The diversity agenda for Venture Capital

DiversityResearch just released by Extend Ventures on the funding gap facing diverse founders shows the huge challenge facing the world of Venture Capital (VC).

As a female Venture Capitalist who has worked in male-dominated industries for the majority of my career, I support the increased focus on diversity and inclusion in the investment space. Not only do VC Funds have a responsibility to encourage diversity within their organisation, but as mentors, they must also set an example for their portfolio companies.

After all, a VC is in a unique position to be able to guide and advise their investee companies in the very early stages of their development so that these practices don’t become increasingly harder when the culture of the organisation has been cultivated.

There is a growing spotlight on the lack of female founders and interns in the industry. Diversity VC demonstrated that 65% of London venture funds have all-male decision-making teams and 39% have no women at all. Morningstar’s quantitative research also shows that by the end of 2019, only 14% of fund managers globally were women, with no change in this percentage for almost twenty years.

Access to capital remains a significant issue for female founders. Extend Ventures, which surveyed start-up founders between 2009 and 2019, found that nearly 70% of money raised went to all-male teams with just 2.87% going to all-female.

As well as gender equality, providing opportunity for under-represented groups of society is crucial. The survey showed that all-ethnic teams received 1.7% of VC investment over the given period. Research by The CFA Society of the UK further reveals that only 35% of investment professionals agreed that their company was doing enough to recruit from racially diverse backgrounds. These figures need to change.

At Sure Valley Ventures, we have invested in tech start-ups with female founders, including Nikki Lanen, CEO of War Ducks, Sandra Whelan, co-founder of VR Education and Anita Finnegan, CEO of Nova Leah. We believe that it is imperative to have more female role models in the industry, as well as making women more visible.

Firms in the industry need to help companies to recognise unconscious biases, increase diverse mentorship and build a powerful and inclusive network. Another important contribution that VC investors can make is to help with talent recruitment by leveraging their own networks to provide more diverse leadership candidates to the companies they are investing in.

VCs must be committed to promoting diversity both in the fund and within their own organisations in order to level the playing field and build a more equitable tomorrow. We continuously track diversity and inclusion throughout our deal flow to better assess how we can improve this.

On gender-based diversity we are tracking well with 56% of investments in our current portfolio being female founded or co-founded teams. Female members of the team are encouraged to become members or take advisory positions and promote mentoring initiatives such as the 30% Club, Level 20 and Enterprise Ireland Mentorship programme. We are also involved with Playfair Capital’s Female Founder Office Hours, which has brought together 300 founders with over 80 investors to date.

However, there is still plenty of work to be done. Our next recruitment protocol will look very broadly across non-traditional backgrounds for VCs. And within the fund, we will do more to help our start-up companies create policies internally for more diverse recruitment. As we grow, the team is constantly monitoring and looking to implement new initiatives and policy recommendations to portfolio companies regarding diversity and inclusion.

Despite the huge amount of change needed, there is an increasingly greater availability of resources online such as Diversity VC’s Diversity & Inclusion in Tech, which is compiled by VCs and founders and provides useful guidelines. SoftBank’s $100 million Opportunity Fund is another promising industry development, targeting visionary start-up founders of colour.

Analysis now shows that diverse groups outperform those with no gender or ethnic minority team members by an average of 20 base points a year. Diversifying recruitment will therefore significantly help to accelerate growth for both start-ups and VC funds themselves.

As investors in the technology of tomorrow, VCs have a responsibility to help rectify the lack of access to investment for under-represented groups of society. Amplifying the diversity agenda should be crucial for any player in the VC industry and as research shows, this can have a real impact on growth and development.

About the author

Isabelle O'KeefeIsabelle is a Principal at Sure Valley Ventures where she focuses on identifying and evaluating investment opportunities in areas including AR/VR, IoT and Fintech. Her previous experience has been working across the telco, technology and media sectors in London, Madrid and the Nordics.

Immediately before joining Sure Valley she worked at the Barclays Fintech Accelerator Programme powered by Techstars, working closely with start-ups and helping them to build and grow their businesses. During her career she’s been involved in numerous deals and investment decisions helping to identify potential investee companies.

 


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