LOS ANGELES, Aug. 26, 2020 /PRNewswire/ -- Act One Ventures (Act One), a venture capital firm investing in enterprise business software companies at the seed and pre-seed stage, announced today The Diversity Term Sheet Rider for Representation at the Cap Table (Diversity Rider) alongside eight venture funds. This initiative is designed to evolve the way venture investing is done by calling for VC firms to bring in Black and other underrepresented groups including, but not limited to, LatinX, women and LGBTQ+ as co-investors on deals, thereby immediately increasing diversity at the core of the deal-making process.
Greycroft Partners, First Round Capital, Maveron, SVB Capital, Harlem Capital Partners, Fifth Wall, Plexo Capital, Precursor Ventures and Equal Ventures are the first firms to commit to the Diversity Rider. They have each pledged to embed the boilerplate rider language into their standard term sheets, creating an opportunity between their firms and all founding teams to identify and bring diverse investors to the cap table. Silicon Valley Bank, Cooley, Fenwick & West, Stradling, Gaingels, Aumni and Crunchbase have also committed to raise awareness within their networks with the intent of helping this become an industry standard. For those interested in joining, you can sign up here.
The Diversity Rider aims to increase the representation of minorities in all venture capital deals, even when firms invest in non-diverse teams. By inviting Black and other underrepresented groups of diverse check writers (DCWs) to co-invest with brand name funds at the early stages, it improves their track record among prospective limited partners (LPs), while founders will benefit from the addition of diverse networks joining their cap table.
"We are encouraged by the efforts being made by all firms – small and large – who recognize we must do more in the wake of George Floyd and Breonna Taylor's deaths which inspired the creation of this rider. Our goal is to ignite more in depth discussions around the lack of diversity in tech and venture," said Alejandro Guerrero, Principal at Act One. "This rider will sustain our collaborative efforts as an entire industry to improve access for underrepresented minorities, every single time a deal gets done. Through this, we will expand co-investing access, evolve diversity discussions at the cap table and create more diverse deal flow across the industry. As evidenced by research, diverse teams outperform and deliver better returns. Not only is this the right thing to do, but it will have a positive impact on the bottom line."
"Offering a chair to diverse groups and ensuring that they have the opportunity to be in the room during every single deal-making process will lead to a larger and necessary systemic change within the venture community," added Michael Silton, Managing Director at Act One.
Act One has offered the following boilerplate language for the Diversity Rider to include in term sheets, outlining the firm's commitment to include at least one DCW as a co-investor in the financing of new or follow-on deals:
Diversity Rider: 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.
To support firms in finding DCWs, Act One is working with Crunchbase as part of its Diversity Spotlight Initiative to compile a list of underrepresented investors who are actively writing checks and would welcome co-investment opportunities. DCWs are encouraged to visit the opt-in Airtable and sign up to appear on this list. Once completed, firms will be able to search this list for DCWs directly on Crunchbase, filtering by industry and stage.
"Supporting and committing to diversity and inclusion offers significant competitive advantage, particularly in younger companies that have the opportunity to integrate best practices into their core foundation," said Dana Settle, Founding Partner at Greycroft. "This rider opens doors to conversations around diversity and inclusion in the venture community and demonstrates to our founders and partners that this is a top priority for us."
"For diverse investors, it is challenging to enter the venture industry without resources or the right network. Short term, the rider helps to solve this by ensuring that these groups get a seat at the table and have the opportunity to develop new relationships which can lead to future success," said Henri Pierre-Jacques, Managing Partner at Harlem Capital Partners. "Long term, this is a step forward in changing the mindset in venture to ensure more investors are frequently considered for co-investment and follow on opportunities."
To learn more about the Diversity Rider, please visit here.
About Act One Ventures
Act One Ventures is a Los Angeles-based venture capital firm investing in business software companies at the seed and pre-seed stage. The firm has $47mm in AUM across two funds and special purpose vehicles, and has built a deep and diverse network, inclusive of underrepresented founders. Its portfolio comprises 28 companies across Fund I & II, with 70% of companies founded by people of color, LGBTQ+ or women. The firm was founded in 2016 by Alejandro Guerrero and Michael Silton. For more information, please visit https://www.actoneventures.com/.
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SOURCE Act One Ventures