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RESEARCH TRIANGLE PARK – The venture capital industry is slowly and steadily addressing long-stand issues such as lack of diversity, according to a new survey. And a key to improving representation for women as well as people of color is a firm having a committed DEI, or diversity, equity and inclusion, policy.

So report the National Venture Capital Association, Venture Forward and Deloitte.

“Many VC firms across the ecosystem have been prioritizing DEI and it was encouraging to see the high uptick in firms participating in the 2020 survey compared to 2018,” said Bobby Franklin, CEO of NVCA. “Firms acting with urgency and intentionality are leading the way. Overall, the industry is moving in the right direction; however, the representation of women and people of color in investment decision making positions remains low. We hope firms can use the survey results to reassess and prioritize human capital strategies to accelerate industry progress.”

The VC Human Capital Survey found: that more than two-fifths of VC firms surveyed have a diversity strategy (43%) or an inclusion strategy (41%). That’s a big jump 2018, when 32% and 31% of firms surveyed, respectively, reported having either a diversity or an inclusion strategy.

According to the survey, companies that have a DEI strategy say that 25% of investment professionals are women compared to 20% at firms surveyed with neither strategy.

Also, 5% of investment professionals were Black employees at firms with one or both strategies compared to 3% at firms with neither strategy, the survey noted.

Some key findings:

  • Nearly one-quarter (23%) of investment professionals in the industry are women, up just two points from 21% in 2018.
  • Women also hold slightly more senior-level roles at VC firms, representing 16% of investment partners today compared to 14% in 2018
  • The greatest increase was recorded among junior-level female investment professionals, where representation increased to 33% (up from 28% in 2018).

VC Human Capital Survey chart

Female employees represent:

  • 24% of those who originate deals
  • 21% of those who represent the firm on the boards of portfolio companies
  • 21% of firm investment committee members and 18% of management company owners.
The minoirty picture not as good

However, racial and ethnic minorities may not be benefiting from DEI efforts at the same rate as other demographics, NVCA and its survey partners noted.

“[P]rogress for racial and ethnic minorities was limited and even retrenched in some instances,” they reported.

Key points:

  • VC firms reported 4% Black investment professionals (compared to 3% in 2018)
  • Firms said 4% Hispanic or Latino investment professionals (down from 5% in 2018).
  • The percentage of investment partner positions held by Black employees was 3% (unchanged from the prior survey)
  • Hispanic or Latino employees accounted for 4% of investment partners (compared to 3% in 2018)

“Low turnover at firms, long investment cycles, financial risk, inherent industry failure rates and a network-driven ecosystem have made entering and succeeding in VC a challenge for anyone, but particularly for those from historically underrepresented groups,” said Maryam Haque, executive director of Venture Forward.

VC Human Capital Survey

What’s next?

“The VC industry carries a great social responsibility to champion DEI,” said Heather Gates, audit and assurance managing director, Deloitte & Touche LLP and audit and assurance private growth leader. “VC firms may need to go beyond simply increasing the number of members of underrepresented groups in different types of positions if they are to build a workplace environment and culture that is truly inclusive. VC firms should be looking across the VC lifecycle and stakeholders with a critical lens and strong appetite to drive systemic change.”