Venture Firms Out of Sync with Tech Industry’s Call for More Diversity
Venture capitalists are most concerned about their portfolio companies hitting revenue growth targets, and being able to hire the right people, but they seem to be less focused on the diversity of those people, according to a survey released on last week by LinkedIn Pulse.
In a report released by LinkedIn on Thursday, it seems that investors are least concerned about those companies having diversity in management ranks and showing a commitment to building a diverse team.
The data shows a serious disconnect between investors and the founders of the startups they are investing in when it comes to their perspective on diversity.
The issue of diversity in venture firms was pulled into the spotlight last year with the case of Ellen Pao vs. Kleiner Perkins Caufield & Byers, when Pao filed a gender discrimination suit against the firm and her former employer, which she subsequently lost in March 2015.
According to the LinkedIn data, over the next five years, 30.54 percent of the startups that venture capitalists will invest in will have female founders, while 33.79 of startups they will invest in will have racially diverse founders. In contrast, over the next five years, startup founders plan to hire 50 percent female employees, and 47.51 percent racially diverse employees, respectively.
When asked what the number one obstacle was that prevented VCs from investing in startups with racially diverse or female founders, 45 percent said it was a pipeline problem – there are too few diverse founders with startups – and 35 percent said that there is no obstacle.
Other research has looked at whether there is a correlation between the diversity at a venture firm and the diversity of the startups they invest in.
Research from Crunchbase, released in April, found that in the last three years, 16 percent of newly launched firms, or 20 VC firms, were founded by women. Of the top 100 venture firms, 7 percent of the partners (or 54 out of 755) are women, and 38 percent of the top 100 firms have at least one female partner.
According to the Crunchbase report, it may be too early to determine whether female investors alter the funding equation for female founders, but it is not far-fetched to believe that diverse representation at an investment firm would open it up to more diverse startup founders.
As tech companies of all sizes strive to fix the gender gap at their own organizations, it seems that venture firms have a long way to go in improving diversity in theirs.
