The Venture Capital Paradox: Innovation Without Change

What if I told you that the industry most famous for funding disruption is one of the hardest systems to disrupt?

Venture capital prides itself on betting big on bold ideas. But the reality is more complicated. It is a system built to fund the future, yet stubbornly stuck in the past. It promises opportunity but quietly clings to precedent. It celebrates the visionary founder but still asks, “Did you go to Harvard?”

I know because I’ve been on both sides of the pitch table.

When I was raising money for TaskRabbit, one of the first questions I got from a prominent VC was whether I had ties to Harvard or MIT. When I said I went to a small liberal arts college in Virginia, he told me flatly, “We like to back Harvard dropouts.” Then he passed. Another time, I walked into a tech event with a fellow founder—he was male, I was not—and the host assumed I was his wife. It was a moment that said more than words ever could.

This is the paradox at the heart of venture capital: we are funding new futures using the same old patterns. And those patterns have a cost.

Despite all our talk of disruption, VC is governed by invisible rules. A kind of social pattern-matching that favors what’s worked before: a certain school, a certain résumé, a certain demographic. And when that system fails to fund new kinds of founders or new ways of thinking, the future narrows.

VCs often lean on the idea that success leaves clues. But too often, those “clues” are Ivy League diplomas, hoodie-wearing young men with dorm-room backstories, and networks inherited rather than built. A Harvard study found that investors preferred pitches from male entrepreneurs 70% of the time—even when the scripts were identical.

At one point, my startup was referred to as “the Craigslist for errands.” But when I pitched the platform as a way to offer flexible income to workers, one VC interrupted: “Does anyone here speak Spanish?” He saw it as a way to exploit cheap labor. I saw it as a system that could empower overlooked communities. The difference? Lived experience.

And the numbers back this up:

• Just 2% of VC dollars go to women.

• Less than 1% goes to Black women.

• Latino founders receive less than 2% of funding—despite launching startups faster than any other demographic.

Meanwhile, research shows that diverse teams generate 30% higher returns and outperform their homogenous counterparts across multiple metrics.

The truth is, venture capital isn’t broken. It was built for a different era.

Firms like Floodgate, Backstage Capital, and Precursor Ventures have shown what happens when you invest beyond the pattern. General Partners like Ann Miura-Ko, who bet early on Lyft before “rideshare” was a word, and Aaron Holiday at 645 Ventures, who backs experiments others overlook, are precedent breakers who rewire access.

But the system doesn’t make it easy. Many diverse fund managers received their first LP checks in 2020, in the wake of George Floyd’s murder and a cultural reckoning around racial equity. Four years later, many of those funds can’t raise a second fund—not because their ideas failed, but because the capital dried up.

As Pete Flint of NFX put it: “Venture has a branding problem.”

It’s not just about who gets the first check—it’s about who gets follow-on capital. Most small, diverse funds invest at seed, where returns take time to mature. But those who control the late-stage capital—the LPs—don’t wait. They recycle money back into the same firms that funded the last wave.

So we get the same stories. The same founders. The same futures.

But cracks are starting to show. More solo GPs. More community rounds. Founder-led funds. A new generation of funders who don’t just want to disrupt tech—they want to disrupt how tech gets funded.

If you’re reading this and wondering if the system is rigged: You’re not wrong. But you’re also not alone.

Venture capital isn’t necessarily broken. But it needs a reset. And maybe that starts not with a teardown, but with a reframe. A willingness to fund what hasn’t been seen before. A readiness to ask: What if precedent is the problem?

If this gave you a spark, share it. Tag a founder who deserves funding regardless of where they went to school, what they look like, or how they pitch.

Let’s break this precedent, together.

Listen here for the full episode with Ann, Aaron, and Pete on my podcast Breaking Precedent.