Last year, Vern Howard met with a number of venture capitalists to pitch his digital events startup, Hallo. The meetings did not always go well. In the office of one prominent VC, Howard, who is Black, was mistaken for a deliveryman. Another meeting ended with the investor joking about Howard running off to Mexico with the money. Still, by January, Hallo had closed a $2 million seed round—although when Howard looked at comparable startups, some of them had already raised 10 times as much.

None of this surprised Howard, really. Venture capital, the money machine powering Silicon Valley, has always been about as white as a new pair of AirPods. By some estimates, just 1 percent of venture-backed startup founders are Black; the numbers are even grimmer for Black women. But in 2020, it seemed like the industry might finally start to care. A summer of protests against police violence and racism in the US led to heated conversations about wider systemic inequality, and finally, the reckoning came to Sand Hill Road. Venture capitalists made promises to invest more money into underrepresented groups and vowed to take Black founders more seriously.

The rhetoric was historic, and some Black founders are finding it easier to get meetings with VCs. But other founders, including Howard, say they’re still waiting for meaningful action—investments, not just conversations. “There’s a ton of noise,” says Howard, who recently started fundraising again, “but I can’t say I see a ton of change.”

This fall, after Howard heard from Black founders who were still struggling to raise money, he pulled data from Crunchbase to see what was happening industrywide. Looking at startups whose total funding fell between $500,000 and $20 million, he found 1,383 companies raised a round in the third quarter of 2020, for nearly $5.9 billion in total. Only 31 of those startups, which together raised $114.8 million, had Black founders—about 2 percent. (Another six startups with Black founders raised less than $500,000.) Howard shared his findings in a post on Medium and called on the VC and startup communities to do more.

The issues with diversity in venture capital are not new, but the problems rarely received the sustained public attention that came this year. Over the summer, Crunchbase began an effort to add data about founders’ race and ethnicity to its database for the first time. The company found that, since 2015, investments to Black founders account for less than 1 percent of all venture capital—and that the number hasn’t changed much in 2020. “People have been reporting on these numbers in the industry for years, but having gone through the effort of collecting and checking that data, I was quite shocked that it was actually so low,” says Gené Teare, Crunchbase’s data evangelist. (And while VC's gender diversity had been improving recently, Teare has found that female founders saw a significant drop in funding in 2020. In her analysis, she also notes that Crunchbase's database "has a documented pattern of reporting delays" and that numbers may shift over time as more data is added.)

Some prominent venture firms set up special funds this year to get more money into the hands of founders from underrepresented groups. In June, Andreessen Horowitz announced its Talent x Opportunity fund, which gave investments of $100,000 to seven startups—ranging from streaming music platforms to a press-on nail brand—with Black founders for its first cohort. SoftBank also created a $100 million Opportunity Growth Fund, to “invest in untapped markets.” The fund currently lists 18 startups on its website, all of which are led by Black, Latinx, or Native American founders and CEOs.

Those funds can go a long way toward getting startups the seed funding they need. But special “diversity funds” have also been criticized as sidestepping the real problem: that VCs’ conception of what a “promising” founder looks like, where they went to school, and what their startup does is still too limited. “I never want to be the earmark of ‘diversity fund.’ I want to be the best,” says Howard. “We need to look at when a fund says, ‘This is just good business,’ because that’s when we start to win.”

To solve that problem, these critics say, investors need to look beyond their own networks, as well as make their own industry more inclusive. As of now, only about 4 percent of all venture capitalists are Black, according to the National Venture Capital Association. “You can’t just hire one person and it’s done. You can’t just check a checkbox,” says Frederik Groce, a principal at Storm Ventures. Groce says improving diversity needs to be done systematically, rather than simply promoting one Black investor at a firm, or throwing money at the first Black founder who walks in the door. “I don’t think we’ve seen enough actual change happen just yet, but I’m still cautiously optimistic,” he says.

Groce cofounded a nonprofit called BLCK VC in 2018 with the aim of supporting other Black investors like himself; its goal is to double the number of Black VCs by 2024. In June, the group started a seven-week training program called Breaking Into Venture, meant to bring Black candidates into analyst and associate jobs at firms. “It’s our attempt to say, if you have a problem finding talent, or you think there’s a ‘pipeline problem,’ well, no, there’s a filtering problem,” says Groce. “If you only look at hiring out of Stanford, Harvard, Princeton, Yale”—whose degrees by some estimates are held by as many as 40 percent of VCs—“then you’ve created an artificial filter.” The first Breaking Into Venture cohort came from a variety of other educational and professional backgrounds. Groce says half of that cohort now has jobs in venture capital. But as Groce points out, the work of diversifying the industry still falls disproportionately on people of color, and more needs to be done by everyone else.

“I think 2020 crystalized for a lot of people that we need to do better and to build more intentionally,” says Alexis Ohanian, the cofounder of Reddit and Initialized Capital, a VC firm, in 2012. In November, Ohanian announced a new fund called Seven Seven Six, along with an Operator in Residence program to find and train aspiring VCs through hands-on experience and formal mentorship. The program’s open application process aimed to source candidates from beyond the well-covered Silicon Valley networks. “I wanted to put something together that was really deliberate from day one, that could look at how to do the job of venture from first principles and generate even greater returns, and seek out an even greater range of founders,” says Ohanian.

For longtime advocates of diversity in venture capital, these recent efforts seem like too little, too late. After Ohanian declared on Twitter earlier this month that 2021 would be “the year we start to see black & brown investors in the ranks of venture capital firms,” the investor Ellen Pao pointed out that there had not been a single Black or brown investor at Initialized Capital, nor at Seven Seven Six. When asked about it, Ohanian said that he was not responsible for hiring at Initialized, and that Seven Seven Six has only existed since November. “I'm thrilled that she's so motivated to be giving us feedback so early in our existence,” he said. (Pao did not respond to an interview request.)

As the year of big promises comes to a close, the question is whether these conversations will continue and how much industry leaders will stay committed to a more equitable future. Howard thinks there may be enough individual investors who start to change the status quo. He mentioned Steve Case, the AOL founder turned investor whom he met while fundraising for his seed round. Case created Rise of the Rest, a fund to support founders who are otherwise overlooked in Silicon Valley. “He’s actually putting money in front of founders, and it’s not like $25k—it’s half a million dollars, enough for you to sustainably build something,” says Howard, who received an investment. “In general, investing in diverse leadership teams is proven good business, and funds should do this without a segmentation of earmark capital.”

Plus, in the competitive startup world, having investors like Case on board can make a huge difference in raising more money. “Once a founder gets a term sheet, everyone else is like, ‘Who’s in?’ If someone’s in the round, other folks say, ‘I’m comfortable doing this too,’” says Howard. “If we can change a small community of people around us, then that means that other people have more equity. And then they can say, ‘I’m in, too.’”