be able to pitch due to the requirement of a warm intro.
This is lazy, sexist, and racist – and also stupid because it has no demonstrable impact on deal flow quality. Does the extra work of having coffee with someone I know make you a better founder? No.
I would also argue that straight whites ask for an intro from anyone they know, regardless of the strength of the connection. They don’t see it as a burning of social capital, and even if their networks aren’t better, they see no downside in asking what makes it a different way of skewing the process towards favoring white men .
It has to end.
The next part of the bias is the most underrated in my opinion – it’s the way people from different groups ask and ask questions.
I’ve seen it over and over again. White boys tell you something could happen and everyone else is telling you what is most likely to happen. Since pitching is about sharing your vision of the future, the pitches of whites will appear bigger, bolder and more aggressive. This is exactly the kind of trajectory VCs need economically to get their money back.
Does that mean the exit results are different? No, but it changes how the pitch is interpreted.
Why is this happening?
For one thing, our society scrutinizes white men less. If you’ve turned the news on for the past 100 years, you’ll find that the penalties and consequences for white men for getting it wrong are less severe overall. Hence, if we go wrong on a field of play and don’t live up to your predictions, it’s one thing we’ll be much more comfortable with. The whole process feels less like a promise to us and we just feel a lot more comfortable shooting our mouths about how big this thing is going to get.
Whenever I suspect someone who is not a white man is punching his seat probably against the possibleI’ll turn around and ask the question: is it possible this is an IPO? Is it possible that the annual turnover is 100mm?
The answer is usually a very positive “yes!” and I think more VCs need to ask that question and not blame entrepreneurs for starting it. On the operational side, I prefer to focus on what is likely so that I shouldn’t burden them too much so as not to make other predictions for the pitch.
This is one of the main reasons I think various founders are losing funding – the unwillingness to talk big about the future and the laziness of VCs to think about what is possible. We’ve seen studies of how men and women are asked different questions, but I also think it’s up to all founders to control the conversation. Don’t let VCs just ask all of their questions and sit passively while they dictate your narration. Make sure they are asking the right questions and tell them if they are not.
Does that mean we should tell everyone to serve like white men?
No, but we should tell everyone that investing in stocks is investing in the future – and we should remind them of that probably This company won’t work so remind people what could happen when it works is a good fundraising strategy.
If you want to call this the “white male approach” then I’m actually more concerned with referring to the needs of the buyer of your equity.
After all, you have the racism, sexism, and willful ignorance that come up in a meeting as part of the evaluation process. This is 100% a part of the daily life of anyone who is not white, and it would be wrong to deny that it is there. I just think that, by and large, it’s not the main reason someone is passing you on.
It also leads me to something I’ve said many times, “Both things can be true.”
It may be that someone said something to you or treated you in a way that was dismissive because of you AND that you really haven’t reached an objective bar for successful fundraising success. If you are recruiting someone who is sexist, has very little growth, or has an unworkable idea, you will most likely feel abused in the meeting, but even the same man-run company would not have received funding either.
It’s easy to forget. While most of the funds go to white men, most white men are turned down for money too.
The last part of why the numbers are so wrong is again the laziness of how people interpret the data – the pure math of it.