Keynote Address: Theresia Gouw

Read Theresia Gouw’s keynote address to the graduating Class of 2022 and returning PhD Class of 2020 at their joint graduation ceremony on Sunday, June 12, 2022.

Good afternoon. Dean Levin, Board of Trustees, GSB Advisory Council, distinguished faculty and administration, and Class of 2022. Thank you for having me, I’m honored to be here. I’m not gonna lie, I’m a little terrified.

I’ve given a lot of speeches in my life, but this is my first commencement speech. And I’ve been told I am the first Asian American immigrant to do so. Zero pressure. I was in panic mode until, suddenly, it dawned on me… I have no idea who spoke at my GSB commencement. Which means soon enough — you likely won’t remember who spoke either. That took some pressure off.

Even if you don’t remember my name, I hope you remember what I talk about.

I want to talk to you about wealth. Specifically your wealth. And how you and your future companies can create a lot of it.

A whooole bunch of you just started paying attention.

The reason I want to talk about wealth is because I know you’ll be involved in creating great value for many people. How do I know this? Look at where we are: You’re sitting in the tech epicenter of Silicon Valley about to graduate from the best business school in the world. Your location and education practically guarantee that you will have an impact on shareholders and wealth creation. I have a few tips on how best to do that.

My job as a venture capitalist investing in tech startups gives me a unique perspective. Venture-backed companies have been the largest engine of job and wealth creation in the U.S. When I sat where you are, I never imagined I would be part of an ecosystem that resulted in creating trillion-dollar market value companies, and in the process making many shareholders incredibly wealthy. The idea of working in venture wasn’t on my radar before I attended the GSB.

I was born in Jakarta, Indonesia. My parents and I immigrated to the U.S. to escape persecution of the ethnic Chinese after political regime change. We eventually ended up in New York. Middleport to be exact. I’ve barely heard of it and I lived there for 12 years. (It’s a tiny village outside Buffalo by the way.)

When we first arrived in the U.S., my parents worked at my uncle’s Chinese restaurant as a dishwasher and waitress until they were able to put my dad through dental school and open a practice. My mom became his office manager. My parents worked tirelessly so my younger sister and I could have a better life and live the “American Dream.” They sacrificed a lot — they expected us to work hard in return. I remember in middle school, when I got an A-. My dad was not happy. I was like, “Dad, that’s a pretty good grade!” He said: “Theresia, an American A- is a Chinese F!” I was tempted to reply that the correct phrase was a B is an Asian F… but fortunately for me, I held my tongue.

My parents’ encouragement paid off, I was accepted to Brown University and graduated with highest honors in engineering. I went on to do a host of things — including getting my MBA right here. What my CV doesn’t tell you, is along my journey… I was often the only woman in the room.

If you’ve ever been “the only” anything, you know it comes with challenges — but also opportunities. It can be challenging to feel like you’re on an island. But it’s also an opportunity to bring a different lived experience to the discussion — to make it richer and disrupt stereotypes. TV shows like “Succession” and “Billions” depict successful American businesses run by rich patriarchs. This stereotype needs busting. Especially because many recent studies show that companies with gender and ethnically diverse teams outperform homogeneous companies — by a significant margin. I’ll get to that supporting data.

First, let me give you a parallel on wealth creation you already understand: equity in home ownership. We know home equity is the largest source of wealth for the average American. We also know that access to capital for homes — mortgages — is NOT equally accessible, that the rate of mortgage approvals differs significantly for POC and women, especially Black home buyers. This issue is known, and we’ve created laws to address this problem. Even after making practices like red-lining illegal, the legacy of neighborhoods of sameness persists.

Today, the second greatest source of wealth for most Americans is their stock portfolio in the form of IRAs. While these investments generally do well in the long term — there’s actually another problem with equity and access. Most Americans’ investments are in publicly traded companies. Access to equity ownership in private companies is where real wealth, generational wealth, is built. Not the 5% annual return — maybe not this year — over the long run, in your IRA.

The five largest companies in the U.S. in terms of market value — Apple, Microsoft, Google, Amazon, and Tesla — were all, venture-backed, private, tech startups. Long before they became household names… they were startups. Looking for investors. Those they found, the partners who secured significant equity ownership in these companies when they were still small and private, had one thing in common. They were largely homogenous.

This is a problem for many reasons.

For one, it widens the wealth gap — which we understand clearly to be a problem when it comes to things like home and equity ownership. It creates widely different neighborhoods both physically and in terms of wealth.

Secondly, it limits future investments to whatever that one group of homogeneous people cares about or who they know — which perpetuates a cycle of “more of the same.”

Third, and perhaps most importantly, homogeneous ownership actually limits wealth creation. As I said earlier, more diverse companies actually generate more wealth and perform better.

That’s the second time I’ve made this statement, let me back it up with something I’m fond of: data. Three separate McKinsey studies looked at 1,000 major companies across 12 countries. Their findings were the same each and every time: Companies with gender and ethnically diverse executive teams and boards increased their returns to their shareholders as measured by ROE by 25–35%. That’s significant. McKinsey’s not the only one. Similar findings have been reported by Google, Forbes, The Wall Street Journal, and many others.

Taking that data in, here’s the big question: What can you, as tomorrow’s business leaders, do? Two simple tips:

Build a diverse company culture up front.

When you’re creating companies, you might think that the best approach is to hire people already in your network. In GSB-core-speak, you’d be hiring based on “propinquity and proximity.” While this approach may be the fastest to build a company, it may not produce the best long-term results. A Catalyst study shows creating diverse teams — from employees to executives — increases your company’s chance of success. Google’s study produced similar results. Workplaces that foster inclusive teams with diversity in gender, ethnicity, LGBTQ+, and lived experiences retain employees at a higher rate and for longer. They’re also more innovative and financially successful.

This impacts products too. We’ve heard about facial recognition software and problems analyzing darker skin tones. Did you know when Apple created the initial iPhone prototype, many women beta testers struggled to use the touch screen because of their long fingernails? These examples show a more diverse team creating these products might have caught these oversights earlier — saving companies time and money.

Diversity matters on the executive side, too. During the decade I served as a managing partner at Accel, I was often told by entrepreneurs I was the only female partner they had ever met during their fundraising — at any venture firm. I knew this had to change.

It’s one of the reasons my current company Acrew is diverse across gender, ethnicity, and generations… Our diversity of lived experiences and perspectives is front and center in our core tenet resulting in a diverse network of contacts and potential companies to invest in. When entrepreneurs ask us to connect them with diverse talent, which they increasingly ask and value, we more easily make those connections than the average venture firm. Our commitment to diversity drives our own success too. My GenZ partners often have a totally different take on a company than I do. We’ve learned that both opinions are critically important to avoid falling into groupthink.

Building diversity into your team from day one is a real advantage. When you provide equity to that diverse team, you are systematically diversifying access to who has equity shares in your private firm — which gives a much broader set of stakeholders the potential to create generational wealth.

The second is: seek diverse investors.

When you raise money for a venture fund or your startup — as with hiring — the fastest thing to do is talk to people already in your network and who can invest a minimum check to get to your goal faster. But, requiring a minimum investment excludes many. Universities that have multibillion-dollar endowments, like that Other business school, have been investing in venture for decades and reap its rewards. Venture, though very volatile, over the long-term has been the best performing asset class for endowments. Meanwhile institutions with much smaller endowments — who cannot afford to meet minimums — like HBCUs — have been locked out. It’s a Catch-22. Great wealth can be generated by investing in venture, in order to invest in venture, you need… great wealth.

This predicament is part of what led me to start Acrew’s Diversify Capital Fund. With DCF, our goal was to increase diversity in the people who invest in our funds. In order to do that, we decided to lower our minimums and be intentional about including more individual executives. I’m proud to say 70% of DCF’s capital is from diverse individuals and diverse-led institutions. One of which is Fisk University, an HBCU in Nashville. The Fisk Jubilee Singers are why Nashville’s called “music city.” It was founded 165 years ago, and has never before had the capital to participate in a venture fund. They’re not alone. My own research into this problem compelled me to donate several million dollars to Fisk and other DEI-aligned entities so they could invest in venture. We have to level the playing field.

Of the 300+ individual investors, most of whom are entrepreneurs, executives, and leaders in their fields, we’re proud to say that over 85% identify as underrepresented. If this doesn’t surprise you, maybe this will: Over half of DCF’s individual investors are participating in a venture fund for the first time. Why? Largely because these CEOs and founders were never before asked to participate! Acrew was the first fund to invite them — even though they’re seasoned executives and repeat founders! I don’t think my fellow VC fund leaders intentionally excluded these amazing executives. If we want to improve access to wealth creation and equity ownership in tech companies, the same way we want to improve access to equity ownership in homes, we simply cannot accept unintentional exclusion.

I admit, creating DCF was slightly longer than if we had reached out to our existing networks. But it was more than worth it. Our fund proves the “pipeline problem” is a myth. In a matter of several months, we found 270 underrepresented executives who are leaders in their fields and were willing to write checks in venture funds!

The bottom line: Inclusion’s a choice… that pays significant returns to you and all of your shareholders. You can quote me on that — if you can remember my name.

Even if you can’t, that’s okay. Quote my advice: As you go into the world and create wealth for yourself and others, build diversity into your company from day one, and seek diverse investors. These two simple tips will create a richer you, yes, but more importantly, a richer world — where access to generational wealth is democratized and diversity and greater opportunity become the norm.

I’m fully committed to intentional inclusion because I know it benefits all stakeholders. I hope I’ve convinced you to join me so TOGETHER, we can live out the GSB motto: change lives, change organizations, and change the world! Congratulations graduates!