Firms with Human Capital Strategies More Likely to Have Diverse Teams

Although women comprise nearly one-half (45 percent) of the total venture capital workforce, few are in investment decision-making positions, according to a new report released  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 venture capital 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 U.S. 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 venture capital 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.

Importantly, the survey findings also indicate that the presence of a human capital strategy, as well as talent programs, such as recruitment or mentorship, drives greater diversity on VC teams.  This data will help guide the future programs of NVCA.

“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,” said 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,” said James Atwell, national managing partner, Technology & Emerging Growth Company practices, Deloitte & Touche LLP.  “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.”

Women in Venture Capital
While women comprise 45 percent of the venture capital 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 venture capital.  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.