New faces driving innovation
As venture capital decouples from Silicon Valley at the earliest stages, new faces are emerging as the go-to entrepreneurs with next-level innovation. The U.S. is on track to becoming a majority minority country in 2045. It’s already 2045 for venture capital. Why? Many of the urban areas that produce top startups have already made the transition.
For example, Austin’s white population is less than 50%. Same in Los Angeles.
In Atlanta, the white population is 37%. In Baltimore, 28%. Houston? 25%. You see the trend.
The business of venture capital is investing in the next tech-driven trends–by demographic necessity, these can’t be “white-led” strategies.
Today, the majority of venture capital is deployed by white male investors to white-male-led teams. In order to generate top returns, this trend, which was supported by demographics in the past, won’t last. As venture evolves and maintains the need to invest in the best of new opportunity, investors will increasingly deploy capital to innovations coming from diverse founders. At Valor, 60% of our portfolio is led by under-represented founders like women and people of color. Among the Kauffman Fellows program, the elite venture capital educational program, the newest class is 50% people of color.
Three trends driving big opportunities
As these large financial and demographic trends work themselves out, investors who adapt before consensus stand to be rewarded. New entrepreneurs, including today’s under-represented founders, have exciting strategies that come from fresh insights. Valor.VC invested in The Gathering Spot–a breakout model with legs in DC, LA and Atlanta that’s re-inventing coworking, membership clubs, and studio-based media thanks to co-founders Ryan Wilson and TK Petersen. We invested in SmartCommerce, led by CEO Jennifer Silverberg, which helps brands get insight into buying habits despite an increasingly dis-intermediated shopping experience. They’re working with 29 of the top 30 international consumer product good brands–companies like Proctor and Gamble, Mondelez and Keurig / Dr. Pepper.
I’m encouraged by the energy of the disconnect in venture capital.
When you see a clear line like the downward trend in first institutional rounds, you know the trend cannot remain. The vacuum in first institutional rounds is unsustainable for our financial markets. All three of these trends say the time is now to reset your investment approach in venture capital.