Last month, Diversity.VC*, supported by Kea Consultants and the EVCN and held a panel discussion covering this question and many others with a group of 30 venture capitalists and a group of fantastic panellists from many parts of the VC industry. The discussion was personal, free flowing, challenging at times and the room hummed with debate and ideas. Thank you to all those who came and especially the brilliant panellists. Chatham House rules apply so we can’t disclose who said what specifically. Nor can we give you a definitive set of answers and a rulebook on how to increase diversity of thought in VC firms. However, the discussion raised many thought provoking questions, from the philosophical to the practical, and we wanted to share these as widely as possible in the hope that they will promote introspection and consideration from everyone at every level of our industry, as they did on the night for us.
- What does diversity of thought really mean? How should we measure it? One thing that came up strongly in the discussion was the lack of educational diversity of thought in our industry. The majority of people we work with will have been educated in very similar ways at a handful of institutions, as that’s the shorthand that is used for ‘good’. Until we are around people who have been educated differently, who have a different cultural context, will we struggle to think differently?
- Is the structure of VC working against diversity of thought? 90% of the deals bought into VC partners are from associates, are partners training them to seek outliers and challenge the status quo? Or are partners encouraging pattern recognition, which hasn’t exactly been proven to generate the best returns. How can we prove that diversity actually improves fund returns?
- Should we be looking at the broader structure of VC? In Venture Capital there are three parties, the LP, the GP and the investee company. Even if the diversity agenda is top of mind amongst the GP, and the investee, do we need the format to change for LPs who provide the capital? Many LPs have it written into their constitutions that they cannot invest in first time funds (many of which are more progressive on the diversity of thought agenda), does this leave us in an impossible position with a sluggish trickle down rate of change? Three of the best performing funds worldwide (Sequoia, Benchmark and Accel) are far from diverse, so what does this tell us?
- Is diversity of thought a positive or negative thing for VC / company relationships? The business of VC is all about relationships, choosing whether to ‘get married’ to the partner or partners you choose to run your fund with, choosing companies that you will be working incredibly closely for the next 5–10 years. So we are programmed to look for harmony in these relationships and often harmony comes from not having cultural discord or structural reasons to disagree. However, the relationship between harmony and performance is an inverted U, so how do we reconcile harmony and performance? Some collision and conflict has been proven to generate better team performance. So how can we strike this balance?
- What is more important — choosing the ‘best’ candidate or achieving diversity of thought? The question was raised about what the definition of ‘best’ was in this context? Is best based on ‘cultural fit’, being able to agree with the structure’? Having a certain number of twitter followers? (this criteria was apparently cited as a deciding factor in hiring of associates) Are we all chasing a definition of ‘best’ that is wrong-headed? How can we think differently about the idea of merit?
- How can the VC culture be changed to make it more inclusive? Does this have to come from the partners only? Should ‘culture workshops’ where the team gets together and writes up some words on a white board and then everyone forgets what they were four months later be banished? Is there anything that junior people coming into a homogeneous firm can do? Is it each of our responsibility to continue to educate people about what is acceptable and what is not, what is inclusive and what is not?
*Diversity.VC has one simple aim: To increase diversity of thought in venture capital. We are doing this by:
- Building a network of diverse VCs. If you are a VC who is interested in being part of these events or in promoting diversity of thought within VC, please get in touch with us and we will add you to our mailing list. We’ll be running events throughout the year.
- Helping to connect VCs with more diverse applicants. If you’re responsible for hiring at a VC and are looking for more diverse candidates we can help.
- Promoting the broader organisations across the technology world who have similar objectives to ours to our community. This includes collaborating on conducting a piece of research to map diversity of thought against fund performance. If you’re aware of any research or organisations that you think we should talk to about collaboration, or you are doing something related yourself, please let us know.