Why increasing diversity in tech funding requires an increase in empathy

In this series, professionals discuss solutions to make the tech industry more diverse and inclusive. Read their stories here, then write your own using #TechTalksDiversity somewhere in the body of the post. For more insights and news on this topic and more, sign up for LinkedIn’s weekly newsletter on startups and venture capital here.

The process of securing investors for an early-stage startup is necessarily a challenge. Getting people to part with their money should be difficult because investing in a business idea is about much more than that. You're also investing in people and making a judgment call on the character, integrity, resilience, and work ethic of the founders.

And because so much of startup investment decisions come down to people decisions, the role of a founder's personal network, social affiliation and familiarity gets outsized influence. It helps to explain why minority founders, often equipped with smaller personal networks and affiliations particularly in regions of the country (Silicon Valley, New York, Austin) where rising real estate prices continue to price out working class and middle class people, have tougher times raising funds for their ideas.

LinkedIn recently conducted a survey to capture the current state of diversity in venture capital and entrepreneurship, and the results indicate despite the many headlines, good intentions and pledges made by VCs at tech conferences, there's still a lot of work to do. Non-white founders are still significantly more likely than their white peers to say, "when I was looking for funding, I had a hard time getting VCs to take my meetings" and nearly half (47%) are more likely to witness what would be described as a "racist episode" while raising capital compared to just one-in-ten white founders.

This reality: that investment decisions are people decisions, helps to explain why since most VCs are white males, most VC dollars also go to white males, too. Through LinkedIn's survey, we learned that just 13% of venture capitalists rate "having diversity in management ranks" as a bigger concern than "hiring the right people" indicating a continued belief that a diverse management team has little correlation with the right management team, and 75% of VCs also said their firms aren't supporting any initiatives whatsoever to increase diversity among founders within their portfolios.

Yes, this helps explain why Stanford graduates secure funding in Silicon Valley much more than graduates of other programs. Yes, this helps explain why Mark Zuckerberg and Bill Gates and so many other successful founders are allowed to be college dropouts yet many of the most prominent minority or female tech founders often have MBAs from Ivy League institutions before even landing venture funding. Yes, this helps explain why black and Latino founders struggle to land meetings with reputable venture capitalists and, when they do finally get meetings, seldom secure funding even with similar traction.

Most importantly, yes, it also helps explains why the problem of the gross under-representation of women and minorities in the tech industry, from board rooms and VC partners to tech executives and engineering managers, persists despite well-publicized and certainly well-meaning initiatives by some of the leading tech companies in the country.

Fact is, ridding the technology industry of its longstanding issue of inclusion and advancement for females and minorities, particularly among the venture-backed founder category, would require empathy. More specifically, it would require the people currently making the key decisions in the industry - most significantly, venture capitalists who fund the sector - to make different people decisions than they've made historically made which would mean to look beyond what they currently know, who they already know, who they're familiar with, who they associate with, who they fraternize with and who they went to college with, but beyond that to people who they're less familiar with. It would require empathy not dismissal.

There is a long-held belief that venture investing is an act of meritocracy, driven solely off metrics and data. This is unfortunate, especially for an industry so deeply rooted in data that continues, more often than not, since to deny the fallacy of this myth is to deny the experiences of hundreds of female and minority founders, myself included, whom have publicly stated their cases and shared their experiences publicly on panels and on blogs.

One of the things that makes raising funds for early stage startups particularly difficult is that most investors are trying to reach their own goals (typically a financial reward they're motivated by) through a founder's vision (typically a problem we're passionate about solving), which is a bit like someone trying to have children with a surrogate who's never given birth at all. In tech, they call us first-time founders.

It's not that it's impossible or wrong or ill advised, but that it requires a different kind of research, diligence, patience and empathy. And many investors choose surrogates that look like them and have given birth before. In Austin, for example, where I live and run my company, the statistics would bear out strong evidence that it's not only serial entrepreneurs who receive a significant segment of the local venture dollars, but also white males who are serial entrepreneurs.

Most VCs understand the research and diligence part of investing like how most men understand that giving birth to a child is difficult. Fewer investors understand that patience and openness to new methods is a key ingredient in the success of many ventures similar to how most people may know it takes nine months to give birth but a far fewer percentage of people understand that it often takes many months and attempts to become pregnant and that IVF and surrogates are often the best alternative.

I'm not trying to compare starting a business to giving birth to say the two things are equal, but I'm trying to relay the message that creating something meaningful and special in the world doesn't happen overnight, especially if you're a female or minority founder being presented with additional hurdles to jump before securing venture funding. There are many ups and downs in creating a successful venture, and just as pregnant women (or women striving to become pregnant) need empathy from their partners (especially men who don't carry the physical burden), early stage investors need a similar level of empathy for founders (especially female and minority founders). To dismiss the unique hardships we face during fundraising - from racist and sexist encounters to more subtle types of discrimination - is to dismiss something not because it's not true, but because it's unfamiliar. That is the very essence of discrimination, to me.

And the number one thing I've learned in the process of raising funds for Localeur is that the hardest-to-find characteristic of an early stage investor is empathy. It's one of the reasons why I'm so thankful to have Heather Brunner, WP Engine's CEO, on my board and Blake Chandlee, a longtime executive who leads global partnerships for Facebook, as a major investor. Both have tremendous empathy, which is an exceptional and rare quality in tech investors.

For example, when I tell someone I just closed a seed round, as I did for Localeur this week, immediately most people want to ask a seemingly harmless question: "who is the lead?"

This is code for "where is the person on the hierarchy of tech industry notoriety?" be it a prominent Silicon Valley VC firm, a reputable angel investor or an executive at a big company in your industry. But when you're black or a woman, suddenly the definition of strategic broadens. If you're black, it means any NFL player is strategic. If you're a woman, it means any famous actress is strategic. If you're black or a woman, you're told to pitch black or female VC partners as if it increases your odds of securing funds despite the fact that there are something like 13 male VC partners for every one female partner and fewer than 20 black venture capitalists at the country's top 100 firms. Nevermind the fact that trying to raise money exclusively from pro athletes and Hollywood star is almost as rare as trying to become a pro athlete or Hollywood star. I can't tell you how many people have suggested I somehow get Jay Z or Oprah Winfrey to invest in Localeur while also refusing to introduce me to the VC partners I saw they were connected to on LinkedIn.

But what most people don't seem to understand is that a founder can have all the best technical advisers and business executives and early-stage startup investment experts in their round, plus "strategics" from the entertainment industries, and still understand that the single most important thing for a founder isn't industry advice or notoriety but empathy. Female and minority founders, in particular, need empathy in their lead investors and board members because fundraising, even with strong metrics, is not nearly as fluid and straightforward a process for us as our white male peers.

"Will this investor help me get the business where is needs to go?"

That is the fundamental question all founders must use to gauge whether or not an investor is "strategic" or not and the answer doesn't always mean the investor can help you close a big sales deal or land a new client or advise your product roadmap or help you expand your product globally.

What's most important is empathy. At times, that means "has this person experienced what I'm experiencing before?" and other times it means "will this person try to understand all the competing factors, both seen and unseen, in this challenging situation I'm dealing with?"

That's why I'm proud to say that my new lead investor, Walt Schoenvogel, is likely to be among the most strategic investors I could possibly have at this important stage in Localeur's life. He's not a VC or a tech executive, but he's a successful Texas-based businessman who comes from a stellar pedigree of empathetic people. His daughter and I worked together for years in Washington, D.C., and his father was once the only doctor within 100 miles in Central Texas willing to serve all patients, including black patients, during the Civil Rights Era.

Most investor ask you "how big can this be?" or "who do you think would want to buy this?" or "how much would you want to sell this for?" but I've actually yet to hear a prospective investor ask me the simple question: "what do you want?" which is the very question Walt asked me.

My answer wasn't nearly as important as the fact that he asked this question because this came after months of banging my head against the wall trying to find "strategic" investors and meeting plenty of "strategic" people in Austin, Silicon Valley, New York and elsewhere who had all the credentials but lacked empathy for the unique hardships I've faced in building Localeur, not only without so much as 3 engineers or $300,000 in the bank at any point over our first 3.5 years, but also as a Black founder.

As Stephen Covey puts it in "7 Habits of Highly Effective People": seek first to understand, then to be understood. I'm excited to have Walt join Localeur as our lead investor and a board observer, with Heather and Blake, not because he used to work somewhere that you read about on TechCrunch or that he has a bunch of VC friends or that he's going to know the ins and outs of our tech stack. I'm excited to have Walt on our team because of the empathy he brings. He doesn't deny my experiences and my truth like far too many in this industry all while saying they're rooted in data.

There's almost nothing more strategic in an adviser than empathy, and whether you're a black, white, male or female founder, that is a fact.