Serena Williams' new focus could help diversify the venture capital game

When megastar Serena Williams recently said that she plans to retire from tennis after the upcoming U.S. Open, she added an intriguing tidbit about her future: She will turn her focus to a venture capital firm she quietly formed eight years ago.

The announcement last week by Williams, who has won 23 Grand Slam singles titles in a career that has spanned more than a quarter century, reignited talk of just how few women and minorities inhabit the elite world of high-stakes venture capital, where often risky investments are made in startup companies in hopes that the investors will reap a significant return.

While Serena Ventures, as her small firm is known, is among a tiny number of VC firms owned by Black women, that's changing, albeit slowly, says Sydney Sykes, a partner at Lightspeed Venture Partners, a Silicon Valley-based VC firm that invests heavily in early-stage, female-led businesses.

"No one is going to look at venture capital and say it's a success at diversity," Sykes says. "But I am more optimistic than I have ever been. I think there's a conversation that's happening now that has a tone that [we've] never had before."

There's room for optimism

That optimism, she says, is in contrast to just six years ago, when she co-founded BLCK VC, a network of Black venture capital investors with the stated aim "to connect, engage, empower, and advance Black venture investors." Among other things, BLCK VC offers a nine-week program designed to help young professionals break into the venture capital business.

When Sykes started out in venture capital in 2016, she says barely 2% of investors at VC firms were Black. This year, the percentage is closer to 3%.

"That's not a huge difference," she acknowledges. "But what I will say is now founders are the ones that come to investors and say, 'I want to diversify my capital.' Or they're saying, 'My company can't succeed the way it looks like right now; it's not diverse enough.'"

That change accelerated with the reckoning brought on by the racial justice movement that took off two years ago, says Melissa Bradley, founder of 1863 Ventures — named after the year of the Emancipation Proclamation.

Since the murder of George Floyd at the hands of a white police officer, billions of dollars in new money has come from Black investors, much of it being funneled into Black-owned businesses, she says.

Still, that's not nearly enough, says Elliott Robinson, a partner at Bessemer Venture Partners.

"We had a lot of conversation about access to capital and diversity of startups and venture capital coming out of the summer of 2020, kind of in the post- George Floyd, Breonna Taylor, Ahmaud Arbery conversation," he says. "But the statistics kind of speak for themselves."

Harvard and Stanford are conduits for the venture capital industry

Part of the problem is that 40% of all the jobs in VC are filled by just two universities — Harvard and Stanford, Robinson says, and historically those schools haven't produced a very diverse candidate pool. "It's kind of jaw-dropping," says Robinson, who earned his MBA from Columbia Business School.

Bradley, who is Black, says she got into the VC business "after I started my first company and realized that there was a lack of access to capital." As a result, she decided that 1863 Ventures should "really [focus] on Black and brown founders."

Since its founding a few years ago, her VC firm has helped more than 3,200 entrepreneurs who have "generated over $1 billion in new revenue," she says. "We focus on how much revenue they generate and [the] chance they create, because we recognize the multiplier effect is in the communities they serve."

Williams could help multiply that effect even more given her high profile not only as a star athlete, but as a Black female CEO of a venture capital firm, Robinson says.

In the venture capital business, founders "need to be a little bit superhuman" to succeed, he says, and Williams certainly qualifies.

Serena Ventures, with its motto "Play to Win," has funneled money into promising new ventures, raising $111 million of outside financing for new investments so far this year, Williams says. The firm is focusing on health, wellness and athletics.

In an essay she wrote for Vogue magazine detailing her plans, Williams — who is married to Alexis Ohanian, a tech entrepreneur and co-founder of Reddit who also started a venture capital firm a decade ago — said that 78% of her VC's portfolio "happens to be companies started by women and people of color, because that's who we are."

"On the other hand, my husband is white, and it's important to me to be inclusive of everyone," she writes. "Serena Ventures has been an all-female business until recently, when we brought in our first guy — a diversity hire!"

Speaking with NPR's Weekend All Things Considered recently, Sallie Krawcheck, the CEO of Ellevest, said despite the fact that businesses run by female CEOs tend to get a very small slice of VC investment, the return on those dollars tends to be higher.

"Having women like Serena ... invest in companies run by women is a way for us to break open the boys' club," Krawcheck told host Michel Martin. "We just haven't made as much progress with traditional venture capital firms as we would have hoped by now."

More women- and minority-led businesses could have a big impact

A 2019 report by Boston Consulting Group, or BCG, estimates that global GDP could be boosted by several percentage points, amounting to as much as $5 trillion annually, "if women and men participated equally as entrepreneurs." And a 2020 Brookings Institution report concludes that a shortage of businesses owned by African Americans in the U.S. "throttles employment and the development of Black communities."

"Furthermore, the underrepresentation of Black businesses is costing the U.S. economy millions of jobs and billions of dollars in unrealized revenues," the Brookings report says.

Lightspeed's Sykes says the fact that financial institutions have "been gatekeeping wealth from the Black community" for so long is precisely why Williams could have an impact.

"To have someone like Serena saying, 'I think it's important to be an athlete and a strong Black woman and a mother. But I also think it's really important to be thinking about financial institutions and generational wealth'" is a big deal, Sykes says.

"I think that says a lot to the Black community at large and the next generation," she says.

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