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Evolution, Not Just Change: The State Of Diversity, Equity And Inclusion In The Venture Capital Industry

Deloitte

The desire for positive change in the venture capital (VC) industry is clear, however there is still much work to be done to advance diversity, equity and inclusion (DEI). The VC industry has significant influence in driving the US economy, which is why we examine its progress related to DEI. The fourth edition of the VC Human Capital Survey, commissioned by Deloitte, Venture Forward, and the National Venture Capital Association, provides a valuable analysis of this industry. With data from 315 VC firms representing more than 6,200 US-based, full-time employees with $594.5 billion in assets under management, this survey serves as a benchmark and significant window into DEI in VC. Here are some key takeaways from the survey on what the VC industry is doing to advance parity and representation and what remains to be done.

  • Women are making progress, though they are far from parity. Although women represent only 26% of the VC workforce, female employee representation is on the rise (compared to 23% in 2020, 21% in 2018, and 15% in 2016). Higher level positions are increasing in female representation, with 19% holding investment partner status (compared to 16% in 2020, 14% in 2018, and 11% in 2016). The percentage of firms that reported they do not have any female investment partners decreased to 57%, down from 65% in 2020, and 68% in 2018. While it is concerning to see so many firms that reported zero female investment partners, the number is trending positively when compared to previous surveys which is encouraging.
  • Black professionals continue to see limited representation. Black employees only represented 5% of investment professionals in 2022, up from 4% in 2020 and 3% in 2018. Senior-level positions held by Black professionals in the latest survey totaled 4%, which is slightly up when compared to 3% in both 2020 and 2018. Junior-level investment Black professionals were at 7% in both 2022 and 2020 (compared to 5% in 2018), with 89% of firms reporting no Black investment partners. Gains for Black women were negligible, with just 1% of investment partners in 2022, compared to 0.25% in 2020 and 1% in 2018.
  • Diversity is found in junior-level positions. There is optimism for the future. Racial and ethnic diversity are measurably increasing among junior-level investment positions. This bright spot may indicate the potential for greater representation among senior positions as talent matures and rises through the ranks. Furthermore, the younger the firm, the more likely diversity exists at all levels. VC firms founded within the last 10 years reported noticeably larger minority representation than older firms.

Evolving toward a more diverse and inclusive industry

These survey results are intended to be a catalyst for meaningful conversations and to help the industry recognize the lack of representation and parity as an issue. This will promote greater awareness of how diversity, equity and inclusion are key components to competitiveness and success.

The VC industry has the power to drive the US economy. A more diverse group of investors can lead to a more diverse group of entrepreneurs raising capital and driving job creation and innovations that lead to significant socio-economic change. While progress has been made in DEI representation, the VC industry is still evolving, and there is a need for strong leadership with intentionality towards making change.

Nonetheless, the shift in culture signals that diversity is on the radar of this industry. Nearly half of firms (46%) already have a diversity strategy in place, and a majority say they have established, or plan to establish, specific DEI goals. A positive sign that the industry is committed to change.

However, it’s more than just change. It’s a fundamental shift away from a more closed approach to talent sourcing and innovation itself. More diverse, equitable, and inclusive teams have been shown to consistently outperform, owing it to broader networks and more effective decision making. The question becomes: to what degree can we accelerate this evolution?

Overall, there is a need to bridge the gap between commitment and action toward creating a more diverse and inclusive workplace in the VC industry. By taking concrete steps towards DEI and regularly assessing progress towards diversity goals, the industry can continue to make progress towards more equity and inclusion.

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.