Intel Launches $125 Million Fund To Back Startups Led By Women And Minorities

Intel’s venture capital arm is betting that a diversity-focused strategy will improve its financial performance.

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Talk to a Silicon Valley bigwig these days, and you'll probably hear pronouncements about the need to correct the woeful lack of gender and ethnic diversity in tech.

Now one venerable tech company, Intel, is now putting money behind such claims, with a new investment vehicle that takes diversity as its thesis.

Intel said today that its venture capital arm, Intel Capital, had formed a $125 million fund to invest in startups led by women and "underrepresented" ethnic minorities. The company said the new Intel Capital Diversity Fund isn't about charity: it's about making money from opportunities that less diverse startups are failing to go after.

It has already invested in four companies, according to today's announcement, including Brit + Co, the San Francisco-based D.I.Y. site. (Brit + Co separately announced the investment today as part of its $20 million Series B financing round.)

Lisa M. Lambert, the Intel Capital managing director who is leading the diversity fund, said the point was not to make "a political or social statement." Instead, she said, "We think it's good business."

Any startup dominated by white men, she argued, is at a certain disadvantage if it wants to reach a broad base of customers.

"The absence of these underrepresented groups in tech says the products we're designing couldn't possibly serve a diverse population, because they're not being conceived by a diverse population," Lambert told BuzzFeed News. "Just imagine the value we could create if we did have that diversity."

Intel is currently taking a hard look at the diversity of its own workforce. Earlier this year, the company announced a plan to make its employee base more closely reflect the demographic makeup of the United States within the next five years. It also said it would invest $300 million in diversity initiatives.

The new fund complements that previously announced effort. And it adds a strategic criterion to the investment mandate of Intel Capital.

The investment unit, which dates to 1991, looks for opportunities that offer some strategic benefit for Intel. Last year, for example, Intel acquired smartwatch maker Basis Science, which Intel Capital had previously invested in.

The diversity fund, which will invest its capital over a five-year span, plans to focus on startups whose leaders fall into any of four categories: either they're women, black, Latino, or Native American. (Intel Capital doesn't consider Asians an "underrepresented" minority.) To qualify, a startup has to have a founder or CEO who fits the bill, or else three senior executives who do.

In addition to the investment in Brit + Co, Intel Capital said it had invested in CareCloud, a healthcare management company; Mark One, a "smart" cup maker; and Venafi, which makes encryption technology.

Other corporations have undertaken similar efforts, though on a smaller scale. Last year AOL announced a $10 million venture fund focused on startups led by women. And Comcast has a $20 million fund to invest in startups led by minorities.

But you won't find such mandates among the most prominent venture capital firms in Silicon Valley. The male-dominated industry recently came under an uncomfortable spotlight when Ellen Pao, a former partner at Kleiner Perkins Caufield & Byers, accused the venture capital firm of gender discrimination. (Pao ended up losing the case.)

Lambert said she hoped the Intel diversity fund would inspire similar efforts in Silicon Valley.

"I honestly see no reason why private venture firms can't do this. In fact, I think they need to," she said. "I think they're missing a major demographic shift, and they're missing an opportunity to build products that service a much bigger market of users."

Brit Morin, the founder and CEO of Brit + Co, said her goals were similar to that of the Intel fund, to encourage more women and girls to work in tech and make things. But she said the challenge in the tech industry was bigger than any one fund could solve.

"In general, there should be more women getting funded. And there should be more women venture capitalists," Morin told BuzzFeed News. "The real problem is women aren't as integrated as men into everyday venture capital funding rounds."

A fund focused on diversity, she added, "is a step ladder to that point."