VC report starts diversity dialogue
While women and minority venture capitalists are still few and far between, the industry is making some progress — particularly by admitting that diversity is an issue — according to the National Venture Capital Association’s first report on the subject.
It’s been a year and a half since the NVCA launched its Diversity Task Force, making it an official priority to broaden the pool of investors — typically white men — who fund Silicon Valley’s tech industry. During that time, former Kleiner Perkins Caufield & Byers partner Ellen Pao lost her high-profile
gender discrimination trial against the storied Silicon Valley VC firm, and investors and tech companies have faced mounting pressure to diversify their teams.
On Wednesday, the NVCA task force released its inaugural report highlighting the steps the association and its member firms have taken toward that end. The NVCA hasn’t set specific diversity goals, nor does it hold its member firms accountable to promises to include more women and minorities, the report illustrates a shift in the conversation and a growing realization that the status quo must change.
“To change the ratio of the business will take a fair amount of time, and that’s why, to me, this is the beginning,” Venky Ganesan, chairman of the NVCA board and managing director of Menlo Ventures, said in an interview. “This is the opening of the discussion. But what I think is gratifying is people recognize its importance.”
Women make up 11 percent of VCs, African-Americans make up 2 percent and Latinos represent 1 percent, according to a 2016 study by Richard Kerby of Venrock. His data, referenced in the NVCA report, show 67 percent of VCs are white men.
But unlike large tech companies such as Facebook and Google, which are pressured to release regular statistics on the diversity of their workforce, the VC industry can be opaque about its partner demographics. The NVCA task force is hoping to change that by launching a survey of firms across the country, with the results expected this fall.
Last year, 45 VC firms pledged to advance opportunities for women and minorities, making the promise in a letter to President Barack Obama during White House Demo Day. And some firms have made strides toward that end. Sand Hill Roadbased Battery Ventures promoted its first woman partner — Chelsea Stoner — to the top role of general partner in 2014.
“I’m very proud to be a general partner at the firm and worked very hard to get here,” Stoner wrote in an email. “But obviously, the entire venture industry has more work to do on this front.”
Last summer, Intel’s VC arm announced the launch of its $125 million Diversity Fund, dedicated to investing in tech startups run by women and minorities. Earlier this year, Mountain View-based accelerator 500 Startups hired its first African-American venture partner, bringing on Black Founders Executive Director Monique Woodard. Other firms, including Foster City-based Scale Venture Partners, have adopted a version of the “Rooney Rule” — a rule that requires NFL teams to interview minority candidates for top coaching and management positions. True Ventures, with offices in Palo Alto and San Francisco, launched a fellowship last year geared toward women seeking their first full-time job at a startup.
Other moves are less public. Kate Mitchell, cofounder of Scale Venture Partners and co-chair of the NVCA Diversity Task Force, said the Pao trial last year made her re-examine how her own firm was run. When it came out that Kleiner Perkins’ employees may not have had access to an official firm discrimination policy, Mitchell realized that her firm, like many small companies, didn’t have such a policy either. So she quickly had a policy drafted and is planning to post a template for other VCs to copy.
As one of the few women investors in the industry, Mitchell said she’s often struggled to have her voice heard at meetings. But she can see evidence of concrete steps in the right direction: “You see all these firms making commitments to do things differently than they are doing today.”
Wayne Sutton, founder of Change Catalyst, a San Francisco-based company focused on diversifying the tech ecosystem, called the NVCA report a helpful tool that showcases the “great work” being done in the field. But now the member firms need to use their money to back up their words — less than 5 percent of VC funding goes to women, African-American and Latino founders combined, Sutton wrote in an email.
“It’s time for NVCA members to dedicate more money to funding underrepresented founders,” he wrote, “and to expand beyond their traditional pattern matching of founders.”