Crunchbase will now show diversity data on its company profiles in an effort to help better promote businesses run by women and minorities, according to CEO Jager McConnell.
In a blog post, McConnell explained that the company was pushed to make this change due to the recent protests against racism and police brutality that have hit all 50 states and dozens of countries worldwide.
“After decades of underfunding and centuries of systemic discrimination, Black founders, Black CEOs, and Black-led venture firms are only beginning to get the attention they deserve. One major challenge they all face is how to connect eager VCs and CEOs. Posts on LinkedIn, Twitter, and blogs help raise the visibility of Black-led companies, but they are ephemeral and not scalable,” McConnell wrote.
“The startup world needs a central place where the two sides can meet for fundraising, building relationships, or mentorship. Crunchbase is uniquely positioned to be that meeting place. That’s why we’ve focused our resources on centralizing and highlighting data about companies with diverse leadership and the investors who fund them. Introducing: Diversity Spotlight.”
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Before the end of the summer, Crunchbase users will be able to look through diversity data through the beta Diversity Spotlight features, which will allow companies to highlight diversity in its own ranks.
According to McConnell, the company’s three main goals with the Diversity Spotlight feature are to raise awareness for companies with diverse founders looking for funding and firms that invest in diversity, show data that illustrates diversity funding trends, and offer transparency into investment firms’ diversity funding activities.
“Investors will be able to create visibility into the diversity of their portfolios. Users will be able to analyze trends and search Crunchbase using diversity as a filter,” McConnell said. “We’ve partnered with several VC firms and diversity advocates to collect diversity data, but we believe that we’ve only scratched the surface. We will need our user community to contribute their company’s diversity data to complete the picture.”
He added that the new diversity data will help close the funding gap by giving investors an easy way to see the makeup of the companies they pump money into.
Last year, RateMyInvestor and DiversityVC pored through publicly available VC-backed deals over the last five years and polled 10,000 founders, revealing that 77.1% of founders were white—regardless of gender and education, women-funded startups received only 9% of investments, and just 1% of venture-backed founders were Black.
There have been many other studies over the years showing that minority business owners, particularly Black ones, are routinely shut out of funding entirely despite claims from venture capital funds that they are unable to find minority businesses to back.
Angela Benton, founder of Black business incubator NewME and data analytics company Streamlytics, said she spent nearly a decade working to increase diversity in the tech industry through her accelerator program.
She noted that when she started NewMe in 2011, it was one of the only accelerators focused on Black tech entrepreneurs. But after getting a spotlight on the issue of diversity through a CNN special feature, many of the commitments made back then never really led to concrete changes.
“This feels very familiar to what happened in 2011. A lot of commitments were made but the only difference is that now, we have the benefit of past experiences to learn from,” Benton said.
“One of the things we do know is the number of Black companies that are funded by VCs and the number of Black employees that are hired from tech companies have not changed in 10 years. They didn’t change even after companies started reporting the numbers.”
Benton added that the current commitments being made are largely meaningless unless there is accountability. Companies, she said, had to move beyond just donating money to organizations and actually increase diversity within their employee pools as well as in the companies they invest in.
“We’re at a critical moment where holding some of these companies accountable as individuals, as organizations and as allies can really help move the industry forward. Things have changed minimally over the last decade. The only big change that I see is that people are aware that there is an issue. Prior to when I started NewME in 2011, people even then still claimed that there wasn’t an issue and said things like ‘Technology is a meritocracy’ and ‘this type of racism and prejudice doesn’t exist because we’re dealing with technology,'” Benton noted.
“But have people been getting funded more? Have people been getting hired more? Specifically people of color? No. What’s happened over the past years is an admittal that there is an issue but not real change.”
McConnell echoed those concerns about accountability, writing that the millions of visitors to the Crunchbase site will now be able to “freely assess a VC-firm’s commitment to diversity” and that the diversity ranking will “empower investors and startup leaders to drive change.”
While the diversity information available at first will only include race/ethnicity data for leadership teams at US-based companies and investment firms, McConnell said Crunchbase eventually hopes to expand the feature to companies around the globe as well as add even more information related to gender identification, sexual orientation, and ability status.
Crunchbase is also changing its recommendation algorithm to help include diversity data as an input. Founders and CEOs from underrepresented backgrounds looking to raise their visibility will have the chance to contribute their data to Crunchbase free and note which Diversity Spotlight tags are relevant to their company.
Much of the initial racial data will be given to the company through the Crunchbase Venture Program Partners, journalists, the Crunchbase data management team, and venture capital funds that already focus their efforts on supporting minority-run businesses.
In his blog post, McConnell thanked organizations like All Raise, Backstage Capital, BLCK VC and Harlem Capital Partners for sharing their data with Crunchbase as well as individuals like Sydney Paige Thomas, James Norman, Yonas Beshawred, and Sefanit Tades.
McConnell explained that one of the main problems is discovery and connection. Black founders and executives who do make it into positions of power, he said, still have enormous hurdles in breaking into venture capital circles.
The venture capital communities are notoriously insular and that’s contributing to lack of diversity, he added. But he noted that “most investment firms want to change” and that they’ve “just been struggling to bridge the divide between the communities they know, and the ones they want to know.”
“As we’ve watched the tragic murders of Ahmaud Arbery, Breonna Taylor, and George Floyd, and saw the nation rally around the Black community, we realized that we could no longer choose to be passive. That’s why we committed so much of our internal resources to build that central meeting place for both investors and leadership teams to find each other and connect,” McConnell said in an email interview.
“We wanted to take an active and lasting stance in fighting for equity, diversity, and inclusion in the startup world. We also believe that race/ethnicity data is just a starting point. There are many underfunded communities, and we’re actively exploring how we can expand our data to support those groups in the future.”
Benton said that the lack of diversity was more than just a cosmetic issue. Now that technology is incorporated in almost every aspect of our lives, it is important to have Black people in the room as it is being developed and built. Before long, she noted, most of our lives will incorporate some amount of artificial intelligence and there have already been a number of indications showing these systems take on the preexisting biases of their creators.
One of the best examples of this, she said, were the issues around facial recognition software being built and sold widely. Dozens of studies have shown that these systems have major issues identifying people with dark skin.
“Years ago, when I would give interviews on this, the answer I would typically give is that a lack of diversity is not fully reflective of the human experience and how we live in the United States,” Benton said. “Now, in addition to all of those things, what is becoming more and more apparent to me is how people are missing the impact this has in their day to day lives.”
McConnell noted that even within Crunchbase, officials are working to change things, creating an anti-racism action plan with tangible steps that include things like a more equitable hiring processes and new vendor sourcing methods. He said the team at Crunchbase has heard from other startup leaders that it’s hard to know where to even start, so they have urged other companies to use this plan as a blueprint to reference when brainstorming their own commitments.
Benton added that she hopes more companies create well-defined plans on how they will deal with diversity issues, particularly in the tech industry.
“The missing piece is the strategy around how they are really going to do this stuff. There’s a lot of platitudes. ‘We’re going to invest in more black companies.’ OK, but how? ‘We’re going to hire more Black employees.’ OK, but how? Oftentimes there is no strategy behind it,” Benton said.
“If we’re saying you should hire or invest in more Black people, we’re not saying you now should have a lower quality or benchmark for whom you’re hiring. We’re not asking people to hire less talented people.”