Venture Capital Has a Starting Line Problem

What most people don’t know is that the game engine for Nintendo’s Excitebike (1984) was used to power Super Mario Bros. a year later.

I backed a micro-mobility company about six or seven years ago. The company was run by a Hispanic founder. He was gritty, insightful, and every bit as hardworking as anyone I've ever funded. Yet, he struggled to raise. Ultimately, the company went under. Not having enough capital to push product innovation was the biggest issue.

I saw that Joseph Cohen had raised $14.2 million in total for Infinite Machine, with investors including a16z's American Dynamism fund. They’re building what can reasonably be described as Tesla for ebikes. They literally look like a pregnant Cybertruck gave birth to an ebike. I’m told it’s really fun to ride and as a big fan of the Revel scooters, I believe it.

If you’re looking at the two companies, the easy read is: bias. Hispanic immigrant founder couldn't raise, connected white guy from Penn clears double digit millions.

Case closed, right?

I thought it was an interesting example by which to dig deeper into the nature of how bias and capital access works.

It also make me think about a phrase that someone brought up to me recently:

“Comparable companies.”

She was sharing that Black founders, for example, “…have been shown to raise roughly one-third as much venture capital as comparable startups formed in the same year, industry, and state” versus their white male counterparts.

What should we count as a comparable startup? I see founders looking to who else raised capital all the time wondering, “Why that company and not them?”

Two NYC micromobility companies getting two wheeled vehicles in the hands of customers. We can put aside that they were different looking products and one was a rental model vs the other is a sale.

Those things change and VCs know it. These companies look pretty comparable.

Yet, I’ve taken a pitch from both of those founders and I know they aren’t.

I first met Joseph Cohen about 16 years ago when I was working for First Round Capital. Josh Koppelman had suggested I meet this founder he had met at Upenn. Josh called him a “rocket ship” if I recall.

He was building a product called CourseKit to replace what everyone agrees is god-awful software made by Blackboard. Blackboard is installed in nearly every major college and university, and one of the many things it does is run the Classroom software where homework is uploaded and the syllabus is posted. It's been there for 20 years. Nobody likes it, so his premise wasn't a bad one.

I thought he was pretty dismissive of the way software actually gets purchased by university IT departments. He believed that once everybody was using his software, administrations would have to concede, and they would tear out the system they had been using for a long time and replace it with a product built by a startup. I was pretty sure he had never even spoken to anyone within the university IT stack.

That didn’t hinder his confidence.

I didn’t see his pitch for Infinite Machine, but I’m 100% sure it was wildly different from the company I backed because of what each founder believed he was allowed to say.

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My founder's pitch was always stuck between two modes: the big vision he wanted to build and the off-the-shelf scooters he was actually renting to show near-term revenue. He never fully committed to the "we're going to burn cash for 18 months and change urban mobility forever" pitch so it got muddled. Investors kept asking about the state of the company now, the nature of the progress he had made up to that point, and the downside economic risk of the current model—all questions he was probably more likely to get as a minority founder, but he couldn’t see his way out of them.

A “better fundraiser” could have judo moved these questions into a conversation about growth, but this wasn’t a failure of pitch skill or imagination. I think it's a completely rational response to growing up in a household where money was real, risk was real, and "we might go to zero" was not an abstract investor concept but an actual lived experience. He was pitching the way someone pitches when they've been taught that financial responsibility matters, but he was pitching in front of people who don't care about financial responsibility at all — they care about whether, if the risk was ramped up high enough, this could return a fund.

I'd be willing to bet Joe, on the other hand, walked in with a swing-for-the-fences pitch, blessed by a UPenn network of founders and operators to pressure-test it before he ever walked in the door.

That's the starting line. Not the room. Not the partner across the table.

When people talk about bias in venture, it feels like they're usually pointing at the decision-maker. Or, at least it felt like that to me as a straight white male decision maker.

You hear stories about the partner who asked the wrong questions and the room that looked like a fraternity reunion.

Did you get mistaken for a courier at the office of a VC firm?

That stuff is real and so are the numbers of who gets funded, but I still think we're focused on the wrong barriers.

Venture pitches come down to trust and fit. Do I trust that you can do what you say you’ll do and is what you’re saying you’ll do something really big?

Because we only get a small sample of a founder relative to the decade we’re going to spend with them going forward, VCs are bound to use proxies to assess trust. I didn’t work with you, but I know people who did. I don’t know how much work you put into diligencing this idea but other people tell me you’re really smart.

That’s a perfectly logical approach to a difficult problem. Why wouldn’t you rely on your network to help you make a trust decision?

Think about how you'd hire a babysitter. If your closest friend's sitter of five years suddenly became available, you'd jump at the chance to hire that person if you needed one. That's not bias — that's sensible risk management. You're not discriminating against strangers. You're prioritizing known quantities.

Investors do the same thing—and it’s a hard argument to make that they shouldn’t.

If you were early to a successful company, I can trust that you know what great looks like and the bigness of big.

If you’re in networks already adjacent to venture, I can trust you’ll source capital and talent faster and more easily.

As someone who built a fair diverse portfolio of female founders and founders of color, I saw first hand the extra miles that some of these founders had to go, because they didn’t begin on the same starting line.

They might have run faster and harder, but some people start out so far ahead, it’s difficult to suggest they don’t have a better chance of winning.

If you're a founder who came up without venture-backed friends, without the network of people who've already been selected by this system, without the nine months of cash runway to get to meaningful traction before you even start a conversation — you walk into that first pitch meeting already behind.

It’s not because the investor is prejudiced—obviously everyone has their biases, but those aren’t nearly as impactful as the fact that every rational signal they use to assess credibility is a signal underrepresented founders had a harder time acquiring than someone else.

If resilience was a driver of startup success, that experience would be an advantage.

I just don’t think it is.

The number one thing a founder is looking for is speed—and it’s hard to go faster when your better networked counterpart is running in a lane with one Mario Kart boost pad after another.

I backed a lot of underrepresented founders at Brooklyn Bridge Ventures. What I watched — and was slow to fully admit — wasn't that investors were treating them differently in rooms. It was that by the time they got to the room, they were starting from a fundamentally different position. One group of founders, on average, had enough cash to bootstrap for close to a year. The other was closer to zero net worth. One group had a text thread full of people who'd been through a raise before. The other was figuring it out first in their networks.

Same grit. Same intellectual capacity. Completely different starting lines.

I’ve heard some people identify this as a “pipeline problem” but that makes it sound like there aren’t enough capable founders from underrepresented communities. That’s B.S.

I think the issue is that these high potential founders aren’t getting networked in the same way—and where that begins for VCs is in the hiring practices of your companies. When you’ve got founders who keep referring to their AE’s as “salesguys” and who aren’t checking the counts of who even got interviewed for positions, you’re compounding a gap between who the industry sees as insiders versus outsiders.

If we' were to ever truly measure “comparable”, it would account for who had the warm intro network, who had already worked inside a funded company, who had the financial cushion to spend another six months iterating before going out to raise.

Strip all that away and you're not measuring bias anymore — you're measuring a gap that bias built long before the meeting happened.

Here's the uncomfortable part, and I'm going to say it anyway: if you're an underrepresented founder, you have to accept that the way credibility is measured isn't going away. You can argue it should be measured differently and maybe you'd be right. But in the room, today, the investor is still going to weight proximity, track record and network density, and they're going to do it largely without realizing it.

Fighting that in the meeting is a losing play.

What you can fight — and what actually moves the needle — is getting onto the treadmill earlier. Find your way into the networks where funded founders live. Do the work that gets you known inside ecosystems, not just adjacent to them. Understand that your job, unfairly, is to accumulate the credibility signals that other founders got handed by forcing your way in—and risk getting seen as pushy or overly ambitious, because we’re not trying to climb a highly political corporate ladder.

We’re trying to jump the buildings in the Matrix. It’s overly ambitious by design.

That's an ask that shouldn't fall on you. The fact that it does is an injustice.

Should the system work towards making itself more fair? 100%.

Can you afford to wait for that?