Human Capital: ‘People were afraid of being critical with me’

Welcome back to Human Capital, where we break down the latest in labor, diversity and inclusion in tech. This week, we’re looking at the launch of the Diversity Riders initiative in venture capital and how it can go further, Instacart’s labor practices and some alternative, more inclusive approaches to running a startup. Also, Y Combinator CEO Michael Seibel recently shared a compelling anecdote about his experience as a Black founder raising money back in 2016.

Justice for Jacob Blake and Breonna Taylor.

Stay Woke

Diversity Riders commitment needs to go further

Earlier this week, Act One Ventures launched a new diversity and inclusion initiative called The Diversity Term Sheet Rider for Representation at the Cap Table. The purpose of the Diversity Rider is to increase the number of Black and other underrepresented investors in deals by making them co-investors. 

Already, firms like Greycroft Partners, First Round Capital, Maveron, Fifth Wall, Plexo Capital and Precursor Ventures have committed to it. What that means is firms will include boilerplate language in their standard term sheets:

In order to advance diversity efforts in the venture capital industry, the Company and the lead investor, [Fund Name], will make commercial best efforts to offer and make every attempt to include as a co-investor in the financing at least one Black [or other underrepresented group including, but not limited to LatinX, women, LGBTQ+] check writer (DCWs), and to allocate a minimum of [X]% or [X] $’s of the total round for such co-investor.

This is certainly a good step on the road to creating additional wealth opportunities for Black, Latinx and Indigenous people, as well folks from other underrepresented groups in tech. However, a stronger step would be to remove the parts about “best efforts” and “make every attempt” because, as it’s currently written, the commitment hedges on rather subjective conditions. Instead, the following would be better:

In order to advance diversity efforts in the venture capital industry, the Company and the lead investor, [Fund Name], will make commercial best efforts to offer and make every attempt to include as a co-investor in the financing at least one Black [or other underrepresented group including, but not limited to LatinX, women, LGBTQ+] check writer (DCWs), and to allocate a minimum of [X]% or [X] $’s of the total round for such co-investor.

Y Combinator CEO Michael Seibel on raising funding as a Black founder

At All Raise’s second annual event for Black female founders, When Founder Met Funder, Planet FWD CEO Julia Collins interviewed YC CEO Michael Seibel about his experience in tech and tips for founders. 

“When I started doing startups, it was 2006 and there weren’t many people who looked like any of us that were doing startups,” he told the audience. “I think what you would’ve expected was overt discrimination but actually I got something else, which was no feedback.”

He went on to say that people were afraid to be critical of him, for fear of being perceived a certain way. 

“People were afraid of being critical with me,” he said. 

That’s partly why Seibel says he’s become the type of person who will tell founders what everyone is thinking. 

“Agree with it or disagree with it, I want you to have a good mental model of what people are thinking and not saying,” Seibel said. 

Gig Work

Instacart is under fire again 

Instacart shoppers, via Gig Workers Collective, made their voices heard again this week. In light of the wildfires and other anticipated climate change-related disasters, Instacart workers want the company to provide disaster pay at a daily rate equal to the average rate of daily pay, including tips, over the previous 30 days for each day Instacart’s operations are shutdown. Additionally, GWC wants Instacart to shut down its operations in markets where a city has declared a state of emergency or issued evacuations.

The demands came shortly after Instacart agreed to distribute $727,985 among some San Francisco-based Instacart workers as part of a settlement pertaining to healthcare and paid sick leave benefits.

Meanwhile, Instacart is also facing a new lawsuit from DC’s attorney general over its “deceptive” service fees. The suit seeks restitution for consumers who paid those service fees, as well as back taxes and interest on taxes owed to D.C.

Alt VC

Tech cooperatives have the potential to upset wealth inequality 

We began exploring earlier in the year the case for cooperative startups, where workers and users have the opportunity to gain true ownership and control in a company, and where any profits that are generated are returned to the members or reinvested in the company.

The way many tech companies are built today don’t need to be that way. Start.coop, a tech accelerator for cooperatives, is trying to help build this new future. This week, Start.coop, received a $150,000 commitment to help fund two new classes of startups per year. Start.coop invests $15,000 in each startup and all graduates become shareholders in Start.coop, which is a cooperative itself that distributes ownership among workers, investors, advisors and startups that go through the accelerator.

Start.coop founder Greg Brodsky previously told me:

Technology has disrupted almost every part of the economy. It’s disrupted the gig economy, gaming, shopping and how to book hotels. But the one thing that the technology sector has not been willing to touch is ownership itself. That is, who gets rich and who benefits from the growth of these companies. That really hasn’t changed. In some ways, the tech sector is just recreating the wealth inequality in every other part of the economy.

There’s more to an exit than IPOs and acquisitions 

Meanwhile, the folks behind the Exit to Community movement are gearing up to release a zine outlining startup paths to outcomes other than IPOs and acquisitions. E2C is a working project that explores ways to help startups transition investor-owned to community ownership, which could include users, customers, workers or some combination of all stakeholders. 

“The purpose of the zine is to provide an initial roadmap to all of the aspects of the conversation that need to happen so we can save founders pain in recognizing and validating they’re in the wrong fit and we need to co-create what does fit,” Zebras Unite co-founder and zine co-author Mara Zepeda told TechCrunch. “It’s not a silver bullet. It’s not like there’s this other perfect thing that everyone needs to do. I describe it as running a Cambrian explosion of experiments in order to figure out what this future is. It’s not just one thing. That’s how what we’re doing is really different. Sometimes there are these niche products or movements that pop up and say, “this is the answer. There isn’t one answer for this moment.” 

Be on the lookout for a deeper-dive into this next week. For now, here’s some additional reading on the topic.

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