Rise of the Rest, a seed fund started by Steve Case, the former CEO of America Online, has invested in 130 companies so far. A quarter of its founders are women. Nearly half (45 percent) are either women or people of color. That's a lot: About 80 percent of venture capital goes to all-male teams; female CEOs get less than 3 percent. Black women get 0.2 percent.
When I asked Case what gender breakdown he would like to see in his fund, he looked surprised, or maybe confused. I ask venture capitalists this question fairly frequently, so I tried to clarify: What gender mix would signal that his firm had left no stone unturned in unearthing the best, investment-ready entrepreneurs?
He still seemed to think this was an odd question. "Women are half the population," he said. "Why shouldn't [the number in the fund] be half?"
In all the times I have asked this question, I'm not sure I've ever heard this answer.
Then again, I hardly ever receive a straight answer at all. Sometimes I hear that the ratio should be 50:50--but just not yet. I hear that women don't pitch venture capitalists in the same numbers as men, so of course they don't get as much venture capital. I hear that women, while they may start lots of consumer products companies, just aren't active in the fund's area of focus: cybersecurity, crypto, enterprise software ... the list goes on, as do the excuses.
Case and I were talking at Rise of the Rest's female founders dinner, held last week in Washington, D.C. A venture capital firm will often arrange these types of dinners to introduce the founders of its portfolio companies, and the firm's own staff, to a group of journalists. They're usually off the record.
Dinners specifically for female founders are relatively rare. After all, why should a venture firm make the effort to introduce the press to its female founders but not its male ones? Besides, most venture firms couldn't assemble a female founders' dinner of any size.
So I was surprised to receive an invitation to a female founders' dinner from Rise of the Rest, because the fund doesn't have a gender-diversity mandate. Instead, Rise of the Rest looks to invest in founders outside of the hot spots of the Bay Area, New York, and Boston. Founders dinners may typically have 40 people, but this one had about 70. OK, that included some of the staff of Rise of the Rest, Steve Case, and Jean Case, CEO of the Case Foundation and chair of National Geographic. There were also some D.C.-area ringers: Secretary of the Air Force Barbara Barrett and WNBA star Elena Delle Donne of the Washington Mystics.
To highlight the potential of great U.S. cities that are not San Francisco, New York, or Boston, Case has hosted eight Rise of the Rest bus tours since 2014. On each tour, Case and his guests visit startups and other members of the local startup ecosystem--often universities and accelerators. Sometimes the mayor pays a visit. The tour wraps up with a pitch competition, with the winners receiving $100,000 investments from Rise of the Rest.
Case has commented before that while the startup ecosystems of the Bay Area, New York, and Boston are relatively homogeneous, that's not true of other parts of the U.S. There, he sees much more diversity.
That probably explains some of Rise of the Rest's success in finding and backing diverse founders, but not all of it. Rise of the Rest does business differently. Venture capitalists often boast of their connections. Their networks may contain lots of affluent people, or people who've had big management jobs at tech companies. But often their networks aren't especially diverse. That homogeneity becomes crippling when you see even the most well-known firms struggle to diversify their partner ranks. The firms may say they will add a woman partner or a person of color once they find one who meets their standards. But any thinking person has to wonder: You guys are so darn connected, so in tune with the cutting edge of technology and culture, yet you don't know even one woman, or even one person who isn't white, suitable to join your partnership? Really? Not one? #MeToo lit a fire under some of these firms, and in the past two years a slew have added their first female partners. But these are the kind of firsts that should have vanished decades ago.
Rise of the Rest looks at connections very differently. When one of its bus tours prepares to go into a city, they want to meet as many people as possible. They want to showcase the best the city has to offer. And they want to make sure that every entrepreneur in town knows about their pitch competition and applies to be part of it. These pitch competitions provide a minority of the fund's investments, but they showcase Rise of the Rest's commitment to geographic diversity. And Rise of the Rest's approach seems to be working: Forty percent of the companies in the first Rise of the Rest fund have gone on to raise additional capital, including StockX, a Detroit-based online marketplace valued at more than $1 billion.
Most venture capitalists won't even look at a pitch or business plan without a warm intro. It's a point of pride: If you're not clever enough to figure out how to meet them, then surely you don't have the hustle to be a successful entrepreneur. Rise of the Rest takes the opposite approach: They make it clear that they want everyone, not just the well-connected. They don't act as if it's the entrepreneur's job to finagle an introduction. Instead, they act as if it's the investor's job to find the best entrepreneurs--not just the best entrepreneurs who are white and male and 25, preferably without kids or mortgages. And in the most recent Rise of the Rest pitch competition, three of the four winners were women. Two were Latinx.
Wouldn't it be interesting if that's what equality of opportunity really looks like?