By Will Kohler and Barry Eggers

People often describe Carta as an “N of 1” company. This term is explained in a variety of ways, but the consensus is it is used when there is a strong product-market fit which has pulled the company to levels of scale that previously were not appreciated.

In the case of Carta, becoming the dominant cap table provider meant becoming the system-of-record for asset ownership across a growing ecosystem. As the ecosystem has grown, a source of truth on employee equity ownership emerged from the data, and this is when things get powerful.

Some of the more provocative conversations we’ve had around equity and diversity have been with Henry Ward, co-founder and CEO at Carta, which if you’re not aware is a Lightspeed portfolio company.

Carta provides cap table management software for thousands of companies, a lot of them inside Silicon Valley. One of Carta’s key founding principles is that society is better served when wealth is distributed more fairly. Henry firmly believes all employees should be able to share financially in a company’s success — not just founders, senior executives, and investors — and that the surest path to wealth is through equity.

But as we all know, Silicon Valley remains an enclave of overwhelmingly white, predominantly male founders and investors, who own the vast majority of equity.

Three years ago, #Angels, a collective of six women investors that includes Lightspeed’s own Jana Messerschmidt, issued a call for transparency into the gender disparity in ownership — what it calls #TheGapTable.

In response, Carta began surveying 524,000 employees at the companies it serves about where the shares are really going and publishing an annual report about its findings. This year it added questions about race, ethnicity, self-reported gender, and parental status to its survey.

Today, Carta published its Table Stakes 2020 report. We can’t say the results are surprising. But seeing the numbers laid out like this brings the disparities to light in a way that’s hard to ignore.

You can find Carta’s detailed report here: https://tablestakes.com/study/. But we wanted to highlight a few things that stood out to us.

The gender gap has not closed.

Carta’s data shows that little has changed. Women made zero gains in ownership in 2020. For every $1 in equity owned by male employees, women employees own just 47 cents. And while women represent more than a third of all employees, they own only 23 percent of the equity.

The reasons for this are no mystery. Women continue to be underrepresented in the positions that typically accrue the most equity. They represented just 15 percent of founders in 2020, a figure that has remained essentially unchanged since 2016. Percent of women founders by year:

• 2016–13.95%
• 2017–15.25%
• 2018–15.16%
• 2019–14.89%
• 2020–15.94%

When growth-stage companies are hiring engineers, they hire men at nearly 3x the rate of women. When women join the C suite, they typically do so in the later rounds of funding and in non-technical positions, like HR or marketing, where distributions are typically lower.

The gap is more pronounced for People of Color (PoC).

What is true for women in the Valley is even more pronounced for PoC. But here there is a stark divide. Black and Hispanic/Latinx represent 15% percent of employees, but only 8% percent of equity. For Asian and South Asian employees, however, the gap is less pronounced.

• White: 64% of responses, holding 62% of the total market value
• Asian: 15% of responses, holding 18% of the total market value
• Hispanic / Latinx: 9% of responses, 6% of the total market value
• Black: 6% of responses, 2% of the total market value
• South Asian: 6% of responses, 13% of the total market value

These employees are more likely to be engineers and to join growth stage companies during earlier funding rounds. They’re also more likely to be represented in the C suite and at the VP or director level. All of these factors contribute to the huge disparity in equity between these groups.

COVID is having an impact on geographic wealth redistribution.

With talent on the move given the global impacts of COVID and remote work, they’re taking compensation with them — these changes in equity distribution are about geography, not gender or race. The surge in people working remotely has caused equity holders to disperse more widely across the country.

People no longer have to live in the Valley to work there. As a result, the distribution of stakeholders is slowly moving out of California to other areas.

If the working-from-home trend continues after the pandemic has finally subsided, as many observers believe it will, it offers a broader talent pool for startups and the potential for more diverse hiring practices, especially for early-stage employees.

How Lightspeed is responding

It’s often said that you can’t change what you can’t measure. Carta’s equity surveys are a small but necessary step toward creating a more level field of ownership.

But all of us have a responsibility to take action. At Lightspeed, we’ve been asking ourselves what we can change and how we can change, and we’ve begun taking steps to address some of the racial and gender inequities across our industry:

We’ve had an internal DEI team working for the last 4 years with the goal of diversifying Lightspeed and our broader ecosystem — to measure who has a seat at the table, and who is missing. Over that period, females have founded 33% of the consumer companies we have funded, and female investing partners now make up 1/3 of investment professionals at our firm. We recognize that we still have a long way to go, and that diversity means so much more than gender.

Our Lightspeed Scouts program is focused on identifying and encouraging young investors from under-represented minority (URM) communities. This year Lightspeed has provided funding and guidance for more than 40 angel investors from diverse backgrounds, half of them women.

We are in our second year of hosting virtual town halls focused on social inequities featuring leaders from government, entertainment, healthcare, sports, and more. Our most recent town hall, hosted by Lightspeed Partner Mercedes Bent and Lightspeed Scout Jason McBride, included US Senator Corey Booker, San Francisco Mayor London Breed, rapper Chris ‘Ludacris’ Bridges, and former US Surgeon General Dr. Regina Benjamin.

In February we’ll be hosting a virtual event for PoC board members. We hosted our first board event in January 2020 which you can read about here: Building Tomorrow’s Board Room, Today. If you’d like to join the conversation, send an email to events@lsvp.com and we’ll add you to the list to receive news about upcoming events.

There is still much work to be done. The Table Stakes report https://tablestakes.com/study/ identifies more than a dozen organizations working within the Valley to drive changes in the ecosystem. #Angels have laid out proactive steps founders, executives, VCs, and other investors can take to increase diversity in their ranks and narrow the wealth gap.

Together we can make a difference. And the sooner we start, the better.