Follow me @samirkaji for my random, sometimes relevant thoughts about venture capital

As expected, when Cyan Banister joined Founders Fund in March of this year, most of the headlines focused on the firm bringing on its first female partner. Although the emphasis probably should have been focused on the firm bringing aboard a tremendous talent who will invariably play a big role in delivering value to the firm, I realize that driving awareness of gender inequality remains an unfortunate reality of our industry.

There’s no secret that the venture capital industry has always struggled with gender balance and diversity in general. As of April 2016, only 7% of investing partners at the top 100 firms were female, a number that sadly has not shifted much over the past decade. Even more startling is that many top venture firms still do not employ a single US based female general partner.

The intention of this post is not to posit about venture capital’s gender inequality problem. In fact, I think too many people mistakenly perfectly correlate gender balance with healthy firm diversity.

It doesn’t.

The truth is real diversity is a function of individuals that, through unique backgrounds and experiences, can bring forward authentic diversity of thought to the firm or to the industry as a whole. In practice, it’s possible that an all-male investment team is better diversified than a team that is completely gender balanced, particular if the latter includes individuals of the same socio-economic backgrounds.

Of course, diversity of thought inherently usually accompanies teams that actively promote a healthy balance of ethnicity, gender, and age.

The shift to creating healthy diversity within traditional venture firms has been slow, albeit a shift that is gaining momentum as more firms realize the need to bring significantly different perspectives to the table. However, tall hurdles within traditional firms (legacy bias, difficult of breaking into a partnership, politics, etc.) remain in place that slow the pace for diversity within venture.

It’s unfortunate. To truly drive the next generation of innovation we need entrepreneurs and investors that that have real capacity to view the world through a different lens.

Additionally, as venture capital returns typically come from a relatively small subset of companies each year, becoming a great venture firm requires consistently seeing opportunity when others see nothing. As many in the industry have commented, some of the best companies ever formed were initially viewed as terrible ideas by the masses. It’s hard to identify these opportunities if everyone within a firm ascribes from the same school of thought.

Fortunately, the world of Micro-VC (firms that raise funds <$100MM) isn’tshackled by the same constraints of traditional venture and rise in the number of new firms (300+ in the US) has helped accelerated the diversity within the investing space. For those that have lamented that the low barriers of entry of starting a Micro-VC firm are a negative, it’s important to be mindful of the impact the sub-sector has had on promoting diversity.

When we did a study of 222 Micro-VC firms in 2015, we found that 16%included at least one female investment partner and well over 50% of firms included at least one minority. Firms like Cross-Culture Ventures, Female Founders Fund, and Rothenberg Ventures are just a small subset of next generation firms playing an important role in developing healthy diversity within venture.

This is great news for the world of entrepreneurs who are seeking to solve problems in areas that aren’t always well understood by the archetypical investor. These entrepreneurs now are availed to a pool of investors that both understand and identify with unique markets and problems.

When we celebrate diversity, we should be doing so not for the sake of it, but for what will come as a result of it.

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