Why we set up an internship programme to fix VC’s diversity problem
Name any well-known tech brand, Spotify, Dropbox, UIPath, … chances are it started with funding from venture capitalists — investors that take on high risks to put money behind new ideas. Yet, whilst VC might be a dynamic investment industry, the space is still lagging behind across the board when it comes to diversity and inclusion.
That’s why we at Diversity VC, a nonprofit created to tackle this problem, staged an intervention in summer 2019 by launching Future VC, a programme to support highly-skilled professionals and graduates from diverse backgrounds into the UK VC landscape.
In 2017 Diversity VC conducted a research project which found that two-thirds of UK venture funds have no senior women, and just 13% of partners at VCs are women. Two years on an update to the research found that the number of senior women had remained static: still 13%. These issues aren’t unique to the UK. In San Francisco, just 1% of venture capitalists are Latinx, 3% are black, and 18% are women. Starkly, black and Latinx women make up close to 0% of the venture capital industry in Silicon Valley.
The business case for inclusion within workforces has already been made. Research by McKinsey shows that diverse teams perform better than their homogeneous counterparts. Meanwhile specifically in the investment space, research by BCG has shown that women tend to create businesses that are relevant to other women, which men often do see the value in. This highlights the importance of including people with diverse life experiences within investment teams so they can spot the value in businesses targeting any section of society.
Why is VC talent so homogenous?
One answer could be the the universities targeted for recruitment, with forty percent of Silicon Valley VCs coming from Stanford or Harvard, and 20% of UK VCs from Oxford, Cambridge, Stanford or Havard (Diversity VC, 2019). Very little attention has been paid to raising awareness of the industry and its opportunities amongst social groups that are less likely to be at these institutions such as those who are BAME and/or working class, not to mention those who simply did not attend university.
Our research has shown that with more information about VC as a career path, many individuals from backgrounds less represented in the industry would be interested in applying.
With Future VC we wanted to make a radical, first-of-its-kind, intervention in the industry to access diverse talent. We wanted to cast the net wider.
The first thing we did differently was the application process.
It was our goal to assess candidates based on the skills deemed to be very useful for those wanting to build a career in VC, so we worked with the VC community to create a list that we used for assessment.
The traits we came up with were: curiosity; attention to detail; being able to focus and remain driven; initiative and self-discipline; being able to build maintain authentic relationships; emotional intelligence; empathy; a natural aptitude towards sales; resilience and conviction.
This form of assessment began to eliminate the confirmation bias that comes from CV factors such as education, previous employers, names and anything else which leads to identification of the person over identification of strengths and weaknesses.
The success of the methodology was marked by our application breakdown: 70% BAME; 47% women; 35% socioeconomic disadvantage; 32% of people who were the first in their family to go to university; 11% LGBT.
But the work started well before the application process — first we needed to get the opportunity to target groups. We did this through approaching specific networks and community group and circulating details of the programme to a wider set of universities. This shows that the answer that talent isn’t out there is simply not true, frankly the onus is on the organisation to reach these groups and at Diversity VC we believe we have only scratched the surface.
The Future VC programme for 2019 came to an end in August. With the curtain raised in late June, the first cohort included 20 full-time and 10 remote participants.
All participants took part in weekly masterclasses from some of the most respected investors in Europe taking deep dives into topics that are genuinely relevant in venture capital, in addition to several sessions dedicated to the development of soft skills and guidance shared from VCs. We also ran a live project that saw the interns working together to present diverse start-ups to an investment panel. The skills and knowledge transfer is not limited to a career in VC, and we understand this industry is not for everyone. The programme also supported future entrepreneurs, those who want to work with startups, or in adjoining and complementary industries.
To measure our impact in year one we surveyed our participants skills and knowledge at the start and end of the 5 weeks and asked them to rate their current understanding and skill level out of 10.
Whilst the extended survey captured far more (and all areas moved significantly to the right), the topics below saw lots of development for the interns:
Start → End
- Confidence to work in VC: 6.3 → 8.8
- Understanding VC as a career: 5.7 → 9.2
- Confidence to work in VC: 6.3 → 8.8
- Fund Mechanics: 4.7 → 8.4
- Transaction Economics: 4.2 → 8.1
We also assessed the masterclasses delivered to the cohort to make sure we were getting them right in terms of content and delivery. We had an NPS score of over 9.1 for all masterclasses which is an encouraging start.
We understand that many firms are breaking with well-worn hiring habits. Some firms that volunteered to take on an intern from Future VC had not hired any interns before. We want firms to understand that talent is evenly distributed and, so far, opportunity has not been. We’re also keen for them to understand that they don’t need to undergo huge upheaval to reap the benefits of this untapped talent, and in fact, just a small few producedural tweaks are required.
Perhaps more importantly, we want groups that have been arbitrarily excluded from venture capital for too long to know that they have a seat at the table. That their unique talents and insights are valuable and necessary for the industry to move forward. And that as an industry we’re excited to welcome them.
Future VC next year will kick off on June 22 2020!
Look out for updates on www.diversity.vc or subscribe to the mailing list.
– Seb Butt, Founder & Programme Director of Future VC (firstname.lastname@example.org)