When Alejandro Guerrero and Michael Silton raised Act One Ventures’ first fund in 2016 after having worked together since 2013 at UCLA Ventures, they applied their individual experiences as founders into the principles by which the firm would operate. The most important pillars were built from their lessons learned through failures and challenges that are unique to startup founders. These experiences shaped the way they would communicate with founders using their own personal experiences and leveraging their network to help the founders succeed.
Alejandro and Michael set out to invest in great founders no matter their background. So much diverse talent was being overlooked and these teams were also outperforming their less-diverse counterparts, which made investing in them a smart business decision. That is why Act One’s portfolio shows a strong commitment to well-rounded founding teams where Alejandro and Michael’s skill sets can be advantageous to each company’s journey toward success.
Today, 70% of Act One’s portfolio companies are founded by people of color, LGBTQ+, or women.
Both of the firm’s funds have existed on three key principles, and now there is a fourth:
- Create access to resources by bringing Act One’s networks to the diverse founders it backs
- Help these founders build diverse teams through its inclusion rider in every term sheet
- Lower the capital commitment threshold to allow more diverse LPs to invest
- Bring other diverse check writers into deals either as co-investors or follow-on investors
The Diversity Term Sheet Rider for Representation at the Cap Table
These strong beliefs and guiding principles led to the creation of The Diversity Term Sheet Rider for Representation at the Cap Table, which calls on VC firms to bring in Black or other underrepresented groups, including but not limited to LatinX, female and LGBTQ+, as co-investors on deals, thereby immediately increasing diversity at the core of the deal-making process.
“I was personally shattered by the deaths of George Floyd and Breonna Taylor, and they were my inspiration for creating this rider,” Alejandro says. “We must do more in the wake of their deaths. Our goal is to lead systemic change around the lack of diversity in the venture capital industry.”
If every firm commits to making this significant change in their deal-making process, the VC playing field will be more inclusive. This will give diverse check writers (DCWs) exposure to networks they previously did not have access to, and it will benefit firms by bringing diverse thinking to the companies in which they are investing. Act One is holding itself accountable by including the Diversity Rider in every term sheet while also calling on others across the industry to make the commitment as well.
Joining us so far are Greycroft Partners, First Round Capital, Maveron, SVB Capital, Harlem Capital Partners, Fifth Wall, Plexo Capital, Precursor Ventures and Equal Ventures. 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. This is the beginning of a movement.
“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,” Michael says.
Join the movement