We know that there is a systemic discrimination problem in the tech industry caused by hundreds of years of institutional discrimination based on race, gender and sexual orientation. We know the facts show that businesses perform better with diverse teams. We know things won’t get better without intentional effort. We know we have a lot of room to improve at Capital Factory and we need to start with our own team. We know we can do better and we will keep trying.

Joshua Baer

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Austin Startups

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7 min read

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Feb 11, 2020

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In 2018 we published our first Accelerator Diversity report with a similar opening statement and our feelings haven’t changed. The last 2 years have seen exciting developments within our community, but we humbly admit that we’ve also learned some hard lessons. We’ve seen results from our hard work, and every challenge we’ve faced has only strengthened our resolve to continue this critically important work.

What is Diversity?

We track a lot of data internally around our events, members, mentors, investments and other activities and we are still learning the best ways to collect and interpret the data. Diversity often starts with gender and ethnicity but there are many ways to look at it such as sexual orientation, disabilities, and veterans. We’ve learned that the way you ask the question can affect the answers you get. Everyone doesn’t answer every question. Everyone doesn’t define diversity the same way.

For context, when we use the term “diverse,” it means everyone that is a non-white male and eliminates double counting. This is a very broad sense of the word so we also try to break it down into more detail when we can.

2019 Accelerator Statistics

• We recruited 28 startups with female founders, which is a 3x increase from 2017. This represented 26% of all of the startups in the Accelerator, which is up from 13% in 2017.
• We recruited 15 startups with Black founders, which is nearly a 2x increase from 2017. This represented 14% of all of the startups in the Accelerator, which is up from 8% in 2017.
• We recruited 15 startups with Latinx founders, which is two more than what we had in 2017. However, this represented 14% of all of the startups in the Accelerator which is down from 21% in 2017. We need to understand this better.
• We recruited 24 startups with Asian founders, which is over a 2x increase from 2017. This represented 23% of all of the startups in the Accelerator which is up from 16% in 2017.
• We recruited 17 startups with veteran founders (we didn’t measure this in 2017). This represented 16% of all of the startups in the Accelerator.

2019 Investment Fund Statistics

• We invested in 12 startups with female founders. This represented 20% of all of the startups we invested in. Nationally, about 10% of all funding goes to teams with female founders, according to Pitchbook.
• We invested in 3 startups with Black founders. This represented 5% of all of the startups we invested in.
• We invested in 3 startups with Latinx founders. This represented 5% of all of the startups we invested in.
• We invested in 8 startups with Asian founders. This represented 13% of all of the startups we invested in.
• We invested in 3 startups with veteran founders. This represented 5% of all of the startups we invested in.

What is Working?

Investing in Diverse People

Not much happens without great people. Capital Factory has been fortunate to have some incredible leaders step up to help make our community more welcoming and more diverse. It’s no coincidence that these people are representative of many different diverse communities themselves.

• Mellie Price is a Capital Factory co-founder and started our Diversity, Equity and Inclusion efforts.
• Eugene Sepulveda is on our board of directors and has also demonstrated incredible leadership in this area.
• Jan Ryan started Women@Austin and brought many new women into our community as mentors and we’re excited to continue working with her at UT Austin’s Kendra Scott Women’s Entrepreneurial Leadership Institute.
• Preston James, Dana Calendar, and Ashley Jennings started DivInc and brought many new women and people of color into our community as founders.
• Sabrina and Jonathan Wojtewicz and the rest of the team from Bunker Labs has been introducing us to incredible veteran entrepreneurs for years.
• In 2018 we hired Savannah Barker as our first DEI Coordinator and she turned our diversity summits into a scalable and effective tool.
• In 2019 Minh Vu expanded the strategy to collaborate with more partners and to add programming in the Dallas and Houston markets.

Recruiting, supporting, empowering, investing in, and hiring great people who are diverse themselves and care about DEI was our first step to improving DEI. These people had the passion and commitment to bring change. We still have more work to do here and we are focused on it.

Investing in Diverse Startups

We know that access to early-stage capital is one of the most critical barriers keeping diverse founders from succeeding. For that reason, Capital Factory invested nearly $1 million in diverse founders in 2018 and 2019. Our $100,000 pitch competitions specifically focused on women and people of color attracted new startups that we hadn’t met before, diversifying our overall ecosystem while also putting our money where our mouth is.

Investing in Diverse Partnerships

We’ve chosen to work with great partners who prioritize diversity, equity and inclusion. No one has been a better partner to us in that regard than Google for Startups. They provide funding, they teach us best practices from Google, and they connect us to our peers all over the world. We also have local partners such as Accenture, Bunker Labs, DivInc, EqualityTexas, Hispanic Hackers, The Riveter, TexasCompetes, Women@Austin, and Women Who Code, and many others.

Investing Across Texas

Three years ago we announced the Texas Startup Manifesto — encouraging startups and investors to treat the entire state of Texas as a single startup megatropolis. Texas has some of the most diverse cities in the U.S, and our startup ecosystem should reflect that. The diversity in Texas’ population brings a wide array of valuable perspectives that we hope to uplift and showcase as we continue to expand.

We acknowledge that the tech industry is systemically tailored for a particular demographic, so it isn’t always accessible to underrepresented groups. We aim to motivate founders, rising entrepreneurs, and innovators from all backgrounds in tech entrepreneurship by providing them with resources they need to succeed in this community.

Not all Texas cities have the same demographics. Houston is one of the most international and diverse cities in the country. Expanding to Dallas and Houston was definitely a contributing factor in the improvements that we’ve seen over the past two years.

Diversity Drives More Diversity

In addition to providing financial capital to founders, our $100,000 investment challenges have also been instrumental in diversifying our ecosystem. We are able to bring people into our community who we might not normally meet. Once they are here, they introduce us to other diverse founders, mentors and investors and, combined with other efforts, make Capital Factory a more welcoming and inclusive community overall.

People feel more comfortable when they see peers, mentors, and success stories who look like themselves.

Courageous Conversations

Mayor Adler challenged all of Austin to take the Beyond Diversity — Courageous Conversations Workshop with Leadership Austin and I’m signed up to take the next workshop in April. I’ve already sent three members of my leadership team and I plan on continuing to send different members of my team so that everyone is exposed — specifically I hope that it will help us improve our hiring practices and increase the diversity of our team at all levels.

The Diversity Pledge

Capital Factory Mentor Stephen Straus collaborated with many others in Austin to launch The Diversity Pledge and Capital Factory was one of the first companies to sign it. Making a public pledge helps raise awareness and can also attract more diverse candidates to your pipeline.

If you haven’t yet, I’d encourage you to read it over and consider making the pledge for your company.

What Do We Need to Work On?

We’ve made some significant progress over the past two years but that also highlights some of the glaring holes that remain. Here are some of the places where we know we have the most room for improvement:

• We need to recruit more people of color as Mentors, especially Black Mentors. Right now we have 22% (43 out of 192 who do office hours in-person). Many of them have joined the network in the past year or two from Dallas and Houston.
• We need to recruit more women as Mentors. Right now we have 16% (30 out of 192 who do office hours in-person).
• We need to recruit more women and people of color on our leadership team, specifically Black leaders. Right now we have two women, two people of color, and two open members of the LGBTQ+ community (18% each). The Capital Factory Dreamteam (our entire staff) is 55% women and most declined to report their race at hiring but a rough estimate is that 25% are people of color.
• We need to recruit more women and people of color to our investment committee. Right now we have no women or people of color.
• We need to think more about people with disabilities and different abilities. This is a different lens for diversity that hasn’t received as much attention.

We recognize that in order to attract more diverse leaders and mentors, we need to make our recruiting more inclusive.

Why We Do This

Our hope is not only that Capital Factory will become a more diverse workplace, but that our work will inspire other companies to prioritize Diversity, Equity, and Inclusion as well. It is one of the few efforts worth fighting for, where — truly — everybody wins.

Have you ever felt uncomfortable or unwelcome at Capital Factory? Do you have ideas about how we can make our community more diverse and inclusive? We are listening and welcome all feedback.

Methodology: This information was pulled from 2019 surveys of Capital Factory employees, accelerator companies, and community members in addition to internal analysis.