Despite gloomy statistics about the lack of diversity in venture capital funding, Adrian Mendoza remains optimistic that change is coming.
Mendoza, with his wife, Senofer Mendoza, runs a VC firm based in the Back Bay that focuses on funding startups in cybersecurity, artificial intelligence, and fintech with founders who bring diversity. Founded in 2016, Mendoza Ventures announced its third fund in January and last week added North Carolina bank Truist Financial as an investor.
The investment will give Truist, formed from the merger of banks BB&T and SunTrust, a boost in forming business relationships with Mendoza’s portfolio companies, Adrian Mendoza said in an interview.
“The fact that I can get a Latino founder, an Asian American founder, a female founder into their ecosystem makes me happy,” he said. The bank gains from diversifying its client base, as well, he said.
It’s a challenging time for efforts by venture capitalists and others to support entrepreneurs from underrepresented groups. In the wake of the Supreme Court’s ruling against Harvard College using racial preferences in admissions, conservative activists have targeted all kinds of race-specific programs. In one such case, a federal appeals court in September blocked Atlanta VC fund Fearless Fund from distributing money under a program aimed at Black female founders.
Mendoza Ventures goes beyond race alone and takes a broad approach in defining the diversity it seeks, which may insulate it from attacks. “We’re not feeling the backlash,” Mendoza said. “We’ve always focused on the entirety of what it means to be diverse, not just a subsegment.”
That includes funding for Boston design software firm Canvas GFX last year. Chief executive Patricia Hume is a woman in her 70s, Mendoza noted. “There’s age diversity, gender diversity playing there,” he said. “We’ve had employees and fellows that are veterans — it’s not just one portion of it. These dollars should go across all of gender, age, everything.”
By any measure, venture capital has a long way to go to make progress. Startups with Black founders received only 0.13 percent of all VC funding in the third quarter, down from 1.2 percent a year earlier, according to Crunchbase. And women-led startups have garnered only 2 percent of funding so far in 2023 (it was 2.1 percent in 2022), according to PitchBook.
Mendoza said he favors collecting more data about the impact of backing diversity in founders, what he calls the “long tail.” That includes jobs created in a local area and jobs created for women and people of color. Such statistics would go beyond even the new California law requiring VC firms to report on the gender, race, ethnicity, and disability status of startup founders.
Investors “want feedback on what happened to those dollars and impact metrics,” he said. “I mean, ESG [Environmental, Social, and Governance] is now a dirty word, but it is a way of cataloging data.”