To make venture capital more equitable, we must understand how that capital flows

Most private business investing isn’t from an individual investor putting their own money up to capitalize a single company they believe in. Early stage investing is first and foremost an asset class aiming to outperform the stock market. But it’s also a window into bets on the future.

A swirl of factors — including low interest rates — have brought in vast new pools of money into venture capital and other forms of private market business investing. Consider the following:

• University endowments — It was once a novelty for university endowments to invest heavily in even the stock market. Last year, a fifth of Yale’s $30 billion endowment was in venture capital. This is true across the Ivy League, which tends to lead in university endowment investing.
• Corporate venture capital — The number of corporate VC funds has more than doubled in the last decade, according to Global Corporate Venturing Analytics.
• Sovereign wealth funds — The amount of these kinds of public money has grown by nearly 20 times in the last decade, including this year, though none more prominently than the Saudi fund’s participation in the embattled first $100 million Vision Fund from Softbank.

VC firms were always primarily deployers of other people’s money. But the scope of how this industry has changed in recent years may still be misunderstood. So whether you are an individual investor — who put $228 million into early stage companies in 2019 — trying to understand the landscape or another part of the ecosystem agitating for change. it’s crucial to understand the financial forces at play.

Can the way capital flows through institutions be changed for more equitable outcomes?

To answer that question, we turned to Bahiyah Robinson, the CEO and founder of VC Include, and Del Johnson, scout and fund manager for indie.vc. They provided perspectives and context on the current systemic structure of the investing world, as well as insights on what changes need to happen for venture capital to address modern challenges, and what actions individual funds or investors can take to drive that change.

Their conversations are part of the latest episode of Off the Sidelines, an investor education podcast produced by us at Technical.ly and sponsored by Project Entrepreneur, a program by UBS. Project Entrepreneur wants to improve the enabling environments for female founders and advance inclusive capital, with a targeted focus on investment readiness and building bridges to funders, and this concept of redirecting the flow of capital aligns with that mission. (We’ll be doing a live recording of a future episode of Off the Sidelines on Nov. 17 — join us.)

Tune in to the episode to hear from Del and Bahiyah on how VCs are going to have to change some of their practices or risk failing as an asset class, and whether not changing could hold even greater risks for the economy and society as a whole.

We have more episodes coming up this season with conversations from notable figures throughout the investing world, so be sure to subscribe and keep up to date with all our episodes.

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