A Change Is Gonna Come. Right?

By Joey Mak

In 2017, the #MeToo movement took down some of the most powerful men in entertainment, business and politics, as women everywhere emerged from the shadows to bravely share their stories. A few years later, the murder of George Floyd galvanized millions of people to organize and march for racial justice.

Amid the unrest was the hope that a change was going to come. It was this sense of hope that motivated me to quit my suit-and-tie job and take the reins at Chicago:Blend, a nonprofit founded by local venture capitalists to diversify the region’s VC and startup ecosystem.

Many tech companies and investors felt motivated (or pressured) to act too, and in the summer of 2020 they pledged to do better. They hosted employee town halls. Who knew that women don’t like it when you comment on their appearance, even if they look nice? They hired chief diversity officers. We found someone to handle this stuff so we don’t have to. And they updated their branding. Going forward, only commercials featuring mixed-race couples will do.

Unsurprisingly, these efforts amounted to very little. Tech still has a diversity problem and, depending on the data source, the problems are arguably worse now. Between 2021 and 2023, the percentage of nonwhite hires at startups declined in virtually every job area from engineering to HR to sales, according to one recent study. On the funding side, just 17% of venture capital goes to companies with at least one woman founder — that number is only 14.9% in Chicago.

The benefits of diversity in all its forms are well documented. Diverse teams enjoy healthier workplace cultures, enabling them to build better products for customers and generate superior returns.

Tech’s diversity check

For an industry that prides itself on innovation and outside-the-box thinking, it is baffling how poor diversity is in tech. While efforts to facilitate meaningful dialogue among employees or establish more inclusive branding are important, the most potent lever for creating meaningful change comes down to money and opportunity.

To illustrate this, Chicago:Blend recently published data for Chicago and nine other U.S. cities to identify how opportunities to launch startups and raise VC funding have been distributed across racial, ethnic and gender groups.

Between 2018 and 2023, Chicago had the highest percentage (36.5%) of new VC-backed companies founded or co-founded by women compared to all other cities in the report. Chicago also had the second-highest percentage (24.4%) of companies with at least one founder of color, behind Miami.

While these figures are encouraging, the share of VC funding raised by these same founders is significantly lower. For instance, Black-founded companies raised less than 3% of venture capital in six of the 10 cities included in the report. We see similar trends when analyzing other demographic groups, too.

Addressing the problem

First, to diversify who gets checks, we must diversify who is writing checks. For our part, we have a fellowship program at Chicago:Blend that has helped more than 80% of our alums land a role in VC post-program.

Second, more investment is needed to deploy nondilutive funding to early-stage founders so they can demonstrate traction and later position themselves for growth capital.

Third, institutional VCs working to diversify the top of the funnel will gain exposure to new ideas and deal flow, translating into a competitive advantage. One investor’s ignorance is another investor’s opportunity to make money.

To borrow a lyric from Sam Cooke, it’s been a long time coming and we’re still waiting for that change to come.

Joey Mak is the CEO of Chicago:Blend, a nonprofit advancing diversity, equity and inclusion in Chicago’s VC and startup community.

Illustration: Dom Guzman