One Man's Effort to Get VCs to Commit to Bringing Underrepresented Investors into Startup Deals

On August 26, 2020, Rachel Uranga from dot.LA reported on Alejandro Guerrero’s “diversity rider” initiative. Guerrero, a partner at Los Angeles-based Act One Ventures and a child of Mexican immigrants, often found himself as the only person of color in the room when investment deals were being made.

“This is about moving diversity forward and there’s two themes of how we address that: money and access,” he told dot.LA.

Alejandro Guerrero often found he was the only person of color in the room when big investment deals were being negotiated (source: dot.LA).

So far ten venture capital firms have committed to include a “diversity rider”- the promise to startups that they made their best effort to find underrepresented investors- in their deals.

Greycroft Partners, First Round Capital, SVB Capital, Harlem Capital Partners, Fifth Wall, Plexo Capital, Precursor Ventures and Equal Ventures have all signed on. Each of the firms are committed to adding "boilerplate rider language into their standard term sheets" that encourages the addition of underrepresented investors to cap tables.

The effort is an attempt to unlock access to investors of color and underrepresented groups, but it also build their reputation and eventually generate more wealth through increasing who owns a stake in companies.

"Long term, this is a step forward in changing the mindset in venture to ensure more investors are frequently considered for co-investment and follow on opportunities," said Henri Pierre-Jacques, managing partner at Harlem Capital Partners, in a statement.

You can read the full dot.LA article here.