Venture capital for equity, inclusion, and long-term value

Sep 8, 2023

As venture capital investments hit record heights with each year in the United States — topping $330 billion in 2021 — most of that funding continues to go to companies led by white men, a disparity that exacerbates the country’s racial and gender wealth gaps. These gaps have continued to grow in recent decades, with long-term implications: the average Black or Hispanic household brings in about half as much in earnings each year as the average white household, and Black and Hispanic households have 15% to 20% as much net wealth, according to the Federal Reserve. The numbers are even more stark for women of color, who have far lower incomes and savings amounts for a variety of reasons.

Reinventure Capital Capital, a venture fund based on Boston, is working to address this problem by investing exclusively in U.S.-based companies led and controlled by BIPOC and/or female founders and helping them make profits. I talked with Julianne Zimmerman, who was Founding Managing Director of Reinventure Capital, about their effort to bring equity and inclusion to the VC industry. Below are some key points from my Forbes article on Reinventure Capital:

Zimmerman sees the hyper concentration of wealth as a social problem. “When you look at the distribution of capital here in the States, consistently more than 90% of venture capital goes to an extremely narrow demographic — in broad strokes, straight, white, U.S.-born men from a dozen universities,” she says. “We have this perilously unbalanced means of propagating ideas and value propositions and technologies and services, which are almost exclusively coming from and validated by and, for the most part, serving that same demographic.”
While yielding good returns, Reinventure’s strategy is considered risky and difficult in the traditionally-oriented VC community. “It’s important to acknowledge that bias — both conscious and unconscious — is real and evident in the venture community, as elsewhere across our society,” Zimmerman explained. “It’s partly just the human psychology propensity to see something that's different as inherently more difficult or more risky.”
Zimmerman believes their strategy reflects a different set of priorities and principals. “The rationale or operating principle of the majority of the venture community is focused on the next raise, the next round, increasing the valuation for that next markup, as opposed to strengthening the mechanism of the enterprise,” she explained. “We don’t expect to necessarily direct any of our companies to a particular acquisition versus public offering or even a structured exit. Instead the way that we think about their growth automatically bakes in some relatively straightforward exit, at a minimum.”
She further said “as part of our investment terms, we have binding commitments that the companies we invest in and will continue to hire, promote, and compensate equitably as they grow; and furthermore will source equitably to the extent that’s feasible, because we recognize that it’s not always in every instance.”
Reinventure extends the cooperative attitude towards other investment funds. Zimmerman said “We only co-invest alongside aligned investors. We never want to own an investment outright, since we don’t think that’s in anybody’s best interes.” She reflected “We try to do whatever we can to raise people's awareness that these strategies exist alongside ours.”

System change is a huge task and can seem hopelessly overwhelming. However, we do see gradual and noticeable progress being made by Zimmerman and Reinventure Capital, among many others. As Zimmerman says, “I am motivated to do whatever I can to get as many people as possible off the sidelines and engaged in participating in driving change across venture and the rest of the financial sectors with all the resources at their disposal.”