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April 18, 2024
April 18, 2024
Our latest Dispatch Live event focused on a few big questions: Is the venture community to blame for the tech industry’s ethical breakdown? Why is this reckoning happening now? And is it a result of negligence or greed—or both?
Venture capital is on track to reach a record $100 billion in investment in 2019. While a relatively small asset class, VC has earned the reputation of kingmaker, catapulting Silicon Valley’s most promising tech startups to unicorn status. But a recent string of scandals, ranging from sexual misconduct to the exploitation of legal gray areas to downright fraud, have cast many former tech darlings and their VC backers in a negative light.
“I’ve been covering technology and Silicon Valley since dirt, and what’s changed is that today there is a lot more opportunity for missteps. The scale [of the industry] is greater and therefore the scrutiny is greater,” said Lizette Chapman, Bloomberg News venture reporter and panelist at our Dispatch Live event last Wednesday in San Francisco.
Chapman was joined onstage by fellow venture and startup reporters Erin Griffith of The New York Times, Tomio Geron of The Wall Street Journal, and TechCrunch’s Kate Clark. Speaking in front of a room of 120 professionals from agencies, startups and venture firms, the panelists discussed the current state of tech and journalists’ duty to hold the industry to account.
The panelists pointed to VC’s long investment horizon (typically 7-10 years) and the slower path to IPO as contributors to the industry’s secrecy and bad behavior. In particular, they spoke to a new class of mature, multi-billion dollar companies able to avoid the scrutiny of the public markets because they’re staying private longer.
Many investors, it seems, are incentivized to turn a blind eye to their portfolio companies’ misdeeds in an effort to protect their investment and potential payout.
“VCs don’t want to be seen as criticizing these companies because they want to get in on the next round,” said Geron.
When asked about the venture community’s enablement of bad actors and poor decision-making, Chapman noted that “people, product and market form the stool of all great billion-dollar companies. It’s an investor’s job to do diligence on all three, especially the people.”
People -- the first leg of Chapman’s stool -- were unanimously identified by the panelists as critical to righting the industry’s homogeneous and sometimes toxic culture. In 2018 just 9% of VC funding went to women-founded companies, 17% went to Asian American founders, 2.4% to Middle Eastern founders, 1.9 % to Latinx and 1% to founders who identified as black.
The panelists acknowledged some positive steps, including the emergence of new initiatives and funds, such as All Raise and Founders For Change, that aim to bring greater diversity to the investor and entrepreneur communities. Yet they also noted that many efforts by VCs were slow-going or amounted to checking a box.
“They all hired one!” was Griffith’s response to venture firms’ efforts to bring in more female partners.
On a note of optimism, Chapman said she felt “a lot of hope in the company-building stage,” while Clark underscored the importance of companies starting to prioritizing diversity. “It just gets harder to change the culture as a company grows,” Clark said. “The approach to diversity needs to be about more than box-checking.”
The panelists also shared how this tipping point for the tech industry has altered their attitudes and approach to reporting. In addition to becoming more skeptical, they spoke to the importance of diversifying their sources and asking more detailed, technical questions.
Chapman raised the issue of companies and VCs “shaping the narrative in a way that doesn't stick to them,” and suggested that journalists move away from on-background interviews to encourage more transparency.
Now more than ever, reporters are the ones holding the industry accountable. “I cover this space because it’s still cool. I have the best job in the world,” Griffith said. “It’s not all terrible, but we’re finally criticizing it for the very first time.”
Thank you to our panelists for an honest, thought-provoking and hopeful discussion, and to our guests for joining the conversation. Watch highlights from the panel below and follow us on Twitter at @missionnorth to hear about our next Dispatch Live event.
