Entrepreneurship | February 23, 2018

Brian Dixon: The 34-year-old African-American VC turning inclusion into a competitive advantage

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New Revivalists is a series from ImpactAlpha and Village Capital profiling the people, places and policies reviving entrepreneurship — and the American Dream.

New Revivalist: Brian Dixon, partner at Kapor Capital
Place: Oakland, CA
Mission: Brian Dixon is demonstrating the value of diversity in venture by identifying new founders, markets, and revenue streams that others have overlooked.
Follow: @MrStartup

Call it the new face of venture capital. Kapor Capital is quietly building one of the youngest, most talented and most diverse teams of venture capitalists in the industry. That team includes Brian Dixon, who at 34, is one of the youngest African American male VC partners in the country.

Kapor Capital, in downtown Oakland, is one arm of a family of organizations built by software entrepreneur Mitch Kapor and his wife, Freada Kapor Klein, to boost inclusion in the tech industry. With a portfolio of more than 100 ventures – more than half with a woman or person of color on the founding team – the decade-old impact investment firm is turning Silicon Valley’s diversity problem into a generational opportunity.

“It starts with the team,” says Dixon, who got started in entrepreneurship at age 16 by customizing sneakers and selling them on eBay. Last year Kapor brought on Ellen Pao, the former Kleiner Perkins Caufield & Byers partner, who has helped bring attention to discriminatory behavior rampant in Silicon Valley. Earlier this month, the firm promoted to partner Ulili Onovakpuri, the former director of programs at Village Capital. Six of the eight people on Kapor Capital’s investment team are people of color; half are women.

But this is not diversity for diversity’s sake. “What tends to get lost is, it’s also great for business,” Dixon told ImpactAlpha. “We’re going to see a company with a diverse set of founders solving a problem that hasn’t been solved before because of their particular lens. That is the opportunity that, as investors, you’re always looking for.”

ImpactAlpha: Tell me about Kapor Capital.

Brian Dixon: It was founded by Mitch Kapor and Freada Kapor Klein. We started as a general VC fund, but in 2013 switched to a social impact focus. Today 100% of our investments are impact focused.

We’re focused on tech-driven, seed stage ventures in the U.S. that can close gaps of access, opportunity or outcome, particularly in low-income communities of color. Our three main categories are education, people tech and health.

ImpactAlpha: How has the focus evolved to be more inclusive about who gets into the pipeline and who you invest in?

Dixon: Mitch and Freada in 2015 pledged to invest $40 million to make tech more inclusive. That includes $6 million to expand SMASH (Summer Math and Science Honors) Academy for high school students, as well as grants to diversify the tech ecosystem. $25 million will go toward backing ventures that have at least one founder from underrepresented communities. Everyone in the building has that shared goal: allowing more folks to get in and truly level the playing field.

We talk a lot about the landscape of venture capital, what it looks like today and what it should look like. Under 2% of capital goes to black and Latinx founders, and under 10% goes to women. That does not reflect the U.S. Over 55% of our founders have either a woman or person of color on the founding team. More than 40% have a female founder and 30% have a person of color founder.

ImpactAlpha: What process do you use to select investments and overcome systemic bias?

Dixon: It starts with the team. If you look at our investment team it’s very diverse, it does not look like a typical Silicon Valley team. Six out eight people on the investment team are people of color, and 50% are women. We just promoted Ulili Onovakpuri to a partner role. Underrepresented women are the unicorns of VC. That’s part of our team makeup, and it allows up so have the portfolio that we have.

We try to be inclusive across the board. If you don’t have a warm introduction to Kapor Capital, you can submit on the web site — and you will get a response.

Third, you’ve got to write checks to a diverse set of founders. We set a goal of 50%, and we revisit it every quarter to make sure it’s a level playing field for all entrepreneurs. Once you back diverse founders, they refer deals and that keeps the cycle going.

ImpactAlpha: Tell me about your own journey and how that informs your work.

Dixon: My journey started in entrepreneurship. I was customizing sneakers and selling them on eBay at age 16, using technology like Photoshop to send mockups to customers. I majored in computer science as an undergrad. I was often one of a few people of color in the room. I didn’t have computer science in my high school, but you show up and find out that other people had. So that’s a personal passion of mine.

I was a developer right out of school at Citigroup, then switched to business and got my MBA. I ended up doing two tech companies, raising angel funding, pitching to VCs. It wasn’t as glorious as I would have liked it to turn out, but it helped me build empathy for entrepreneurs. These people are taking a big risk to change the world, and I try to bring that lens every day.

ImpactAlpha: What opportunities do you see that other funders might not?

Dixon: What most other funds miss is that they don’t see the lived experience of a founder. When you look at a diverse founder, they are bringing their lived experience to a startup, solving problems they might see in their community or family. They see problems and opportunities that others don’t. A lot of times they’re scratching their own itch.

For example, LendStreet. They allow you to restructure your credit card debt and rebuild your credit score. That came out of a personal experience of the founder, Jerry Nemorin. He wouldn’t have started it if he didn’t see these problems in his community. Those are the kinds of companies we like to see, a founder with passion solving a real problem that helps level the playing field. It’s personal.

Another one that for us is very meaningful, is Hustle. Think of it as a p2p communication tool for organizations using tech or SMS to reach different communities, for example, community organizers or political campaigns.

We invested in that about a year ago and are looking for the positive social impact of this as a venture business at scale. And the founders are committed to building a diverse and inclusive workforce.

ImpactAlpha: That’s a great segue into my next question, which is about the Founders’ Commitment. Tell us about that.

Dixon: We created the Founders’ Commitment in January 2016 as a way to help portfolio companies make progress in the areas of diversity and inclusion. It is mandatory for new investment — we won’t make a first investment into a company if they’re not willing to build a diverse and inclusive workforce. Over two-thirds of our existing companies opted in, including large companies like Twilio, which went public last year.

ImpactAlpha: What are the results so far?

Dixon: It’s a new initiative. We’ve learned a lot from our end. We talk about not being too prescriptive and setting goals, because every company is different. We host workshops [on diversity] and they’re well attended. Teams are making the time to attend, which is one proof point. We’ll know we’ve done a good job when we see diversity and inclusion included in every monthly report: here are the jobs open and how we’re recruiting, here are the resources we’re making available.

ImpactAlpha: Are others in the industry following suit?

Dixon: Looking at the companies we back, I hope it will change the teams; it’s a conversation we’re having. As far as a commitment from another funds, I haven’t seen any out there. But there are funds like Social Capital, Reach Capital or UpFront that are very open about inclusion. And there are funds led by folks of color, like Precursor and Cross Culture Ventures in LA. Those five are definitely pushing the envelope.

What tends to get lost is, it’s also great for business. We’re going to see a company with a diverse set of founders solving a problem that hasn’t been solved before because of their particular lens. That is the opportunity that, as investors, you’re always looking for. How do you get an outsize return? It will take a few years but we’ll see some big exits and then others will begin to take notice.

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