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Building Diversity into the Venture Capital Ecosystem

Before Melissa Bradley taught at Georgetown University, before she served under Presidents Clinton and Obama, and long before she launched a nonprofit accelerator to help minority entrepreneurs, she was a young college graduate trying to build her first business.

She went to the Small Business Administration for help with her startup financial services company, and she was turned down flat.

“They told me there was no way in the world I would get funding because I was Black, I was a female, and they didn’t know any successful Black women in financial services,” Bradley said.

That frustrating experience revealed the institutional roadblocks for female and minority entrepreneurs, and it set her on a lifelong path to remove them. At her nonprofit 1863 Ventures, Bradley’s mission is to close the wealth gap in the United States by helping more Black, Brown, and female founders get their businesses off the ground. Her programs provide mentorship and instruction that goes beyond the typical lessons about pitching and fundraising. She wants new entrepreneurs to learn management, marketing, technology and digital skills.

Frederik Groce, principal at Storm Ventures and co-founder of BLCK VC, agrees with Bradley’s holistic approach.

“We’ve got to think about entrepreneurship more broadly,” he said. “Underrepresented communities, particularly the Black community, [are] structurally kept out of access to that knowledge.”

“You’ve got to be willing to be uncomfortable, and you’ve got to be willing to learn. It’s a long tail.” –Melissa Bradley

Groce and Bradley spoke during a livestream of Leading Diversity@Wharton, an ongoing speaker series hosted by Wharton management professor Stephanie Creary, who is a diversity and identity scholar. Wharton management professor Ethan Mollick also joined the conversation, titled “Overcoming the Racial and Gender Gap in Entrepreneurial Leadership and Funding.” (Listen to the podcast at the top of this page or watch a video lower down on this page.)

A Two-sided Problem

Creary and her guests talked about the funding problem as a vicious circle. It’s well-documented that female and minority founders don’t have the same access to capital as their white male counterparts because of structural racism, institutional bias, the lack of a network and generational wealth, and many other reasons. That uphill climb means fewer of them have successful exits. Investors can then use those lower exit numbers as justification to deny funding.

“Quality is evenly distributed; opportunity is not,” said Mollick, who co-founded a startup before entering academia.

Bias is so ingrained that even the simplest questions are loaded, he said. For example, female founders are typically asked how they will avoid losing, while male founders are asked how they will win. Women make up 38% of business owners in the U.S. while getting less than 3% of venture capital.

“I often show my class a picture of a white, male Stanford grad and say, ‘This is who gets most of the funding in the U.S.,’” Mollick said.

Groce noted that just 3% of venture capitalists are Black, even though Black people make up about 13% of the U.S. population. That translates into roughly 100 individuals who can “write meaningful check sizes,” he said.

But Groce added there is good news: He is seeing a greater willingness in his industry to solve these long-standing problems. More investors are asking questions, arming themselves with knowledge and strategizing on how to fix a fundamentally broken system. His organization, BLCK VC, is part of the solution. Like 1863 Ventures, it’s a nonprofit also aimed at supporting Black entrepreneurs and increasing diversity in venture capital.

“This is the job of venture right now as we evolve from a cottage industry to an asset class,” Groce said. “We’ve got to start to do better. We’ve got to emerge and no longer use our cottage industry as an excuse to not do the work to build diversity and inclusion in every part of this ecosystem.”

Getting Uncomfortable

Creary asked her guests to be more specific about what changes are needed to transform the system. Groce and Bradley said white male colleagues who represent the majority need to educate themselves on the facts, spread the knowledge and learn to fight for the underrepresented. They also need to get comfortable with being uncomfortable, because the fight is not an easy one.

“First and foremost, be an advocate. That signal effect is no small thing,” Bradley said. “You’ve got to be willing to be uncomfortable, and you’ve got to be willing to learn. It’s a long tail.”

Groce said if allies aren’t feeling discomfort, they’re probably not doing enough.

“It’s going to feel a little not normal, it’s going to feel out of the natural pattern because that’s what it is,” he said. “You are breaking the pattern and creating a new normal.”

“We’ve got to think about entrepreneurship more broadly.” –Frederik Groce

Groce and Bradley also stressed the importance of good governance, sound policy and fair regulations so that bias is eradicated from the process. And they emphasized both external and internal mentorship. Successful minority and women founders need to reach back into their communities and help the next generation stand up.

Words of Encouragement

Groce encouraged minority and women founders, saying there is a higher awareness and more funds wanting to meet them than ever before. He exhorted those founders to be prepared. “People are willing and ready to be blown away, and our job is to do it,” he said.

Bradley wants women to set aside any feelings of “imposter syndrome” and surround themselves with trusted peers who will help them see their greatness and call out their mistakes. Entrepreneurship is a team sport, she said, and there is no reason to go it alone.

Bradley said she won’t stop working toward equality until accelerators like hers are no longer needed. She dreams of the day when better conditions put her out of business.

“I look at this not just as a moral imperative but an economic one,” she said. “It seems naïve that as a country we are under-investing in the fastest-growing businesses and those that are creating jobs.”


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