The questions LPs can ask for due diligence on diversity and inclusion in VC

It is widely recognised that improving diversity and inclusion in the venture capital and private equity industries is the right thing to do. Not only that, but there is strong evidence that increasing diversity will lead to better returns, increased talent retention and more creativity.

However, it is unclear how Limited Partners who invest in VC funds are actively encouraging or assessing diversity and inclusion in the managers they are investing in.

Diversity VC is a non-profit launched in March 2017 with the mission of creating a fairer and more diverse venture capital industry. We focus on providing resources to help equip venture funds, companies with the tools they need to promote diversity and inclusion in their firms.

As part of this work, we have put together a list of questions which Limited Partners can use to ask GPs at venture funds questions during the due diligence process to better understand their approach to diversity and inclusion.

The first set of questions is taken from the ILPA guidance, the second has been compiled by Diversity VC in discussions with GPs and LPs in Europe and the US.

If you would like to add any questions, or if you have any comments, please email check@diversity.vc.

ILPA Diversity & Inclusion Questions

1. Does the Firm have a formal Diversity and Inclusion policy or initiative? If ‘yes’, provide a copy of the policy.
   — (Only if ‘no’) Would you be willing to develop and implement a policy or initiative within one year?
2. Does the Firm have a Code of Conduct that covers harassment, discrimination and/or workplace violence?
   — If ‘yes’, provide a copy of the Code.
   — (Only if ‘no’) Would you be willing to develop and implement such a code within one year?
3. Does the Firm require such a Code of Conduct at its portfolio companies? — (Only if ‘no’) Would you be willing to require such a code at the Firm’s current/future portfolio companies within one year?
4. Does the Firm have a Family Leave policy?
   — (Only if ‘no’) Would you be willing to develop and implement such a policy within one year?
5. Does the Firm track the gender composition of employees taking family leave benefits? If ‘yes’, provide a summary of employees that have taken family leave in the last three years.
   — (Only if ‘no’) Would you be willing to begin tracking this information within one year?
6. Does the Firm have a formal mentorship program for minorities and/or women?
7. Does the Firm work with organizations that promote the attraction and retention of women and minorities within private equity? If “yes’, provide a list of these organizations, as well as any additional programs you have embraced.
8. Has the Firm put procedures in place for the reporting and investigation of harassment and/or discrimination? If ‘yes’, provide these procedures
   — (Only if ‘no’) Would you be willing to establish and communicate procedures within one year?
9. Have there been any claims of sexual or general harassment, misconduct or discrimination against any current or former Firm employees (while employed by the Firm) within the last 5 years?

LP Diversity & Inclusion questions for VC managers

1. Do you have a Diversity & Inclusion policy in place?

• Parental Leave
  — What is it?
• Flexible Working
  — What is it?
• Anti-harrassment/ discrimination
  — What is it?
• Employee Grievance
  — What is it?
• Recruitment
  — What is it?
• Other (please specify)
  — What is it?

2. Do you have a Diversity representative/champion at your firm (or external to your firm)?
— If so, what qualifies them to be able to effectively support diversity and inclusion?

3. Does your D&I policy apply to every aspect of your workplace?

4. Do you have a training offering that covers unconscious bias/ social justice training for employees?
— Some (please specify who)
— All

5. What is the current ratio of men/women in management and among investment professionals respectively? Has there been any change since last year?

6. Please describe the way in which your firm looks to promote diversity (e.g. age, cultural background, professional experience, skills, gender) in your organization, as it relates to recruiting, retention and promotion of professionals to senior levels.

7. How do you ensure diversity (e.g. age, cultural background, professional experience, skills, and gender) is promoted at the portfolio company board and management levels? Do you capture and report on diversity data to your investors (or does the individual company publish this on its website)? Give 2–3 examples of how you have contributed to portfolio companies’ development regarding diversity at board and senior management levels.

8. Ethnicity Diversity Snapshot: Complete ethnicity diversity snapshot chart for the Firm’s investment professionals, Operating Partners and other professionals.

9. Gender Diversity Snapshot: Complete gender diversity snapshot chart for the Firm’s investment professionals, Operating Partners and other professionals.

10. Have you engaged with your portfolio companies to establish policies or management systems on diversity and inclusion?

11. Do you have a code of conduct?

12. Do you have a regular pay benchmarking exercise?

13. Do you have a prayer room?

14. Do you have a lactation room for new mothers?

15. Is your office accessible? (for example for wheelchair users). If the answer is no to the above, is there a clear system and place where founders can request to meet you somewhere that is accessible?

16. When issues around diversity, inclusion, harassment or discrimination are raised, do you have any particular procedures are followed?

17. What procedures or resources, if any, are in place to support the employee who has raised the complaint?

18. Can founders submit their pitches to your fund ‘cold’ (i.e wihout knowing someone in your network)?

19. Do you have a point of contact for entrepreneurs to raise/report issues?

20. Do you collect data on the gender of founding teams that pitch the firm? What is done with that data?

21. Do you have a system to encourage submissions from founders of diverse backgrounds?

22. Does your reference list include people from diverse backgrounds?

Diversity VC is a non profit organisation that aims to make Venture Capital firms and the tech companies they invest in more diverse and inclusive through thought leadership, data and actionable tools & training