It took social media by storm – because there were only 14 people. It is estimated that there are less than 20 black decision-makers at VCs in the entire country out of 1,703 in total.
Ella Wales Bonner
The diversity problem lies not only on the investor side, but also in terms of who wins investment. Less than a tenth of all VC deals go to women, Black, Asian, Ethnic Minority and LGBT+ founders, according to venture capital fund Backstage Capital. Government-commissioned research reveals that less than 1% of VC funds go to start-ups run entirely by women. This is despite last year being a record high for investment.
Workspace hosted a Business Insight Dinner at The Record Hall in Hatton Garden to explore how to make VC fairer and more diverse, what the investment community can do to stamp out societal biases for good and how minority groups can overcome societal biases to secure investment. You can watch the full panel discussion here:
Read on to hear from: Andy Ayim, Managing Director of Backstage Capital London; Kasia Borowska, Managing Director and Co-founder of Brainpool AI; Alejandro Saucedo, Chief Scientist at the Institute for Ethical AI & Machine Learning; and Helena Murphy, Founder and Head of Investment at Raising Partners.
So why don’t the numbers stack up? London in particular is a hit with VCs; tech businesses in the capital got £1.8 billion last year, according to figures from number-cruncher PitchBook and the Mayor’s office. Funding is up for grabs in London – one of the world's most diverse cities – but it appears to be reaching only certain sectors of society.
Andy says, "The root of the problem is a mentality issue. When you're an adult you're moulded, hard and set; it's really hard to break that and re-mould you. All the biases we have grown up with and the opinions we have shape our view of the world."
This is only exacerbated by things like referral networks because people's friends often tend to be similar to them. Andy says, "If we do that, we're not going to get out of those networks. That is what is happening with VC right now."
Watch Andy explain why VCs in the UK are overwhelmingly white, middle-class men that invest in other white, middle-class men, and the pros and cons of government intervention.
Add artificial intelligence into the mix, and the problem is compounded. Algorithms are increasingly used in addition to, or instead of, human beings to make life-changing decisions on things like bank loan applications, university admissions and even parole hearings.
Algorithms make these decisions based on data they are fed from humans, but biased data leads to biased decisions. Facebook's advertising algorithm recently came under fire from the likes of New York Magazine after a study came out identifying a 'significant skew in delivery along gender and racial lines.
Algorithms not only follow the original data to the letter but also exacerbate biases, says Alejandro. "The challenge with AI algorithms is that they learn from data. Unfortunately all data carries an underlying societal bias, and removing it completely is impossible. Instead we must introduce practices and processes that enable us to mitigate undesired biases."
Watch this video to see Alejandro explain the power of algorithms, how they are used in business and how they can backfire.
The Institute for Ethical AI & Machine Learning is developing an open source, ethical framework to weed out undesirable biases in machine learning systems, which is currently being tested. In the meantime, businesses that use AI in their decision-making process should exercise caution.
A lot of companies apply ready-made solutions and their data scientists are self-taught to use [algorithmic] libraries. At Brainpool, we try to encourage clients to first allocate resources and time to make sure what they try to build is ethically correct. This means [pre-screening for] data biases, and employing data scientists or researchers with an academic background that actually know the maths behind machine learning code. It is important to understand what these systems are doing. There are so many off-the-shelf solutions that anyone can use with simple instructions, but unless you understand the background of what you are building, you cannot build a sustainable artificial intelligence solution.
So what can minority entrepreneurs do to overcome these hurdles and attract VC investment? The VC landscape isn't going to change overnight, so that means working in tune with VCs. Helena recommends founders present an investment proposition to investors that resonates with them in a way that they are used to. She says, "Focus on the investment proposition rather than who you are."
Watch this video to see Andy's suggestions for how VCs can attract more diverse entrepreneurs.
Will VC ever be fair?
I don't think so, not at the pace we're moving at now. Not for a long time.
The only thing we know for certain is that algorithms play a growing role in our personal and professional lives. If we want future decisions to be made fairly, we need to give algorithms the fairest data we can.
Read what our guests had to say about the panel discussion.
“The #WBIDinner on Investment and Algorithms: Tackling Diversity and Bias Challenges in Business was a great event with a multidisciplinary panel, who gave passionate and informed views on the subject matter. Attendees from a wide range of fields were very engaging and I'd definitely recommend future #WBIDinner events.” Mac Alonge - Co-Founder, The Equal Group
“As a black woman, I found this dinner informative and challenging. I will definitely encourage others within my community to source (responsibly) funding and apply with a sense of entitlement. If we don’t try, we definitely won’t get. Thank you for a great evening.” Orlene Badu, Headteacher - St Matthias School Hackney/Cultural Competency Trainer
Helen Murphy recommends reading Invisible Women by Caroline Criado Perez, to understand the true extent of the data bias affecting women.
Andy Ayim recommends listening to The Bootstrapped VC, a podcast by Arlan Hamilton. Sign up to Andy's newsletter to stay up-to-date on minorities in tech.
Kasia Borowska recommends reading her piece in Forbes: The AI Arms Race Means We Need AI Ethics.
Women found 38% of US companies but only get 2% of VC funding. Watch Dana Kanze explain why in this TED Talk, it boils down to the type of questions investors ask: tinyurl.com/why-female-founders-get-less.
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