Exclusive: Venture capital to make diversity pledge

SAN FRANCISCO — Venture capitalists will pledge concrete measures to bring greater diversity to their predominantly white male profession during a high-profile event at the White House.

Tuesday's announcement from venture capital's trade group will take place during the White House's first Demo Day to showcase technologies from the nation's diverse set of entrepreneurs and kick off a new initiative to bring greater diversity to the tech world.

For its part, the National Venture Capital Association is making a commitment "to advance opportunity for women and underrepresented minorities in the entrepreneurial ecosystem," the trade group says in a letter to President Obama that was exclusively shared with USA TODAY.

The trade group's task force, formed in December, to tackle the profession's lack of diversity "is committed to developing both near and long-term solutions to effect positive change," the letter reads.

It was signed by 45 venture capital firms including Andreessen Horowitz, Kleiner Perkins Caufield Byers, Battery Ventures and Norwest Venture Partners.

"This is a great indication that we get it and that we are going to hold ourselves accountable," Ray Leach, CEO of JumpStart and a member of the task force, said in an interview.

Among the steps the National Venture Capital Association is promising to take: to conduct and share research that measures diversity at venture capital firms and their portfolio companies, develop model human resources policies to encourage more inclusive work environments and participate in programs to encourage women and minorities to pursue careers as entrepreneurs or venture capitalists.

These are just initial steps to address the yawning racial and gender gap, said Silicon Valley venture capitalist Kate Mitchell.

"We are putting a stake in the ground," said Mitchell, co-founder and partner of Scale Venture Partners and co-chair of the diversity task force. "We see this as a beginning."

Diversity advocates have called on venture capital firms to make significant changes in the wake of a closely watched gender discrimination lawsuit against Kleiner Perkins, one of Silicon Valley's most famous firms. Ellen Pao lost her case but international news coverage of the trial trained the spotlight on the stark lack of women and underrepresented minorities in the clubby profession.

"The Ellen Pao trial did add to the urgency, absolutely. There isn't any doubt about it," Leach said. "It basically highlighted to all of us that this is something we need to get a better understanding of. We can't leave this alone. We have to make progress on these issues."

A 2011 survey by the National Venture Capital Asssociation and Dow Jones VentureSource found 89% of investors were male and 11% female, while 87% were white.

The lack of women and minorities affects who gets funding. Pepperdine University found in a survey last year that female and minority entrepreneurs were significantly less likely to raise venture capital than their white, male counterparts.

Why does that matter? Venture capital firms are the secret sauce of Silicon Valley. They funded the likes of Facebook and Google and offer the cash and connections necessary to becoming tomorrow's success stories.

"The industry is small but it has a disproportionate impact on wealth creation and the economy," Leach said.

And venture capital is waking up to the fact that it needs to be more in tune with the nation's changing demographics "for the long-term benefit of society and for its own financial returns," he said.

The National Venture Capital Association began to press the diversity issue with its members by hosting a diversity panel at its annual meeting in 2014. Last December, it established a diversity task force, which quickly came under fire for having too few women and no African Americans or Hispanics.

This year, the trade group elected more women and people of color to its board of directors. And in September, it plans to give its members more information and tools to increase diversity.

Before the White House Demo Day, members of the trade group plan to gather for unconscious bias training and to share information on diversity efforts.

Greenspring Associates, for example, has adopted its own version of the National Football League's Rooney Rule. Scale Ventures contributes a minimum of 20 hours a month as faculty for educational programs targeted at women.

Still, the pledge at the White House is — at least for now — just words.

"It's the first or second of a thousand steps," Leach said of the White House pledge. "But we are motivated and excited to take these steps as an industry."

Follow USA TODAY reporter Jessica Guynn on Twitter: @jguynn