Precursor Ventures May Be Small, But It’s Taking on a Big Mission: Diversity

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Precursor Ventures is not yet a big name in venture capital, but it’s taking on a big mission: Making sure more entrepreneurs from diverse backgrounds get an equal shot at venture capital dollars and their Silicon Valley dreams.

For decades Silicon Valley has been known for its racial and gender gap. It’s only in recent years that the technology industry has begun to try to close it. Nowhere is the lack of diversity more pronounced than in venture capital, a clubby profession dominated by white men who, by and large, fund very few start-ups founded by underrepresented minorities and women.

A new wave of venture capital firms and a new generation of venture capitalists are emerging to shake up the status quo. Chief among them is Charles Hudson, one of the few African-American technology investors running his own venture firm.

Since striking out on his own with Precursor Ventures two years ago, Hudson has raised $15.3 million for his first fund and made more than 50 investments with the help of an associate. Of those investments, 31% of the companies have at least one female founder, 16% have an African-American founder and 7% have a self-identified Hispanic or Latino founder, Hudson says.

Those demographics are very different from the norm at traditional Silicon Valley venture firms.

By making investments at the formative stages of a company, well before later-stage investors open their wallets, Hudson hopes to gradually shift the gender and racial make-up of the tech industry, especially in its Silicon Valley power center.

“The fastest, simplest way to change the composition of the tech industry is to change who gets to make funding and hiring decisions,” Hudson said in an interview with USA TODAY. “I think we have ample evidence as to what the status quo produces and I don’t expect significant change in outcomes until we have a more diverse set of leaders in positions of influence and authority.”

Venture capital is ground zero for the growing push to diversify the tech industry. Big bets by venture capitalists can give a young company the opportunity to mature from the larval stage into the next Facebook or Google. Yet a tiny fraction of start-ups led by women — and an even tinier fraction led by African Americans, Latinos and Native Americans — attract venture dollars.

To break that cycle, Hudson accepts a lot of cold calls and emails as he hunts for start-up founders with hustle, ingenuity and a good idea, not necessarily the “central casting” pedigree, such as studying at big name school or working for a hot start-up or major tech company. Many of Hudson’s investments are outside of Silicon Valley and outside of tech hubs with venture capital firms.

This unconventional approach can make a big difference over time, uncovering promising entrepreneurs who don’t fit the Silicon Valley start-up stereotype and who have been overlooked by traditional venture firms, Hudson says. His belief: It’s also a competitive advantage.

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SOURCE: USA Today, Jessica Guynn