Silicon Valley needs to figure out how to promote women and people of color. Andreessen Horowitz is doing that by changing one of its founding rules. | Innovation & Feature

The high-profile venture capital firm has elevated Connie Chan to general partner — and scrapped a rule that the firm candidly admits was outdated.

During its first decade of existence, Andreessen Horowitz — one of Silicon Valley’s premier venture capital firms — held fast to a seemingly minor rule about the types of people who comprised its top investors: To become a general partner, you had to have founded or led a company as CEO. No exceptions.

But amid the broader conversation nationally — and in Silicon Valley specifically — about gender diversity, the firm earlier this year quietly scrapped a rule that its critics said, unintentionally or not, made front-of-the-pack partnerships like Andreessen Horowitz’s just a collection of (mostly white) guys.

The firm said today it was elevating Connie Chan, a well-regarded expert on the intersection of Chinese and American tech trends, to general partner. It’s the first time the firm has internally promoted someone to that post, or the level when an investor leads their own deals and splits the firm’s profits.

“When I first started at the firm, I didn’t think this was a path,” Chan said in an interview with Recode.

The rule change amounts to some inside baseball, but it also speaks to how venture capital firms — powerful institutions that control which types of people and ideas get funded and which don’t — are changing. Due to Andreessen Horowitz’s big profile, the rule has been frequently criticized in hushed tones in Silicon Valley by diversity advocates as an example of the types of hurdles that women and minorities face professionally.

The firm isn’t saying the change was a reaction to those concerns, though Chan did say the change was a “testament” to how Andreessen Horowitz managed to move with the times. Last month, the firm announced it had hired Katie Haun — also not a founder or a CEO — as its first female general partner.

Jeff Jordan, a longtime Andreessen Horowitz general partner, described the rule to Recode as initially useful for the firm — which was only founded in 2009 — as it battled the existing, dominant venture capital players in its early days.

But now? It limits their pool of talent, he said.

“When we were out there looking for [general partner] candidates, I found myself comparing them to Connie,” Jordan said. “Frankly, Connie’s abilities and track record compelled us to do this.”

The firm is being pretty candid and forthcoming about how the rule grew to be outdated. For more, here’s two excerpts from firm co-founder Ben Horowitz’s blog post on Chan’s promotion:

I felt an immediate conflict with where she was going and the way we had constructed the firm. When we founded the firm, we made a brand promise that if you raised money from us, we would put a Founder or CEO of a significant technology company on your board. That was our General Partner requirement, because we were determined to be the best place for technical founders to learn how to be CEO. To make good on the promise, we built the most powerful platform for giving founders a big time CEO-like network from capital markets to talent to big company customers to the press. On top of that, we committed to putting someone on the board who could help develop the CEO skill set. Finally, we wanted everyone in the firm to culturally understand the struggle of building a company. These were great ideas, but it meant that we did not promote General Partners from within. And in my heart, I knew that one day we would have to promote Connie or miss out. The thought was making me a little insane.”

…

“Fortunately, as things evolved, our culture became stronger than the GP no-promotion rule. Everyone in the firm became all about the entrepreneurial struggle and helping founders grow into CEOs. Founders didn’t just get a person; they got a platform. The old rule started to seem dated and out of place. So, four months ago we dropped the criteria and the promotion rule.”