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

Let’s be clear: the venture capital industry lacks diversity. The good news is that the industry is working to improve itself. To begin with as an industry, enterprise capital can only improve the way we measure it. In 2016, we aimed to innovate, a strict methodology for tracking diversification, equity and inclusion (DEI) progress in venture capital and measuring and quantifying that information through our biennial VC Human Capital Survey.

Conducted by the National Venture Capital Association, Venture Forward and Deloitte – The survey aims to collect demographic data on VC employees across all types, sizes, stages, sectors and geographies, as well as to recruit talent management and trends to practice.

We’ve learned that progress may be slow and seem discouraging, but we’ve also found evidence that some areas are increasingly increasing legitimacy (and a strong habit of advancing diversity) as other regions have unfortunately not seen the same pace of change. We fielded the survey in 2016, 2018 and 2020 and published the results of the third edition last month, revealing data collected from 378 firms (as of June 30, 2020), a significant increase from 203 participating firms in 2018.

In addition, more than 145 firms have signed the #VCHumanCapital pledge to publicly commit to submitting their DII information. High-level data showed that improvements in diversity among investment partners were largely driven by the recruitment and advancement of female investors, while little progress was made in the equitable representation of black or Hispanic investment partners.

However, the demographic composition of junior investment professionals offers some reasons to be optimistic as it reflects the greater diversity and wide acceptance of diverse-focused talent management and recruitment practices. The industry still has a long way to go, but here are some key insights and changes identified from the latest survey.

More organizations are explicitly responsible for promoting diversity and inclusion internally – 50% of organizations have a staff or team who have delegated this responsibility (34% in 2018 and 16% in 2016). At the same time, diversification and inclusion strategies have taken on a wider dimension; 43% of companies have implemented a diversification strategy (32% in 2018 and 24% in 2016), while 41% have an inclusion strategy (31% in 2018 and 17% in 2016). This intentionality translates into improved diversity results.

Dedicated DII staff, strategy and program firms achieve greater gender and caste diversity in investment teams and among investment partners. Increased emphasis on DII is also a broader ecosystem trend. Further firms reported that limited partners and portfolio firms have asked for their DII details in the last 12 months.