Diversity Wins

Every VC fund needs a token, white, male, general partner.

Sputnik ATX does mark-to-market portfolio updates quarterly and the results thus far have been fantastic (89%IRR, not that I’m bragging). Our goal is to help people reach their full potential, and we believe that IRR is a key outcome to measure if we’re doing our jobs well. Diversity is another measure of that success. How are we doing?

Two metrics we’re just as proud to cite: over 40% of our portfolio companies have a female founder, and over 20% have a black founder. How do we do it? We joke among our team that our secret to success is maintaining a token, white, male, general partner.

Yes, I’m the only white dude.

The fact that we have only one white male on our team gives us an unfair advantage. I highly suggest more VCs try this approach. If you’re a general partner (GP) reading this article, please consider ways to get your own token, white, male GP and do so NOW.

What we’ve learned at Sputnik ATX is that when diverse people (education, culture, work experience, ethnicity, gender, etc) all have a say in decisions, we make FAR better decisions. There is copious research to support me on this (check out this HBR article.).

We’re well past the time to continue to allocate capital to homogeneous white dudes and yet, the flow of capital to these funds is shockingly disproportionate and persists. It’s time for lip service to end, and action to begin.

At the risk of alienating allocators looking at our next raise, I just have to say to every fund of fund manager and pension fund manager, please stop giving money to funds where the GPs all look like me. It’s hurting your returns, its skewing investment away from quality founders, its exacerbating US economic apartheid, and preventing everyone from reaching their full potential.

Note: I highly suggest reading the links in this article, and the book on US economic apartheid is especially interesting. Also, after writing this article, Sputnik ATX shockingly found another white guy who joined our team as a temp this summer. Congrats Matt, you beat the odds at our fund. Let’s not get too comfortable. Our investor returns depend on it.

Author: Joe Merrill

I'm a VC in Austin, TX.