Taking stock of the VC industry’s progress on diversity, equity and inclusion – ClearTips

Taking stock of the VC industry’s progress on diversity, equity and inclusion – TechCrunch

Let’s be clear: the venture capital industry lacks diversity. The good news is that the industry is working to improve itself.

To start as an industry, venture capital can only measure what we measure. In 2016, we set out to develop a rigorous methodology for tracking progress on diversity, equity and inclusion (DEI) in venture capital and to measure and benchmark those data through our biennial VC Human Capital Survey.

The goals of the survey – run by the National Venture Capital Association, Venture Forward and Deloitte – are to collect demographic data on the VC workforce across all firm types, sizes, stages, regions and geographies, as well as trends on firm talent management . Recruitment Practices. We have learned that progress can be slow and may seem discouraging, but we have also caught evidence that diversity (and a firm practice to pursue diversity) is increasing in some areas, even That other areas have unfortunately not seen the same pace of change.

To start as an industry, venture capital can only measure what we measure.

We surveyed in 2016, 2018 and 2020, and released the results of the third edition last month, with data collected from 378 firms (as of June 30, 2020), a significant increase from 203 participating firms in 2018. In addition, more 145 companies signed a #VCHumanCapital pledge to publicly commit to submitting their DEI data.

At a high level, the data showed that improving diversity among investment partners has been driven largely by the hiring and advancement of female investors, while very little progress has been made in equal representation of black or Hispanic investment partners.

However, the demographic composition of junior investment professionals reflects greater diversity and the widespread adoption of diversity-focused talent management and recruitment practices suggests some reason for optimism. The industry still has a long way to go, but here are some key insights and changes identified from the latest survey.

Intentions associated with better diversity

More firms are clearly assigning responsibility for promoting diversity and engaging internally – in 50% of firms a staff person or team works with this responsibility (with 34% in 2018 and 16% in 2016 ). Simultaneously, the strategy of diversity and inclusion has become more widespread; 43% of firms have implemented a diversification strategy (against 32% in 2018 and 24% in 2016), while 41% have an inclusive strategy (31% in 2018 and 17% in 2016).

This intentionally translates the results of improving diversity. Firms with dedicated DEI employees, strategies, and programs achieve greater gender and racial diversity on investment teams and among investment partners. Increased emphasis on DEI is also a trend towards a wider ecosystem. More firms report that limited partners and portfolio companies have requested their DEI details in the last 12 months.

Promoting signals in talent recruitment and development

Venture firms are relatively small and turnover is generally low, but in 2020, 21% of firms reported that their number of senior-level investment positions had increased, while 43% said their number of junior-level positions increased. Has expanded Meanwhile, the demographic composition of junior investment professionals reflects high gender and racial diversity, a positive leading indicator for the diversity of future investment partners.

Overall DEI strategies have become increasingly widespread, and more firms have also developed DEI-focused recruitment and recruitment programs – with 33% of firms having Formal Program while 74% is Informal The programs reflect both have been growing steadily since 2016. Firms were also more likely to report that they typically seek outside candidates for open positions which they did in 2018.

However, firms rely to a large extent on internal networks for recruitment, which often encourage homogeneous hiring outcomes. Between the 2018 and 2020 surveys, little change was shown in the use of narrow recruitment methods to find outside candidates; Informing peers in the VC industry (78%) and informing the firm internally (59%) were the most frequently cited strategies. The exception was posting on third-party websites such as LinkedIn or newsletters, a strategy reported by 54% of firms in 2020 (a substantial increase from 37% in 2018), an opportunity to reach a wider audience of candidates outside of the current Provides. Network.

Assessing inclusion is a challenge

Once talent is on board, inclusive culture and retention become key metrics of DEI progress. More companies are implementing dedicated programs for leadership development, mentoring and retention, with nearly two-thirds reporting Informal Versions of such programs (20 percent more than in 2016) and 20% of firms reporting Formal program.

Assessing inclusion through the VC Human Capital Survey is challenging because we survey one representative per representative, and one person may not speak to the degree of inclusion felt by others. However, we added a new question to the 2020 survey on how companies are assessing themselves to be involved. While 41% of firms have an inclusion strategy, only 26% said they survey their employees to assess inclusion.

Important factors remain important consideration in publicity

Well-structured, consistently applied policies for career advancement are critical to ensuring that diverse talents reach the industry’s most senior decision-making levels. About 20% of firms are reported to have Formal DEI programs are focused on promotions (up from 5% in 2016), while 65% of firms have Informal Program (compared to 39% in 2016).

Although DEI programs focused on staff promotion are more widespread, thematic factors remain an important consideration for promotion decisions, which may lead to uneven and biased results.

Nearly all firms reported that “contribution to the fund’s performance” (90%) and “deal origination” (82%) were very important or important factors to take into account promotion. However, 94% of firms stated that it was very important or important. Subjective factors of this type present significant opportunities for unconscious bias to creep in and may be different from the weights given for more relevant objective measures of performance.

keep the pace

The results of the third edition of our survey are timely, coming on the heels of a year in which social justice and racial equity have been the subjects of sharp national attention, with policymakers seeking to increase access to capital for ineligible communities , And the VC industry have renewed focus on DEI. The survey suggests that VC industry efforts should be focused and at the same time serves as important reminders of the international needs of DEI-focused initiatives.

Data show that progress within a demographic element may be more granular when considering people who represent many marginal communities (for example, the percentage of investment partners who are women has steadily increased, but those Percentage of investment partners who are not women of color).

The pace of DEI progress has been slow and uneven in some areas, but there are reasons for optimism. On April 6, NVCA, Venture Forward and Deloitte hosted a discussion with industry leaders to examine the latest survey results and address DEI challenges, opportunities and strategies for the industry. More firms are prioritizing these constructive interactions, both within their firms and publicly with industry peers. More firms are acting in a collaborative spirit, adopting thoughtful and concrete DEI strategies and acting deliberately and with urgency.

If the industry can continue to build on this momentum and commitment around DEI efforts, we can reach a tipping point that will turn into meaningful progress as reflected in future editions of the survey.

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