Revolution's Rise of the Rest pushes for diversity in venture capital hubs

Revolution’s Rise of the Rest is a platform that focuses on spotlighting regional startup hubs with seed funding. Steve Case, Revolution Chairman & CEO and Rodney Sampson, OHUB Chairman & CEO join Yahoo Finance’s On The Move panel to weigh in on the importance of investing in a diverse workplace.

Video Transcript

ADAM SHAPIRO: And welcome back to "Yahoo Finance On the Move." There's a lot of talk, and a lot of it's just talk, about inclusion and diversity, especially when it comes to venture capital. I want to bring in two very important people to talk about how that can be changed as there's a push for more diversity at the venture-capital funding rounds that a lot of people talk about.

We invite into the stream Steve Case, Revolution chairman and CEO of the Opportunity Hub, Rodney Sampson. And Mr. Case, it's the Rise of the Rest seed fund that is behind what this discussion is going to be about, which is giving minority-owned, people of color, access to the dollars they need to launch their businesses. And I want to throw out a statistic, that 79% of all venture-capital investment dollars went to just three states-- California, New York, and Massachusetts-- and only 1% of VC-backed founders were Black.

So, Rodney, let me start with you. I think I know the answer, but why is it so little? Why is so few dollars flowing to these men and women?

RODNEY SAMPSON: Well, I think, you know, we're having this conversation during some very unprecedented times where our nation is addressing race and ethnicity and the lack of opportunity that Black Americans and Indigenous people of color have been experiencing for over 400 years. So going back 20 years ago, I was one of the first founders in America, Black, to actually raise venture capital. And, you know, in the last 20 years, the needle hasn't moved that much. But I think these are unprecedented times, and unprecedented action is what we're starting to see with initiatives like Rise of the Rest.

JULIE HYMAN: Steve, it's Julie here. And I know this is something that you have been looking to for years in terms of geographic diversity, right, looking outside of the traditional venture-capital hubs. This latest competition that you're doing-- I believe the competition window closes on October 25th. That's the deadline for people to get in their pitches. So walk me through how it's going to work, how much money you guys are giving out, and what you're looking for in some of these ideas.

STEVE CASE: Well, first of all, when we launched Rise of the Rest almost six years ago, it was initially focused on place-- the statistic you mentioned that more than 3/4 of all venture capital just goes to three states. But in the process we've learned that we have a similar problem around people. you know, we talked about 1% going to Black founders, less than 10% of venture capital goes to women. So we've been leaning into this issue for a few years. Actually about 45% of our Rise of the Rest portfolio right now are Black founders, Brown founders, or women founders, so we're making some progress, but it's still not what it should be.

So we decided to launch with Rodney and Morgan Stanley, a lot of other partners so far-- about 75 venture capital firms have joined us on this-- and we'll be doing this pitch competition in December. As you said, the application deadline is coming up soon, so go to the Rise of the Rest site to get the information about how to apply. And what we're going to do is have the winning pitch competition get a $1 million investment, but we're because we have-- the runners-up if you will will also get an investment. But we're really trying to get all the companies that apply some support, so all the venture capital firms that have agreed to join us agreed to meet with at least three of the people that apply to be in the pitch, whether they get selected for the competition or not.

So our hope is we'll broaden the network. Venture capitalists will be exposed to opportunities they might not otherwise have had, and these Black founders will be exposed to some of the venture capitalists where so far that connection really just hasn't happened. The networks often don't exist.

MELODY HAHM: Rodney, Melody Hahm here. Would love to kind of dig deeper in this convergence that you're talking about with, of course, the subsequent protests and the calls for diversity inclusion after the death of George Floyd, Breonna Taylor, and the like, but also this ongoing coronavirus pandemic that has disproportionately affected Black and Brown communities. What are the areas that you're seeing the most innovation, perhaps creativity, out of this chaos when you look at Black communities right now?

RODNEY SAMPSON: Absolutely. When I look at some of the Black founders that we've been investing in, they're standing toe to toe with building software, using artificial intelligence, machine learning, quantum, building enterprise software to do B2B. We're also seeing issues being solved in terms of things that have plagued the Black community or other socially disadvantaged communities, whether that be financial technology or energy technology or food waste, poverty. So I think, you know, all of the issues that plague a lot of Americans-- particularly in this pandemic, but also Black Americans maybe disproportionately more-- can be solved I believe with strong teams that are obsessive about solving these problems using technology, software, and automation and then fuel with the rocket fuel of the capital and the access to the markets and the networks.

ADAM SHAPIRO: Rodney, if I were a person watching right now who is a person of color and I had a plan but I needed help putting together the business model, does OHUB actually offer that kind of assistance before you're actually ready to talk to VC?

RODNEY SAMPSON: Um, absolutely. For seven years we've been running what's called a entrepreneurship support programming and pre-accelerator, mostly out of our own tech hubs of coworking spaces. We've now taken that programming virtually as well. We're also starting to see more historically Black colleges and universities partner with us to offer these startup boot camps or these coding boot camps as well, because when, you know, you meet with investors like myself or even like Steve, you definitely want to have your act together.