It’s tough starting a new business. One in two of all new ventures will fail within five years, and if the owners are Black, eight of ten will shutter within just 18 months—many of them because of a lack of adequate funding. And that’s where Sydney Sykes is helping make a difference.
A partner at Lightspeed Venture Partners, a leading venture capital firm in Silicon Valley with $25 billion in assets under management, Sykes works with consumer entrepreneurs across the spectrum—she describes her role as “figuring out . . . complex business problems and figuring out how to poise a business so it can be most successful”—while also championing more venture capital opportunities for Black talent. That latter initiative, co-founding the nonprofit BLCK VC with the goal of doubling the number of Black investors employed by venture capital firms, saw her named one of the industry’s 30 Under 30 leaders in 2021 by Forbes.
“I feel a lot of empathy for all [business] founders I meet,” Sykes tells WayMaker Journal. “Being a founder is an incredibly difficult job of convincing people to believe in something and see something that fundamentally isn’t there yet.” And that’s especially true for Black leaders and entrepreneurs who face particular biases “that prevent you from maybe getting the experience that is helpful to being an entrepreneur. There are so many barriers.”
On the other hand, she adds, “I think that adversity makes incredible founders. Grit, the ability to persevere when something is hard, the ability to find a complex solution to a problem . . . being a Black person in America fundamentally prepares you for those kinds of things or creates those kinds of traits. I think there’s a lot of power behind being a Black entrepreneur. But yes, it is incredibly difficult, and I have empathy for that process.”
Starting out in the investment world as an analyst with New Enterprise Associates (NEA) in San Francisco, Sykes soon became aware of the lack of diversity in the venture capital world. “When I first started working in venture, I was the only Black person at my firm,” she recalls. “Every other Black person I knew was the only Black person at their firm. Every other venture capital firm I was looking at had no Black people.” Something like 93% of venture capital firms didn’t have a single Black investor, “so it was very much the norm for you to be the only one in the room.”
She talked about all that with another rare Black venture capital expert, Frederik Groce, “and we realized this was something that everyone was going through. And so BLCK VC really just started with a dinner of like, ‘Let’s get these people all in the same room. Let’s talk about the things we’re all thinking through or talking about one on one.’”
That gathering sparked such a demand for more that she and Groce established BLCK VC as a nonprofit to help build community among and support Black investors. “And from there, we realized there were a lot of aspiring Black investors who needed support to get into the room, to get into the interview conversation, to learn about this field.”
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Changing an industry
The BLCK VC initiative has sparked and fueled growing Black representation over the past seven years. Starting out, Sykes thought that the group would be relevant to maybe 300 people or so, but several hundred have gone through its training and development programs. In 2020, an online event drew 4,000 participants.
“We’ve enabled Black investors to get into angel investing more so than any other group,” says Sykes. “So, it’s been an incredible transformation and impact . . . It’s really created this conversation across the industry and outside the industry around how diversity is in the capital providers who affect this economy.”
Despite what has been achieved, there is still a long way to go: on its website, BLCK VC notes that while U.S. venture capital firms invest more than $130 billion each year,
This International Women’s Day, we want to #InspireInclusion by shining a light on the gender disparities that exist within the venture capital industry.
— BLCK VC (@BLCKVC) March 8, 2024
Here are some insights from our 2023 State of Black Venture Report: pic.twitter.com/4ig3KUFdac
“Black investors have systematically been excluded from mobilizing this capital.” Currently, only 3% of venture capital investors are Black, and only 2% of partners—those who make investment decisions—at venture firms are Black.
Last year, BLCK VC released its State of Black Venture Report, which was a mixed bag of news. Drawing from a survey of more than 200 Black investors and other research, the study found some positives—among them that the number of first-time Black fund managers was growing.
However, there were less positive realities, such as the discovery that a “relatively small” proportion of Black investors at firms managing larger funds held decision-making roles and that Black women—who make up just 1% of venture capitalists—faced an “especially hard time,” being disproportionately represented in non-partner level roles.
While BLCK VC has been able to provide practical help, its most significant contribution may be the sense of connection it offers. “Just sharing ideas, talking about deals, sharing communities, I think is the best thing we can do for venture capital as an industry and for the Black VC community,” says Sykes. “So, as much as I’d like to say we figured out the secret sauce and we’re whispering some knowledge in their ear that no one else has, I don’t know if I can say that’s true in a world where information is so prolific. I think the only thing that can differentiate the members and community of BLCK VC is the membership and community itself.”
BLCK VC hasn’t just made a difference for Black investors. It has also impacted non-Black investors “who realized that there were business opportunities they were missing or that there was a fundamental inequality and unfairness to the exclusivity of venture capital as an industry,” Sykes notes. “And so now it’s really created this conversation across the industry and outside the industry around how important diversity is in the capital providers who affect this economy.”
Increasing diversity
Sykes didn’t set out to make a name for herself in the venture capital world. Graduating from Harvard University with a degree in psychology and economics—she later added an MBA from the Stanford Graduate School of Business—she was thinking about a job in management consulting or investment banking but “realized those paths didn’t really appeal to me and, honestly, I didn’t know what I wanted to do.”
Seeking advice from others, she was stimulated by talking with venture capitalists about how the world would change in the future, from technology to consumer behavior. “I just loved those conversations,” she remembers, deciding to pursue venture capital even though she had no experience.
“I got connected with NEA, and I think what they saw in me was this passion for understanding the consumer and consumer behavior . . . And I realized once I got into venture that it is such an incredibly interesting and powerful industry where you’re able to empower future leaders, fund sort of the future businesses that will be fueling our economy. And it was so much more than I even realized a year before that.”
Sykes’ discovery of the lack of diversity in venture capital may have been disappointing, but it wasn’t entirely surprising. Growing up, she had been told that, no matter what field she went into, there would not be many people who looked like her. “‘You’re probably going to be the only one in the room,’ and I was kind of used to that to a certain extent,” she says. “Not to the extent that is true in venture capital, but most classrooms I was [in] at Harvard were majority white, or at least not majority Black. I don’t think I had a single Black female professor while I was at Harvard. My college internships: a lot of white people, a lot of white men.”
So, when she was scrolling different venture capital firm websites to try to figure out who to reach out to and saw lots of pictures of white men, she was not shocked. “I was like, ‘OK, this is where I thought I was going,’ and it gave me a little bit of extra fuel and motivation because I realized just by being in venture capital, I could be making a difference. I could change the statistics . . . you could really see an increase in diversity in any firm I joined . . . and so that was something that made me feel really accomplished just by entering the process.”
Unlike other financial sectors, venture capital is “very much impacted by your wins,” Sykes observes. “It’s not about marginal gains. It’s not about arbitrage. It’s about investing in the right companies and getting the right amount of ownership. You could have one company that returns your entire fund, even if you make 100 investments. In fact, that’s fairly normal.”
It’s all about the return on the investment “because you could also have a company where you invest $10, and even if they make it to $30 billion, that’s not going to return the fund; that small amount of ownership is not going to return the fund.”
Venture capital insiders also talk about their anti-portfolios. “So which ones did you have the opportunity to invest in that you missed?” she says. “Did you miss Uber? Did you miss Lyft? Did you not understand the opportunity of Instacart or Klaviyo or whatever it is? Those ones, they don’t affect their batting average, but they don’t make you feel good.”
Entrepreneur advice
From her VC experience, Sykes offers three tips for entrepreneurs looking for someone to invest in their dream.
Know why them. Understand what sets you apart from everyone else, she says. “If anyone in this world can have an idea and if anyone in this world can start a company, why are you the right person to start this company right now? What in your background, what in your interest set, what in your characteristics as a person, really enables you to be the best founder for this company?”
Know the space. Demonstrate that you have done your homework and understand the sector you’re in, she adds. “What hasn’t worked in the past? What’s possible now that wasn’t possible before? Why have certain companies failed, and why have others succeeded? And what pitfalls do you need to understand?” Having that sort of awareness demonstrates thoughtfulness, Sykes says, the number one quality she is looking for. “You don’t need to have answers to every question. You don’t need to know the future. But I hope that you’ve thought through everything that you can.”
Know the details. “Maybe you haven’t started generating revenue yet, but you’ve had hundreds of customer conversations, and you understand the pain points in the market,” she says. Or, if you have started the business, “knowing those unit economics, knowing what affects growth, knowing where the pain points are, knowing what the strengths and features of your product are—that stuff is so important. Because that’s what a business comes down to. It comes down to the founder and their ability to lead, the environment and the external factors affecting the company, and the fundamental business economics.
“And if all of those things are great, it’s gonna be a great company.”
Reflecting on her time at Harvard, Sykes also has advice for young students like her. Looking back, she wishes she had realized “how important your network and your community was,” she says. At Harvard, she was very focused on her studies. “I was like, all I have to do is keep my head in the books, learn my math, and I will get there—wherever there is, I will get there.”
Now, she sees that the people you meet along the way—your mentors, your sponsors, your peers and others—are all significant factors that make a difference between success and failure. It’s about “not being alone on the journey,” she says. “I would encourage all teenagers, I would encourage my younger self, to just be more conscious of the community and the network I’m building around myself . . . relationships.”
These days, anyone with access to a computer can learn anything online. “But you can’t build a network by being on your own; you can’t build those relationships. And so, when you have access to an incredible community of talent, I think you’ve got to take advantage of that.”
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Understanding the investment arc
Venture capital, private equity, series A through D: Sydney Sykes explains the differences along the venture capital journey:
Venture capital is technically a type of private equity—private equity being private capital and equity in private companies versus public equities, which is a different category. So, the real difference between venture capital and private equity is the continuum of how early it is and how risky it is.
The earliest and riskiest form of venture capital is angel investing. Maybe that’s, “Hey, you have an idea: I’m going to give you $10,000, go figure out this idea. I hope it turns into something, but I really don’t know.”
Then you have mid-stage or early-stage venture capital, which is kind of like seed through series B or so. Maybe there’s some revenue; the founder might have some experience in this space. They’ve hired some experienced leaders around them, and there’s some evidence that something is working here.
And then you have later-stage venture capital, which is series C through maybe D, or late-stage investing, which is where a lot more of those questions are answered, but there are still fundamental risks.
And then you have private equity, which is really growth-stage businesses or businesses with potentially hundreds of millions of dollars in revenue. They potentially have always been private. They might be thinking about going public, but it’s just a continuum of the stage of the company. That’s the differentiation.
SYDNEY SYKES: MY WAYMAKERS
My parents always had incredibly high expectations of me, which really fueled me. Thinking about my first job [at New Enterprise Associates], I had incredible mentors in venture capital: Rick Yang [Partner, Head of Technology] and Vanessa Larco [Partner] were people who I really looked up to. They were incredibly helpful in encouraging me, thinking about not just my experience at NEA but my future career path.
I look at every point in my career path, and I see there was someone there who empowered me or encouraged me, made the right introductions for me . . . Charles Hudson [founder and managing partner of Precursor Ventures] has been an incredible mentor and waymaker for me. He’s one of the Black investors I’ve looked up to and was one of the first Black investors I met who had started his own fund. He always made time for junior people who were coming up in venture, and he’s still someone I turn to today for career advice.
