In the 2025 season arc, it should surprise no one that corporate diversity, equity, and inclusion (DEI) programs were at the top of the call sheet. Such efforts have been a pet peeve for many CEOs like Meta’s Mark Zuckerberg who blamed Sheryl Sandberg, former COO, for pressuring Meta to implement DEI programs. How on brand to blame a woman! Further, it’s been a chief talking point on the political right for a while now. With Trump returning to office and tech CEOs writing seven-figure checks for the inauguration taking place today, DEI is on the chopping block. In fact, one of President Trump’s first Executive Orders will be to end DEI practices across the federal government.
Costco started the year with a glimmer of hope, declaring in no uncertain terms that the company would not be walking back its DEI efforts. Apple followed shortly after. Predictably, headlines and hot takes followed.
PayPal Sued for Discrimination
However, an even subtler, but equally important development, emerged when Nisha Desai, founder of Andav Capital, recently sued PayPal over its DEI program.
In the wake of the 2020 Black Lives Matter protests that gripped the US after the police murder of George Floyd, PayPal put up $500M for an Economic Opportunity Fund (2% of their revenue in 2020) and devoted $100M to invest in several black-led funds, a much-needed injection of capital. According to TechCrunch, Andav Capital had launched two years prior and was denied funding from PayPal’s program. When Desai met with the fund’s representatives, she said she was informed that she was turned down – not on merit – but because she was Asian.
One-Off Initiatives Don’t Solve DEI
The lawsuit against PayPal offers an instructive example of how many of Big Tech’s DEI programs have been set up to fail. Instead of addressing the root of the problem of why 1% of funding goes to Black and Latino-led startups, and how that lack of funding was squashing innovation, Big Tech launched separate initiatives and funds. These separate one-offs essentially pitted underrepresented founders and emerging fund managers against each other, creating even more oppression, when more support and collaboration was needed most.
A more successful strategy would have been for Big Tech to start by re-examining how they source and select startups and other funds to back for their main funds — one of many viable solutions to the problem — rather than creating separate one-off programs, and address it head on from there.
For example, they could have taken a deep look at their pipeline and asked:
- If our fund focuses primarily on taking warm referrals from existing portfolio founders and fund managers who tend to be white, what other networks should we build relationships with? How do we open our doors to cold intros more effectively and be more responsive?
- If our fund is only recruiting from certain MBA programs where 90% of the graduating class are white, what other schools and programs should we tap?
- If our fund has conscious and unconscious biases in our investment decision-making processes, how can we break those patterns and what experts can we hire to help us go through this process?
After examining the holes in their investment strategy, a plan could have been developed and iterated on to invest in underrepresented founders and funds from their main fund.
PayPal’s response to the global reckoning over racism was not unique. Many Big Tech companies had a similar response, which (unintentionally or not) reinscribed racism. (A similar response happened during the MeToo movement concerning sexual harassment). They assumed that Black and brown people had put themselves in harm’s way and forced a critical conversation for the sole purpose of securing a competitive advantage – of being ushered to the front of the line. The notion that they were calling to dismantle decades of racist and discriminatory-based practices and to level the playing field, for everyone, seems to have not been understood.
The fact that this ended with PayPal being sued by a woman of color was the most predictable outcome because Big Tech in general has fundamentally misunderstood the problems they were seeking to address with DEI.
Big Tech’s misunderstanding of DEI didn’t just fall from the sky. After all, the surest path to getting something spectacularly wrong is not caring about it to begin with. Many of Big Tech’s DEI initiatives were the Steve-Buscemi-with-a-skateboard meme of social impact programs; squinting at #BlackTwitter long enough to do a bit of refrigerator-magnet poetry, then placing a cynical bet on DEI marketing. Substance and truly making tech anti-racist was never the point.
Of course, all of this will be used as fodder for anti-DEI discourse, since it’s been set up to fail anyway, and assassinate the character and credibility of critical voices who have been pitted against each other in many ways in the startup and VC world.
The lawsuit against PayPal is important because it shows that just launching a separate fund or program to address DEI doesn’t solve the root of the problem. Diversity, equity and inclusion need to be truly integrated into the core of our work – starting with how we work.
Retooling Investment Strategies to be Inclusive
In reality, this legal battle illustrates the intellectual dishonesty driving the anti-DEI crusade in the name of equality. Even when pandering to equality, very few in positions of concentrated power are truly interested in meaningful transformation. Such shifts would require Big Tech CEO’s and General Partners at large funds to actually do hard, transformative work. It would require them to retool their strategy and practices to welcome underrepresented founders and fund managers and to give them seats at the main table and fund them to help solve some of the thorniest problems in the world.
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