Lawmakers target ‘tech bro culture’ in financial sector with diversity push
House lawmakers are looking to hold venture capital firms accountable for fostering ‘tech bro culture’ in financial technology services, with data showing that the vast majority of companies the firms invest in are owned by white men.
Lawmakers at a House Financial Services subpanel Thursday blasted private equity firms for leaving minority and women-founded businesses behind, and discussed ways to turn the tide as capital injections into the sector continue to surge.
Venture capital investments into financial technology companies nearly doubled last year, reaching $35 billion, according to House figures. But only 1.8 percent of venture capital-backed owners were Latino, and 1 percent were Black. And just 2 percent of venture funding went to companies founded solely by women.
This gulf in funding spurred lawmakers to call for measures to increase diversity in the management and investment patterns of venture capital firms.
Expert panelists argued that part of the problem was that the venture firms themselves are controlled disproportionately by white men.
“Due to implicit or unconscious bias, many seasoned investors do not consider people of color to be successful entrepreneurs,” said Wemimo Abbey, co-founder and co-CEO of financial technology company Esusu Financial, at the hearing. “Investors tend to go invest in people they know and are comfortable with.”
One policy idea floated by lawmakers and panelists was a diversity scorecard for venture capital funds, to measure how diverse their management teams and investment patterns are. Lawmakers argued publicly grading a firm’s diversity may influence investor behavior.
“We had a grave problem in the mortgage and banking area,” said Rep. Stephen Lynch (D-Mass.). “With the banks … we looked at the investments they were making in minority areas and then we graded them publicly … that exposure did a lot, I think.”
Rep. Warren Davidson (R-Ohio) admitted the industry is “male-dominated” and championed the efforts to increase diversity in the financial technology sector.
“There are, of course, a lot of white males in the industry,” said Davidson. “It’s also encouraging to see the diverse folks that are involved.”
–Updated on July 6 at 9:25 a.m.