Research shows that diverse fund managers in venture capital firms can lead to better results, Cleo Capital Managing Director Sarah Kunst said at an Axios virtual event on Tuesday.

What she's saying: Diversity can come in various forms, Kunst said, but racial and ethnic diversity are especially proven to "drive diverse opinions and insights which yield better results."

  • With a more diverse group of people seated at the table "you're more likely to spot ideas that aren't going to work, and more likely to spot ideas that will work but aren't exactly in your wheelhouse."

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Updated Jun 30, 2020 - Axios Events

Watch: A conversation on inequity in venture capital

On Tuesday, June 30 Axios hosted a conversation on the impact of Black Americans' underrepresentation in venture capital with Axios business editor Dan Primack and chief technology correspondent Ina Fried featuring Precursor Ventures Managing Partner Charles Hudson, Cleo Capital Managing Director Sarah Kunst and Bessemer Venture Partners' Partner Elliott Robinson.

Sarah Kunst discussed the importance of having racial and ethnic diversity at the decision-making level in venture capital firms and how that drives financial returns.

  • On underrepresentation for Black people in venture capital: "Obviously the funds haven't done a good job hiring diverse candidates even though they're there...Venture just hasn't made that leap to make it a priority in recruiting...It's easy to hire what we know."
  • On how racial and ethnic diversity drive diverse opinions and insights that yield better results: "You're more likely to spot ideas that aren't going to work, and more likely to spot ideas that will work but aren't exactly in your wheelhouse."

Bessemer Venture Partners' Partner Elliott Robinson highlighted title inflation and how it allows firms to appear diverse without giving people real power.

  • On what he calls "diversity theater": "I've lived it...for both black and brown investors as well as female investors. We'll give you an 'investing role' but we won't let you touch things like carry real check writing, sitting on boards, and the like."

Precursor Ventures Managing Partner Charles Hudson discussed what is critical in making systemic change in the industry.

  • On what a lack of diversity signals to potential partners: "When you look at a firm's web page or you look at an industry where you see almost no one who looks like me, I think it can send a pretty strong signal to founders that perhaps I'm not welcome here."
  • On what needs to change in venture capital: "We're an industry that really only hires people from a very narrow set of backgrounds — whether it's academic or professional...As long as we're focused on what's perceived to be low-risk pedigree hiring, we're not going to change anything."

Thank you Cooley LLP for sponsoring this event.

Precursor Ventures founder: VC firms should be introspective on diversity

Axios' Ina Fried (L) and Precursor Ventures Managing Partner and Founder Charles Hudson. Photo: Axios Screenshot

The venture capital firms that have best responded to widespread conversations about systemic racism have focused on their own hiring and funding standards and not public praise, Precursor Ventures Managing Partner Charles Hudson said at an Axios event virtual Tuesday.

The big picture: Hudson said some firms have reached out to him for advice on how to provide funding to a more diverse set of recipients. Progress will only come once those firms conduct rigid re-examinations of processes for hiring, retention and how they determine who gets funding, Hudson said.

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