Note from NVCA: In September of 2017, NVCA announced our path forward to address harassment, diversity, and inclusion in VC. With the help of our Members and Industry Partners, we’re currently primarily focused on updating our sample HR policies and developing HR best practices, but we know policies and best practices can only go so far. To that end, we launched this VentureForward blog series for industry leaders to share their perspectives on why diversity and inclusion (D&I) are important for the future of VC, their firm’s activities and approach to D&I, and guidance for how we—as an industry—can drive meaningful change.
Andy Schwab, Co-Founder & Managing Partner of 5AM Ventures, continues the series with his post below:
Diversity Breeds Diversity
I’m a strong believer that diversity breeds diversity. This includes gender, race, ethnicity, sexual orientation, geography, socioeconomic background, religion, etc. Rather than focusing on increasing one specific type of diversity, the best organizations have the broadest diversity. For the last 16 years, we have been building a diverse 5AM team and backing a diverse group of management teams. Consistent with the research, our 5AM experience shows that diversity produces results.
I also know unconscious bias is real. Almost all of us are more comfortable with people who are like us. This concept leads to people hiring people who are most like them. This applies to both firms and entrepreneurs and is especially true in Silicon Valley VC firms, which has been well documented.
In light of my convictions that diversity breeds diversity and unconscious bias is real, VCs must be more intentional in how we build our firms and which portfolio companies we support. The NFL’s Rooney Rule may go too far in being a formal requirement to interview a diverse set of candidates for every job, but we must consciously break the unconscious bias.
At 5AM, we started in 2002 with a three-person investment team that was 100% Caucasian with one female. Sixteen years later, our 21-person investment team is essentially majority non-white male and includes a diversity of gender, race, ethnicity, sexual orientation and religion. Of our 65 portfolio companies, ~50% of the companies had non-white male founders or executives when we invested.
Importantly, the trendline is moving in the right direction with increasing diversity in our 5AM team and our portfolio companies. Our team diversity has increased every year, and the next generation of the firm’s leaders are on track to be far more diverse than the leadership to date. On the portfolio company side, each fund has invested in portfolio companies that are more diverse than the previous fund. This steady progress supports the underlying thesis that diversity breeds diversity, and 5AM is likely to invest in more non-white male entrepreneurs since we have more non-white males on our team.
In terms of breaking through the unconscious bias, one of the areas where we have had success is with Executives-in-Residence (EIRs). Each of our four EIRs over the years have added to the diversity of the firm (i.e. Phyllis Whiteley, Laura Shawver, Yujiro Hata, and Amy Burroughs). Importantly, they have gone on to found 5AM portfolio companies including Bird Rock Bio (f/k/a Anaphore), Cleave Biosciences and IDEAYA Biosciences, and served as advisors to many others.
We also have a goal of maximizing the career potential of all team members and eliminating any potential glass ceilings. Active career development includes mentoring and sponsorship of external advancement opportunities such as the Kauffman Fellows Program. The best example of our success to date is Kush Parmar, M.D. Ph.D. who joined the firm as an Associate in 2010, became a Managing Partner in 2015, and now leads our Boston office.
It is also important to recognize that the people we hire at 5AM and back as entrepreneurs are highly-trained in the STEM field. If we want to foster diversity for the future, then we need to fund the talent pipeline to continue that trend. Unfortunately, women earn only about 35% of undergraduate STEM degrees in the U.S. according to the World Economic Forum. This means that there are two male candidates to one female candidate for every job. This is a broader issue, but the implications for diversity in the VC community and entrepreneurship overall are significant.
I joined the NVCA board last year as a way to advocate for key issues in Washington that were important to 5AM and to me personally. These include immigration, basic research and technology transfer, healthcare innovation, and taxes. I am very proud of the work that NVCA did last year, especially the rapid response to the VC sexual harassment news that surfaced in June 2017. There is no place for the type of behavior that has occurred in our industry, and I’m committed to being part of the solution going forward. I’m very supportive of NVCA’s VentureForward goals – “expanding opportunities for men and women of all backgrounds to thrive in the venture ecosystem and ensuring everyone who works in this ecosystem has a welcoming professional culture and safe work environment, free from any type of harassment, abuse, and discrimination.” I appreciate that being a Caucasian male puts me as the minority in many of these discussions (as evidenced by the turnout at the NVCA Sexual Harassment Workshop last September), but I’m hopeful that many of my peers will step up to be part of the solution as well.
I am married to a former VC and current founder/entrepreneur, Catarina Schwab (Co-CEO of NPX Advisors). I’m fortunate to have frequent conversations with Catarina about the challenges of being a female VC/entrepreneur, how to effectively recruit a diverse team, the specific challenges of working mothers, etc. These insights have been very instructive as we have built 5AM over the past 16 years.
There is a lot of hard work ahead, but I think embracing and increasing diversity will be key ingredients to the solution. Let’s collectively commit to hiring diverse teams, consciously breaking our unconscious bias, and supporting each other in these important efforts. My strong belief, and direct experience, is that this will lead to improved outcomes for our generation and future generations. The time is now.
Read the other posts from this series:
Greg Sands – Focus on Progress, Not Perfection
Lisa Lambert – Diversity & Inclusion is a Growth Story
Maha Ibrahim – Canaan Forward: Diversity as an Asset
Carmichael Roberts – Being Different
Kate Mitchell – Time’s Up – We Need to Fix This