A US congressional hearing on “combating tech bro culture” in the venture capital world is will take place this week, with some of the biggest names in startup funding under the spotlight.
The House Financial Services Committee’s Task Force on Financial Technology is scheduled to meet on Thursday. FSC majority staff said in a memo [PDF] the hearing will focus on how VCs have failed to invest in, say, fintech companies founded by women and people of color.
We’re told Sallie Krawcheck, CEO and cofounder of Ellevest; Marceau Michel, founder of Black Founders Matter; Abbey Wemimo, cofounder and co-CEO of Esusu; and Maryam Haque, executive director of Venture Forward have at least been invited to speak at the meeting.
“VC firms have demonstrated a strong interest in technology-based companies, including fintechs,” the staff wrote. “However, the majority of that investment has been directed towards White and male-founded companies.”
The memo claims investors are 21 percent more likely to back founders of the same ethnicity – White employees account for roughly three-quarters of the VC workforce – so either more diversity is needed or a little less bias. We’re told Black founders have been handed only one percent of funding. Latin-American founders received only slightly more at 1.8 percent. Asian founders received 17.7 percent. That doesn’t quite match up with the US adult population.
Similar goes for gender: female-founded companies consistently receive only two percent of VC funding, despite women owning 20 percent of all US companies, the memo states.
The FSC memo names three VC firms well known in the tech world: Y Combinator, Sequoia, and Andreessen Horowitz, aka a16z, though it doesn’t direct any specific accusations at them.
Looking through the archives, we can find wide-scale harassment of women by various VC firms. In 2018 a survey of women founders working with Y Combinator found that one in five were sexually harassed. Sequoia-backed Uber paid out more than $4 million to settle sexual harassment and retaliation claims in 2019; that same year the CEO of an a16z-backed fintech startup was sued by three female employees over sexual harassment.
The hearing’s agenda includes a look at policy tools that could help women and minority-owned businesses land more VC investment, though it doesn’t say what those policies could be. It does contain a hint about where possible action could come from, however.
The final section of the memo examines differences between disclosure laws for VC companies and VC advisors, the latter of whom are under far more scrutiny from the SEC. VC advisors can include fund managers, who are responsible for identifying investment opportunities.
According to the memo, the SEC has been “increasingly engaged” with tackling the lack of diversity in the VC ecosystem. The SEC Small Business Capital Formation Advisory Committee has recommended the regulatory body take action “to reduce barriers to entry for underrepresented founders and their investors.”
Those interested in seeing what path VC regulation might take can tune in to the virtual hearing on Thursday at noon US Eastern Time. ®