There are many ways that Bahiyah Yasmeen Robinson defines the leading edge of diversity-focused investing, at the intersection of technology and social impact.

Robinson is the CEO of VC Include, an ecosystem and marketplace designed to expand investment opportunities for diverse asset managers, as well as a partner at new fund-of-funds Include Ventures.

Previous to her current initiatives, Robinson developed online technology competitions and conferences in Africa to provide early-stage capital to the first wave of technology entrepreneurs across the continent, partnering with the U.S. Department of State, the World Bank, Microsoft, Mozilla and Nokia. Prior to that, she was a senior consultant at Ashoka, where she devised value-added propositions for clients including ExxonMobil, G20, Amgen, the eBay Foundation, HUD, Google and Omidyar Network.

Robinson was also a former co-chair with the Aspen Network of Development Entrepreneurs, and her work has been recognized by the Knight Foundation, Echoing Green, Entrepreneur, CNN and Forbes.

Q: Bahiyah, thank you for agreeing to share your insights with the Worth community. This is a very unique time. A broader set of investor types are expressing interest in diverse managers, and firms like VC Include are gaining visibility. Please speak to the evolving picture you see.

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A: Thanks, Nancy.

When I embarked on creating a platform for underrepresented emerging managers in the VC and ESG space in 2017, which I officially launched in 2018, the sentiment was much different than it is now as it relates to asset allocator perspectives on this niche market.

Just a few years ago, the allocation story was much more about investing in later-stage asset managers and more on the public side of the market. This was interesting to me, because there was so much innovation and alpha being driven in alternatives on the private capital side, particularly in private equity and, specifically, in venture capital.

It was a challenging time trying to engage and source institutional investors that were willing to invest in smaller funds. One reason is that emerging managers, particularly at the cross section of venture and impact, are simply much smaller funds trying to take advantage of a new market, typically under $100 million in total AUM (or assets under management). The median size of a diverse fund that’s focused on impact investment or ESG and venture capital opportunities was, and still is, in the $30 to $50 million AUM range or smaller.

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Before the pandemic, there was definitely a product mismatch in the marketplace between smaller diverse and ESG focused funds and institutional investor appetite for those types of funds. Institutional investors wanted to almost exclusively cut larger checks for larger funds due to their mandates and client demand.

In the wake of the pandemic and the zeitgeist shift due to civil unrest in the U.S., more institutional investors are looking closely at updating their strategies to meet the moment and to take advantage of alpha opportunities at the earlier stage where these managers are sourcing the next unicorns. This shift is mostly driven by client demand—more private capital cares about what and where they’re investing.

There’s been a pendulum shift amongst many family offices and institutional investors, which is refreshing.

There are varied approaches and sometimes very qualitative definitions applied to the terms ‘diverse’ or ‘BIPOC’ manager. Please speak to the range here. What are your preferred definitions and why?

Naming conventions are so important, and yet everyone has a different lexicon when it comes to identifying non-white male communities.

We seem to be at a turning point now as we deepen the understanding of diverse and underrepresented communities, so that on one hand, diverse can mean Black or Latinx founded. What it really means is that historically underrepresented groups are coming into the spotlight, which along with women of any ethnicity, still make up only 1.3 percent of all asset managers in the U.S., according to a Knight Foundation survey conducted in 2019.

And so whether it’s gender lens or racially diverse, that term becomes the catch-all—and it has been for a few decades. The shift here is the intentionality about the type of diversity that institutional investors are looking at.

We know that, for instance, Asian men specifically, and then secondarily Asian women, over index in the financial services industry as a whole, based on their percentage of the population here in the U.S. A number of reports show this, including a Racial Equity in Financial Services study by McKinsey for the W.K. Kellogg Foundation concluded in September 2020 which breaks down the data quite clearly.

What we don’t see as much are Black and Latinx diverse managers en masse.

When you look globally, even in frontier markets like Africa, you don’t see many African or Black-led funds in the private equity and venture impact space. Splicing that data is important when we look at diversity, because then we can get a better picture of where there are alpha opportunities and where certain populations can be included in a way that drives returns. 

It’s interesting that there are relatively few Black-run African funds, based on your experience.

Yes, expat Europeans or Americans are running most of the African-focused investment funds.

BIPOC nomenclature was really designed to be specific, to call out Black, Indigenous, the interesting thing is that Latinx is not part of that first part, but it is a part of the ‘POC’ part, which is people of color. BIPOC as a distinction is meant to identify the least represented people in America in a number of industries, including the investment industry.

Many large institutional investors need to put sizable tickets to work and typically rely on consultants, OCIOs and fund-of-funds to analyze or allocate to earlier stage managers, if that is a part of their allocation mix. This earlier stage is where many diverse manager firms are in their lifecycle. Please speak to the pluses and minuses of this potentially consultant heavy approach, and any alternatives you find compelling.

While it makes sense that large institutional investors would rely on consulting firms to advise across their portfolios and provide recommendations around the particular types of managers that map to their strategy and their interest in particular focus areas, the one challenge with consulting firms that’s remained true is that both the research arm and the CIOs are typically not BIPOC themselves.

When you look at Black, Latinx and Indigenous staff at consulting firms, they are at a relatively low employment level. DAMI’s 3rd Annual Investment Consultant survey, released at the end of 2020, looks at how that breaks down. Firm ownership remains overwhelmingly male and white. Gender diversity is improving slightly amongst senior management. 

This is challenging because people usually look to their networks to source deals, based on trusted relationships over time, buddies from college, etc.

I liked another sentiment from that same survey, namely that diverse manager days, inclusion in databases, firm policy statements about diversity and the like change the playing field, but the real change we’re looking for comes when more money is managed by minority-owned fund managers.

As there are not a lot of people of color working at these firms, it tends to skew the pool of qualified managers being considered. That’s something that many consulting firms are taking a hard look at now, at least in my conversations with them. They recognize that they need to hire more diverse investment talent at their firms and that will yield a more diverse product suite.

We’re far away from the makeup of the major consulting firms matching the racial makeup of the country, and part of the reason I built the VCI platform was to be a solution to this challenge. 

In terms of allocations to diverse venture capital managers, in particular, the percentages on an overall basis are still quite low despite the broader conversation taking place these days. Given your expertise in the sphere of venture capital at the cross section of diversity, and the fact that you’ve evolved a platform to ‘do something’ about it, why is this true relative to other asset classes and what makes you optimistic?

Well, as we know, the venture capital industry grew out of a particular set of circumstances that occurred in a particular region, in this case, Silicon Valley.

Government spurred technological innovation in the Bay Area in the ‘60s and ‘70s, and out of that came the first hardware innovations, later technological innovation around the world wide web/internet and later software. A very specific set of variables led to the birth of venture capital, the more high-risk, high-reward type of investment structure and overall strategy.

Now that software and hardware technological advances have covered the globe, Silicon Valley is still the leader in this space, for obvious reasons. But I think there’s a challenge for the rest of the nation and, in certain cases, the world, in terms of really understanding that there are new solutions, new markets, new companies and new fund managers that could have an equally compelling strategy and investment thesis as we approach the next level of innovation and Web 4.0. 

What inspired you to put together your first official VC Include emerging manager program? Please speak to the project sponsors and what excites you about it.

The inaugural VC Include fellowship was realized in 2020, when the VCI platform was gaining real momentum as a meeting place for managers and investors at the intersection of diversity, ESG and venture capital investing.

A lot of investors in our ecosystem were very excited about building a platform specifically for venture capital and impact fund managers.

When the pandemic struck, everything paused for a number of months on the early stage investing side. And then the George Floyd and Breonna Taylor incidents happened, which sparked civil unrest in the U.S.

At that point, VCI experienced a real avalanche of interest from institutional investors asking how they could ‘meet this moment’ and be good fiduciaries and put some capital to work at the early stage, and specifically into Black and Latinx managers.

So, we were able to look at the breadth and depth of current managers on the platform: first-time managers that were fundraising, as well as new managers that were coming into the market in 2020. We started to build the emerging manager program we wanted to see, focused on building institutional grade asset management firms at scale.

We realized that we could best serve the GPs asking to join the platform by really being specific, making sure that those managers are ‘institutional grade.’ And so we stood up the VCI fellowship to provide the type of training and education, mentorship and engagement that many first-time managers sorely need and somehow don’t attain as they’re building and raising their first fund.

We’re very excited to be sponsored to create this fellowship as a first effort of many to provide a pipeline of institutional quality fund managers from fund one, through fund two and fund three, and support them as they grow through their lifecycle. 

What challenges do you see in the diverse, emerging manager ecosystem?

There are plenty of smart, pedigreed, underrepresented founders and funds in the ecosystem that we’ve built. There’s a ton of ‘pipeline.’

The challenge is that many institutional investor mandates dictate that they cannot invest in earlier stage funds; they have to invest starting with fund three due to risk rules and tolerance levels.

So we bump up against this question of risk. We see this particularly because venture is already an asset class that’s based on having savvy investors that can balance risk with some bigger, larger bets to drive returns for the entire portfolio. 

We’re in the business of finding the right fit of alpha generating potential, in the context of big bets in venture and impact and really understanding trends that drive that probability of great success.

VC Include is laser focused on supplying those managers with exposure to potential LPs that track to their asset class; this is much easier to do when you talk about high net worth or family office investors who are also fiduciaries. If they’re investing in venture and impact, they’re already early adopters and first movers. They get the plum alpha opportunities because they’re taking larger bets.  

For me, this is just a matching problem.

It’s less about there not being enough talent, and it’s more about facilitating better engagement, aligning strategies on the manager side and on the investor side. That’s what we specialize in.