Diversity Venture

Inside VC Firms: The Gender Divide

Almost every time I have entered a venture capital firm in Munich, Berlin, London or San Francisco, I’ve been greeted by a female office assistant who offered me coffee and walked me to a conference room.

And almost every time, the partner of the fund I met for an interview was male, white, and over 40 years-old.

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I am currently conducting a year’s worth of ethnographic and interview-based research with venture capital firms for my post-doctoral project at the Max Planck Cambridge Centre for Ethics, Economy and Social Change.

This has afforded me access to VC funds worldwide. And while I initially set out to understand the investment decisions made by these funds, what I’ve observed is an incredible gender divide.

As a researcher, I find myself attempting to answer the following questions: Am I the only one observing this discrepancy in the VC world (because as a white man myself I am often most easily introduced to other white men) or is it an industry wide issue? If only men are making decisions inside VC firms, why is that and what influence does this have on the companies being funded?

As in other parts of the economic world, we already know that gender disparity is commonplace. But when we look at the data regarding VC specifically, it’s quite revealing.

For example:

  • Only nine out of the 100 top VC partners worldwide are women, according to the recently published New York Times and CBInsights 2018 list.
  • Women make up only 11 percent of VC deciders (investment partners) in the U.S., according to a report published recently by industry organisation NVCA and Deloitte.
  • In the United Kingdom, the just-published figures from Diversity.VC mirror this picture. Diveristy.VC is a UK-based initiative that aims to increase awareness about the lack of diversity in VC and offer tools to address it.
  • Its 2019 survey published in July shows only 30 percent of VCs are female in the United Kingdom (compared to 47 percent of the UK labour force overall); further, senior investment roles are occupied by only 13 percent of women and 83 percent of all UK venture firms have no women in their decision-making bodies at all.

The lack of female representation is evident among startup founders as well.

  • In the U.S., Q2 2019 data from Crunchbase News shows that only 3 percent of venture money was spent on all female teams (exactly as much as in Q3 2018); 8 percent was given to mixed teams while 89 percent supported all male teams
  • In the UK, just 1p in every £1 (or about 1 percent) invested in 2017 went to all-female founder teams according to a recent report by the British Business Bank, BVCA and Diversity.VC.
  • 83 percent of VC deals involved founding teams with no women.

Economically speaking, this presents a clear conundrum as women obviously spend significant amounts of money as consumers ($18 trillion in 2018 globally).

In fact women control 70-80 percent of all consumer purchases. There are also large segments of the economy that cater specifically to women (and are increasingly being addressed by female founders). For example, the women’s health industry is slated to become a $50 billion market by 2025. The economic incentive for VCs to be more inclusive is massive. As a result, it’s unclear why this potential isn’t reflected in the demographic of VC firms tapping into these areas through their networks.

Women VCs Respond

I was able to speak to some female VC partners about how they thought the gender bias was built into the industry.

Karen McCormick, Chief Investment Officer at Beringea in London, believes that VC is traditionally a “predominantly white male industry” and the hiring often takes places from a pool of (white male) investment bankers, which she refers to as “legacy bias.”

Additionally, the small team sizes – VC firms often only have 4-6 investment partners – and the relationship-based work between partners and start ups make it difficult for anyone to leave temporarily. As McCormick put it to me, “There is no such thing as ‘filling in for maternity leave’ in the deal-doing partner function.”

Marta Sjögren, an industry veteran who worked for the UK- and US-based DN Capital before becoming a partner at early-stage venture fund Northzone (the fund that backed Spotify and iZettle) in Stockholm had to deal with the issue of maternity leave personally.

“When I was pregnant, people in the industry told me ‘You’re going to mess it up for yourself.’ So, I quit after six months…There were very few examples of women walking around in London or Berlin with pregnant bellies and VC business cards.”

Sjögren was fortunate to meet the right people in Sweden and was hired part-time with flexible working conditions. Ultimately, she had to become the role model she didn’t see making it as partner at Northzone.

The Takeaway

At this stage I have spoken to over 120 VC partners in the last 18 months – and most of them were at least aware of the gender gap problem.

But the changes that have been made so far are small. In the UK, we are seeing more junior female VCs (37 percent in 2019 versus 29 percent in 2017), but there has not been any progress at the crucial partner or GP level where investment decisions are made.

Initiatives like Diversity.VC’s toolkit and the Femstreet newsletter are encouraging but also mainly targeted at the junior ranks (and entrepreneurs). Incidentally, as Sjögren explained further, even some of the venture funds’ own investors (limited partners, often pension funds, foundations, endowments or family offices) are pushing for different investment approaches that are more inclusive.

Although there are more incentives for VCs to let women in now than before, gender equality is just one piece of a larger puzzle. Inclusivity in all dimensions – race, age, (educational) background – is becoming more of an issue in VC circles, or at least among those who observe them like myself.

It’s been suggested that inclusive VCs will fund more inclusive startups that will therefore enrich more people’s lives with their ideas (and do so more ethically). The benefits here seem obvious as VCs have the potential to tap into new markets (and produce higher and more secure returns for pension funds and the like.) One would think that a more diverse set of entrepreneurs would attract funding for innovations that allow different (and under-served) groups of consumers to benefit.

One would also hope that VCs might wake up to the cost benefit, if not the ethical benefits, of inclusivity.

And the doors might open a bit wider.

Article written by Johannes Lenhard, the Centre Coordinator of the Max Planck Cambridge Centre for Ethics, the Economy and Social Change (Max Cam). Currently, he is working on a project about the ethics of venture capital investors in Berlin, London and San Francisco. He is also a visiting researcher at Stanford University. His writing has appeared in academic peer-reviewed journals as well as journalist outlets (Vestoj, Aeon, KR, and The Conversation). Follow him on Twitter @JFLenhard. 


Photo by cowomen.com, via Unsplash.

  1. The author would like to thank Tess Davidson, a friend and colleague from Cambridge, for support with this piece in its initial stage and also the female VCs he interviewed.

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