April 16, 2024

News and Political Commentary

How investors should prioritize diverse investments in AI

2 min read

Sara Choi, a biotech investor and partner at Wing Venture Capital, has invested in nine companies led by women or people of color. But she isn’t motivated by altruism. Choi is looking to make money. 

“I gave these founders a chance, and they’re making me and my firm quite successful,” says Choi. “It’s not just charity.”

Industry data shows a persistent lag in VC funding toward companies led by women or founders of color. A report published last year by the Alan Turing Institute found that female-founded artificial intelligence companies accounted for just under 3% of VC deals in the United Kingdom over a 10-year period through 2022.

Black founders often receive a similarly slim percentage of funding from VCs. And a more cautious tone about investing in diverse founders has emerged in the wake of a court case involving Atlanta-based Fearless Fund, which invests in businesses led by women of color but is facing a lawsuit alleging discrimination because of this mission.

Choi says that founding a company and raising money requires distinct expertise and that mentorship can help new founders. “But the problem is, who would have insider knowledge?” asks Choi. “It’s people who come from these backgrounds and privilege, dare I say, who could then instruct the next generation in terms of how to successfully do things that are discrete skills, like raising funds.”

“Venture is a business of pattern recognition,” says Joy Marcus, cofounder of The 98, an early stage venture capital firm that has raised close to $10 million to invest solely in women and technology. “And we don’t have the patterns of women starting companies and getting funded by venture firms. We do have patterns that venture firms are ignoring—of women being very, very successful leaders.”

Two of the women-led AI companies in The 98’s portfolio are Private AI and Stratyfy. Marcus says that because women-led companies don’t get as much funding as…

John Kell

2024-03-12 10:00:00

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