Not many venture capital firms can claim companies with multi-million dollar valuations—the likes of Uber, Bitly and Dropcam—as portfolio companies. Even fewer can claim half their investments go to female or minority-led companies.
But Kapor Capital, the California-based venture capital firm led by Freada Kapor Klein and husband Mitchell Kapor has accomplished just that.
Their secret to identifying high-growth potential in companies and simultaneously advancing diversity?
It starts with a strong and shared commitment to improving diversity, understanding biases and working to dismantle institutional barriers facing women and underrepresented populations in start-up and tech cultures.
This commitment is evident in their own internal practices—their partners and investors are diverse, they embrace companies whose founders “lived experience” helps craft a unique technology solution to societal problems and encourage their portfolio companies to do likewise.
Integrating inclusion into the start-up community
Kapor Klein opened the Council for Entrepreneurial Development’s annual Tech Venture Conference with a keynote address designed to share lessons learned from Kapor Capital’s success and advise attendees how to integrate diversity and inclusion into the community.
Her advice? Practice what you preach. Look in new, undiscovered places for ideas and talent. And build in diversity and inclusion into companies and communities from the beginning.
The venture capitalist, philanthropist, social scientist and sexual assault advocate pioneer has dedicated her career to bringing awareness to issues and barriers affecting women and underrepresented populations. She’s been in the trenches advocating for the advancement of women and minorities since 1976, when she founded her first organization. Called Alliance Against Sexual Coercion, it was the first non-profit dedicated to ending sexual harassment in the workplace.
Since then she’s co-founded other nonprofits to advance diversity like the Level the Playing Field Institute, and her most recent, Project Include, a collaboration with Tracy Chou and Ellen Pao.
How it works at Kapor Capital
Kapor Capital invests primarily in minority and female start-ups focused on “closing gaps of access, opportunity or outcome” in mostly education, consumer finance, and health sectors.
Kapor Klein noted that many companies create products for the top one percent of income earners. Kapor Capital and her other initiatives and organizations are focused on investing in companies who serve the 99 percent. Portfolio companies like Pigeonly, a start-up that collects data on inmates and designs services to affordably connect inmates and their families, emerged from what Kapor Klein calls a founders’ “lived experience.”
While many entrepreneurs’ start-ups are a solution they designed to fix a problem they encountered, if a person does not encounter a lived experience like the difficulty of communicating with a loved one in prison, they do not see the need for a solution. Diverse experiences like these help create better solutions Kapor Klein says.
Making diversity a requirement
In 2015, Kapor Capital was the first venture capital firm to require portfolio companies to sign a pledge or a “Founders Commitment” to advance diversity in their companies. While Kapor allowed existing portfolio companies to opt out of the new requirements, 81 signed the pledge and have since embarked on the four-part action plan nick-named “G.I.V.E.”, which Kapor Capital designed to assist companies in achieving their diversity.
“G.I.V.E.” stands for goals, investment, volunteering, and education. All new companies will be required to sign the pledge to be considered for investment.
The actions include unique requirements like “investing in tools, training programs, and/or resources to assist in mitigating bias in recruitment, hiring and employment,” and “organizing volunteer opportunities for employees to engage with underrepresented communities.”
Practice what you preach
But Kapor Capital doesn’t just require portfolio companies to embrace diversity—it models the behaviors internally. Two of its four partners are African-American and two-thirds of the investment team come from underrepresented backgrounds.
Kapor Klein closed her address with a call to action for the Triangle community, encouraging the community to thoughtfully and strategically instill diversity into start-up companies and the community saying, “It can be done. It’s not easy, but it’s well worth it.”