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Lack of women and minorities in senior investment roles at venture capital firms
VC firms with human capital strategies more likely to have diverse teams
Washington, DC, December 15, 2016— Although women comprise nearly one-half (45 percent) of the total venture capital (VC) workforce, few are in investment decision-making positions, according to a new report released today by the National Venture Capital Association (NVCA) and Deloitte. Based on the findings of the first ever NVCA-Deloitte Human Capital Survey conducted by the Deloitte University Leadership Center for Inclusion, women represent 11 percent of investment partners or equivalent on venture investment teams.
Racial minorities are also significantly underrepresented across the VC industry, according to the survey. By race, the report found that non-white employees comprise 22 percent of the VC workforce, including black employees at 3 percent and Hispanic or Latino employees at 4 percent.
In addition to assessing the demographic makeup of the venture industry, the NVCA-Deloitte Human Capital Survey gauges the adoption of talent management practices and diversity and inclusion programs at venture firms, as well as the extent to which those programs lead to more diverse teams.
“The survey results reinforce what we already know, which is that the venture industry is not representative of the overall population of the US transparency is a powerful force for change, and we now have a clear benchmark by which we can measure progress to create a more inclusive VC industry,” said Bobby Franklin, president and CEO of NVCA.
“For the first time, we have a comprehensive picture of the industry as well as a better understanding of existing programs to support diverse teams. Research shows that diverse teams make better decisions and, with this baseline measurement in hand, we now turn to developing the tools and resources that will empower all venture firms to take action,” Franklin said.
The fact that the NVCA is examining D&I through in-depth analytics gives them the opportunity to identify target areas they want to focus on rather than a more ‘peanut butter’ approach which we know is a failed strategy.
- Christie Smith, PhD managing principal, Deloitte University Leadership Center for Inclusion & Community Impact, Deloitte LLP
What’s key for the future success of venture firms is instilling a culture of inclusion and implementing human capital programs and policies that foster and enrich the composition of a diverse and inclusive talent model that encourages individuals to be their authentic selves in their careers. Our survey indicates that firms that have a human capital strategy have a higher percentage of female and minority employees overall, and we know that having a diverse workforce can improve business performance. Addressing diversity and inclusion in the workplace is a tremendous opportunity for venture capital firms.
- James Atwell, national managing partner, Technology & Emerging Growth Company practices, Deloitte & Touche LLP
Women in venture capital
While women comprise 45 percent of the VC industry, findings show significant differences by firm size, location, and investment focus. In general, the smaller the firm, the smaller the percentage of women on teams. For firms with five team members or fewer, women comprise 29 percent. For firms with 6–20 team members, women represent 41 percent of the workforce. In firms with 21 or more team members, women comprise 47 percent of team members.
According to the survey findings, women are consistently overrepresented in administrative functions and underrepresented in investment functions. Women comprise 95 percent of administrative roles; 75 percent of investor relations, communications, or marketing roles; yet only 15 percent of investment professional roles. Looking specifically at investment partners or equivalent on investment teams, women comprise only 11 percent.
Minorities in venture capital
Racial and ethnic minorities comprise a smaller proportion of the venture workforce than women overall. According to survey findings, non-white employees comprise only 22 percent of the venture industry. However, not all ethnicities have the same experience in VC. Black employees comprise 3 percent of the venture workforce, Hispanic or Latino employees 4 percent, and Asian/Pacific Islander employees 14 percent.
By role within their firms, black team members comprise 2 percent of investment professionals; 3 percent of finance roles; 3 percent of investor relations, communications, or marketing roles; 4 percent of administrative roles; and 5 percent of operations positions. Further, 2 percent of senior positions across all functions are filled by black team members, compared to 4 percent of junior positions.
Looking specifically at investment partners or equivalent, survey results found no black investment partners in the sample. However, it is important to note that while the firms in our sample did not report any black partners, this does not equate to a zero number of black investment partners working across the industry.
Impact of talent strategies
Survey findings show a strong correlation between the existence of human capital strategies at venture firms and representation of women and minorities at those firms. Firms that have a human capital strategy have an average of 54 percent female and non-white employees overall, while firms without a human capital strategy have an average of only 41 percent female and non-white employees.
Moreover, findings suggest that the existence of a human capital strategy translates to better representation of women in senior positions across all functions. Firms with a human capital strategy have 4 percentage points more women in leadership than those without a strategy, firms with a diversity strategy have 10 percentage points more women in leadership than those without a strategy, and firms with an inclusion strategy have 7 percentage points more women in leadership than those without a strategy. Similarly, firms with a human capital strategy have 13 percentage points more minority employees than those without, firms with a diversity strategy have 12 percentage points more minority employees than those without, and firms with an inclusion strategy have 14 percentage points more minorities than those without.
Examinations of relationships between formal mentorship and recruitment programs and the representation of women in senior leadership positions at venture firms revealed that firms with formal mentorship programs have 16 percentage points greater representation of women in leadership and firms with formal recruitment programs have 9 percentage points greater representation of women in leadership.
Download the full report NVCA-Deloitte Human Capital Survey Report.
In-depth survey insights via an interactive dashboard
In addition to the report, NVCA and Deloitte have developed an interactive dashboard to drill deeper into the survey results. Users can create their own analyses of the survey findings to determine the demographic makeup of the industry by firm (e.g., size, location, firm age, etc.) and team members (e.g., age, gender, education, etc.).
View the dashboard of diversity and inclusion in the VC industry.
An email was distributed to 1,336 VC firms, including NVCA members, asking them to participate in the study. Firms had the option to complete the assessment one of two ways: through a web-based survey, or through an identical Excel workbook. Each firm assigned a representative, such as their CFO, GC, or HR manager, to complete the survey and provide information for every employee. Employees were not contacted to respond individually. The survey was open from July 20 through August 23. In total, 217 firms completed the survey, providing a 90 percent confidence level that the study is representative of the entire VC population.
About the National Venture Capital Association
Venture capitalists are committed to funding America’s most innovative entrepreneurs, working closely with them to transform breakthrough ideas into emerging growth companies that drive US job creation and economic growth. As the voice of the US VC community, the National Venture Capital Association (NVCA) empowers its members and the entrepreneurs they fund by advocating for policies that encourage innovation and reward long-term investment. As the venture community’s preeminent trade association, the NVCA serves as the definitive resource for VC data and unites its member firms through a full range of professional services. For more information about the NVCA, please visit National Venture Capital Association.
Deloitte provides industry-leading audit, consulting, tax, and advisory services to many of the world’s most admired brands, including 80 percent of the Fortune 500. Our people work across more than 20 industry sectors with one purpose: to deliver measurable, lasting results. We help reinforce public trust in our capital markets, inspire clients to make their most challenging business decisions with confidence, and help lead the way toward a stronger economy and a healthy society. As a member firm of Deloitte Touche Tohmatsu Limited, a network of member firms, we are proud to be part of the largest global professional services network, serving our clients in the markets that are most important to them. Please visit www.deloitte.com for more information.