Venture has a diversity problem. And this should come as no surprise to anyone.
The lack of diversity is found in terms of the number of female decision makers, or check writers, at firms, and with the number of female-led start-ups trying to raise capital from the VCs.
I recently spoke with Jenny Abramson, founder and managing partner of Rethink Impact. She’s also an active member of All Raise, which focuses on hiring and investment trends in VC.
Abramson noted that 2020 was a tough year for female and non-binary founders, and it’s especially true for women in underrepresented groups, such as those who are Black or Latinx.
Despite all the anecdotes of what seems like a lot of firms hiring women, only 27 women became what All Raise describes as check writers for the first time in 2020, representing a 50 percent decrease when compared to the 54 hired in 2019. The pandemic no doubt impacted the hiring strategy of firms. But in aggregate, it’s interesting to note that about 41 percent of all new check writers are women, according to All Raise, and this is consistent to recent years. In other words, new female and male partners are both being hired, and the rates haven’t changed much.
Further, All Raise reports racial and ethnic diversity remains a critical missing piece of the puzzle, with just one female check writer who self-identified as African American, and zero Latinx female check writers.
I’ll point out, however, that All Raise is not yet looking at firms with less than $25 million in AUM, so first-time fund managers Chingona Ventures and Cake Ventures are not included.
Abramson said that there is still a lot of work to do in terms of diversity. And she noted there is still cautious optimism about 2021. But she said that change is going to happen because of the business decisions involved.
“VC is about making money, and there’s pressure from LPs for firms to hire women and there’s pressure from entrepreneurs demanding more diversity on their cap table,” she said.
If you want to hear more from Abramson, coming soon we’re reporting on the issue of diversity in VC. At Venture Capital Journal, we’re also planning in the weeks ahead to run compelling contributed columns as well as additional news stories on the topic.
In addition, VCJ along with a few of our affiliate titles are publishing in July our inaugural Women of Influence special report, featuring venture and other asset classes.
Let me know what you think about diversity in venture and how your own firm is approaching the issue. You can drop me a line at email@example.com.