As a child, Marceau Michel always asked for a quarter.
He knew if he kept asking for a quarter, he’d have a dollar one day. Then he’d be well on his way to having two — a slow but purposeful build toward amassing his own little fortune.
Today, at the helm of the Black Founders Matter venture fund, Michel has kept that mentality. The fund announced today the formation of the 25 by 25 Pledge, which encourages venture capitalists to commit to investing a quarter of their funds into BIPOC women founders by the year 2025. The pledge also requires VC firms to have 25% of their staff be BIPOC women, believing the increase in diversity behind the scenes will help pivot more deal flow into marginalized communities.
“This is about changing the power dynamics in venture capital,” Michel told TechCrunch. “You have to start at who is left behind and bring them to the starting line.”
Michel was inspired to start the pledge after realizing his own investments leaned toward Black male founders. That led him to focus on investing in Black women, and added five companies to round out his portfolio of 10. His new initiative hopes to encourage VCs to prioritize investing with diversity in mind as a way to improve the industry’s harrowing fundraising stats.
White women receive a marginal portion of total venture capital funding, but the amounts minority women get are far more diminutive. Last year, women raised just 2% of the record $330 billion in venture capital. Of that 2%, less than 0.50% went to Black women, approximately 0.51% went to Latina founders, an estimated 0.71% went to Asian women, and a mere 0.004% went to Indigenous founders, according to Crunchbase data.
“If more funds said, ‘I only want to see deals led by women,’ then we’d see more women being invested in,” Michel said. “Black, Indigenous and women of color make up most of the women on Earth. Asking for 25% [of investment volume] is not too much. I just see it as the start.”
The pledge is available on the Black Founders Matter website for those wanting to sign.
The impact of a pledge
The 25 by 25 Pledge has a precedent: the 15 Percent Pledge, launched in 2020 by fashion designer Aurora James.
The 15 Percent Pledge encourages retailers to dedicate at least 15% of their shelf space to Black-owned businesses. So far, it has received commitments from 28 retailers, including Sephora and Nordstrom. The pledge, now a nonprofit, also created a database of 1,200 Black companies to help companies find and build relationships with Black founders. To date, the 15 Percent Pledge says it helped Black-owned businesses generate $10 billion in revenue and aims to beget $1.4 trillion in wealth for Black entrepreneurs by 2030.
If this is the impact a pledge can create in retail, one designed for venture capital could have a seismic impact on BIPOC communities. A 2019 Kauffman Fellows report found that women-founded startups tend to hire 2.5x more women than their male-founded counterparts, which means more funding for their startups could create a domino effect, increasing opportunities for women workers.
Michel pointed to this rationale, saying it’s one of the reasons he’s asking companies to commit to a 25% increase in hiring and investments rather than 15%. He doesn’t expect legacy VC players to sign the pledge quickly, but is optimistic it will attract the next generation of funds, associates and managers.
Like the 15 Percent Pledge, Michel says Black Founders Matter will track the diversity progress of those who make the 25 by 25 commitment by asking for quarterly investment and hiring metrics. This is to hold venture capitalists accountable, especially after many faltered on delivering on their promises after George Floyd’s murder.
“If a fund does not want to do this pledge … the question is why,” Michel said. “The status quo just doesn’t hold up anymore. Keeping people that look like us out of the picture just doesn’t work.”
Industry experts say it has potential, but some are hesitant
Angel investor and entrepreneur Jenny Wang said such a pledge is necessary, especially with the continued emergence of male-dominated segments like crypto and web3.
Lorine Pendleton, the lead investor at Portfolia Rising America Fund, said the pledge’s success depends on several factors, including upholding accountability and combating the prevalent notion that investing in diverse founders means missing out on a “better” product from a white founder.
“There are going to be people who say this is a quota, and they’re not investing in the best entrepreneurs; they’re just investing because of their skin color,” she said. Pendleton added that investing in diverse founders shouldn’t be seen as more of a risk than investing already is — even though most dollars go to white men, most VCs still aren’t profitable in risk-adjusted terms.
“In theory, I think [the pledge] is good,” she said.
Bianca Bussereth, the Black woman co-founder of the mental health startup Mentally Fit, is also a fan of the pledge, as she feels it could help increase funding avenues for BIPOC women. While raising her round, many VCs told her she’d have better luck raising from a Black VC fund, but as there is only so much money for those firms to allocate, it left her and other Black founders competing for what is already a small amount of money. “Take the pledge and take risks to effect real change,” she said.
Dean Newton, general partner and co-founder of Relevance Ventures, agreed that the pledge has potential. Relevance is one of the few — if not only — venture firms owned by Native Americans. Newton’s only hesitation is that the metric might not be feasible in every industry.
“Fifteen percent may easily be achievable in one sector and unachievable in another,” Newton said, pointing to his firm’s latest wellness fund and how half the portfolio consists of diverse founders. “Could we replicate that percentage if we were a biotech VC? I honestly don’t know.”
But that doubles down on Michel’s wishes for firms to do their own research to diversify their portfolios. Surely, there is no shortage of diverse founders — Black women, in particular, are the fastest-growing group of entrepreneurs in the U.S.
Following the pledge, Black Founders Matter expects to raise $6 million in funding by the end of this summer and to use that money to invest in 10 more Black businesses and hire an additional woman associate. He says if he can do it, anyone can.
“This puts the mandate on these funds to go and find 25%,” Michel said. “They have to go after it. It’s just not going to fall in their laps.”
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