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Following the deaths of George Floyd and Breonna Taylor—and the resurgence of the Black Lives Matter movement, which inspired racial justice protests around the world—businesses across corporate America and Europe spoke out against racism and discrimination last spring.

Venture capital funds were no different. Silicon Valley behemoths, from Sequoia and Bessemer to Kleiner Perkins, tweeted about doing better on diversity. But as the anniversary of Floyd’s murder approaches, has anything really changed in the investing world? 

“I think we have, absolutely, [seen change],” said Paula Groves, a general partner at the venture capital firm Impact X, which invests in underrepresented entrepreneurs across Europe. “You see a number of companies and corporations…start to allocate funding to Black entrepreneurs. … All of these corporate giants have been spurred by the momentum of the Black Lives Matter movement, and I applaud their efforts.”

Groves—who began her career on Wall Street in the 1980s, then worked in private equity before spinning out her own VC fund focused on women- and minority-led tech companies—said that regardless of what investors may say about diversity, what really matters is where they put their money.

“Getting capital in the hands of [diverse] entrepreneurs is going to be so important from a wealth creation standpoint,” she said. 

Supporting Black entrepreneurs has broader implications beyond just their individual companies, Groves said. Studies show that Black entrepreneurs typically support other Black businesses, such as restaurants. They’re also more likely to employ Black people in their own companies. It’s called the virtuous circle, and leads to wealth creation, which then leads to more entrepreneurship.

Funding Black founders also makes good business sense for investors.

“Mainstream entrepreneurs are getting most of the capital, as we know, and certain deals are oversaturated,” said Groves. “When deals become oversaturated, they become overvalued. … If we can find these hidden gems, we can take advantage of a valuation arbitrage, if you will, providing capital at a lower valuation, working with businesses to grow, and creating strategic value.”

Boosting diversity from within

Andy Davis, the founder and general partner of the 10×10 fund in London, said he is optimistic about progress being made inside venture capital firms themselves.

“On the VC side of things, we’ve seen a lot more Black VCs not only get interviews but get hired,” he said. “We’re seeing more people get to the final stages of interviews and get offered funds—so the VC industry is moving, in my opinion, though it’s moving slowly.”

Davis has worked in the past with the London-based firm Atomico, which he said is making a concerted push to hire more Black investors. That said, many of the roles being offered to Black candidates are entry- or mid-level. That’s below the seniority level at which real investment decisions are made.

“There is an issue at the check-writing level,” Davis said. “We do need to progress the careers of those who are at mid-level.”

He said there are only a few Black venture capital partners in the UK, and those that exist are partners at their own funds. In other words, there are no Black partners at non-Black firms. 

Davis, who began his career as a startup founder before moving into angel investing, created a network of Black British founders in 2015. A few years later, he started a similar community for Black venture capitalists and angel investors. Those efforts have culminated in the 10×10 venture capital fund, an early stage fund to invest in Black founders, announced last July and launching next quarter. It will begin with about £3 million ($4.2 million).

Europe vs. the US

So far, both Davis and Groves work primarily with British startups. In some parts of continental Europe, investing in diverse entrepreneurs is complicated by a lack of data. In France and Germany, for example, the governments do not collect racial statistics at all. 

Even in the UK, a recent study by Extend Ventures—a not-for-profit for diverse entrepreneurs—found a dearth of data on diversity in venture capital. 

“We must be prepared to shift the status quo significantly on race with the same determination that we’re tackling gender disparity,” wrote industry expert Patricia Hamazhee in the report. “Without data, we cannot marshal the evidence that is demanded before change can be made.”

Groves said there is a handful of European investors starting to build out the Black entrepreneurial ecosystem, and that she believes it will grow.

“I would say that the European ecosystem is probably about 20 years behind the US ecosystem,” she said, adding that that’s true of the VC space in general, not just in terms of VC diversity. 

Davis agreed that American VC funds tend to have more capital—and that the US has more of a startup culture. 

“In the UK we are traditionally conservative, and in the US they are a lot more open to risk and the idea of entrepreneurship,” he said. 

What next?

“In the wake of Black Lives Matter and the George Floyd movement, I think other people are starting to wake up to what I believe is an opportunity—not just to right a societal wrong, but also to maximize results and bring equality,” said Groves. “I believe that economic inclusion and the economic domain is the next place for equality in our society.”

For her, the key to getting Black entrepreneurs better access to capital is to prove that investing in them makes good business sense.

“Oftentimes people feel like the solution is to get a bunch of really smart people in the room and sit down and talk about strategy, and brainstorm what’s broken and how do we address these needs, and write a report,” she said. “We’ve done that for years. We have the data, we have the information, we’ve proven the business case—so let’s start to deploy the capital.”

Impact X, which has raised money from high-net-worth individuals in the UK and US, has so far invested in more than 20 transactions. The firm has had one exit—a fintech company, which it exited at a 7x markup in valuation from its initial investment. Groves hopes to have two more exits by June.

“So we’re proving the thesis,” she said. “[We’ve got], not just the data as to why it makes sense from an academic standpoint, but now we have actual financial results that we can point to.”

When it comes to finding diverse European entrepreneurs to invest in, Davis said there are plenty to choose from. “Every month I see about 120 companies and end up investing [personally] in 0.8 percent,” he said. Of those 120 diverse startups, about 100 are founded by Black entrepreneurs.  “So,” he said, “when they say there’s a pipeline problem, it’s not on the founder end.”