Leading as VCs

We believe VC firms should take the lead in tech diversity and inclusion, holding their portfolio companies accountable by adding comprehensive diversity metrics to their quarterly reporting and by implementing our recommendations in their own firms. Taking the lead to make their own teams diverse and inclusive will give them the credibility and experience to be better advisers to tech startups  —  and better investors making better decisions and driving better returns.

Why did we choose this area?

VC firms have a big influence on how companies build and scale their cultures and teams. They also determine which entrepreneurs and teams succeed through their funding decisions. Until recently, firms did not track or share information on diversity and inclusion on their own teams, much less of the founders they funded, or the teams those founders built.

As we recognize that diversity and inclusion contribute to better outcomes, we send a call to action to VCs to help lead the change. As board members and investors, VCs need to drive change in their portfolio companies  —  and they need to walk the talk by making their own firms and teams diverse and inclusive.

How do we think about leading as VCs?

VCs can have a huge influence on a startup. The first critical step VCs take is to decide whose plans to consider and which companies to fund. VCs are usually very influential in selecting and placing board members, since CEOs and founders look to the VC’s usually bigger network for candidates and usually require VC approval for their candidates. VCs also interview and select the senior management team, and sometimes replace CEOs, at the startup phase and over the lifetime of the portfolio company as founders and other leaders are replaced.

We looked at easy but effective ways to bring some accountability to companies, and a way to compare progress over time and against a peer group. VCs are in a position where they already collect performance data, usually quarterly, on the companies they have invested in. It would be relatively easy to add a few lines to track team diversity and board of director diversity for their portfolio companies, their pipeline of potential investments, and their investments over time. It would also be valuable to see how aggregate numbers track across the industry. We strongly recommend that they track and report the diversity of their own teams by position.

What are we concerned about?

Almost all VC firms do not have diverse or inclusive teams internally,1 so their ability to direct or help their portfolio companies build diversity and inclusion into their cultures, processes, and teams is limited. Recently, we have seen a few women added to investing teams, but often as the only ones. We see little to no racial and age diversity, few disabled people, limited numbers of veterans, and little religious diversity. Caregivers, remote workers, and people from nontraditional backgrounds are also poorly represented. A recent survey of VC firms found that 20 percent of VC firms had only white men as senior investors; the same survey counted a total of only four Black VCs out of 552 senior VC investors.2 The limited amount of investing in founders from underrepresented groups is disappointing, and VCs have work to do to overcome their biases.3

If VCs don’t make an effort to understand the value of standardized metrics like the ones proposed here, they may rely on vanity metrics or other incomplete data that don’t accurately represent diverse balance in their portfolios. If firms continue to remain nearly all white and nearly all male at their top levels, they will fail to be inclusive, and the VC industry, the technology industry, and technology startups will continue to exclude new ideas, potentially big opportunities, and equal access for all.

What are our recommendations?


Apply our metrics to portfolio reports

Adding the metrics we suggest to portfolio reports allows VC firms committed to inclusivity to track progress at their current and potential investments. VC firms should be looking for diversity in their portfolio companies based on research that shows companies with diverse leadership and boards have better financial performance.4 It will also give them confidence that they are seeing a wide range of opportunities.

Using consistent metrics also reduces the risk of using incomplete or vanity data in discussions about portfolio composition and performance.


Value the hard work required for D&I programs

D&I work is complicated, takes time, and requires tradeoffs. VCs should recognize the hard work and value of preventing problems before they become too difficult to manage internally. They should reward efforts to build better, happier teams that make better decisions and ultimately drive a 35 percent likelihood of better financial performance.5 VCs should already understand how much work and money it takes to clean up a culture and change behavior.


Apply our recommendations internally

We also strongly urge VC firms to build diversity and inclusion into their own cultures, processes, and teams. VC firms should be tracking the same metrics on diversity in their pipeline candidates for both investment teams and new partners. By doing so, they will be better advisors to their portfolio companies and drive better returns.6 Panels and conferences they run, sponsor, or have active roles in should include diverse speakers.

VC firms should require their portfolio companies to commit to set and commit to diversity targets. VCs are uniquely positioned to encourage founders to address diversity and inclusion during the particularly crucial early stages of a startup  —  which will avoid the harder work of solving problems later. VCs can help by expanding their own recruiting networks to provide more diverse leadership candidates for their startups. Similarly, VC firms could employ coaches and mentors to help founders create open, empathetic, and inclusive cultures. Additionally, VCs should consider adding a scouting program for sourcing potential investments with diverse founders.

Working together, VCs and startups can help each other build diversity and inclusion.


While Project Include provides resources as a starting point, we have not made a comprehensive search of all resources and do not necessarily agree with everything in the resources. We share these as helpful references and encourage you to continue exploring.

  1. Social Capital and The Information. (October 2015). “The Future List.” Retrieved April 2016 from: https://www.theinformation.com/future-list

  2. Ibid.

  3. Kathryn Finney on her experiences raising money as a Black woman founder: “I was told literally that I would not be given any money because they did not know of a venture capitalist who had ever written a check to a Black woman before.” Nesha. “A Peek Inside Her Agenda: Kathryn Finney.” Her Agenda. Retrieved April 2016 from: http://heragenda.com/power-agenda/kathryn-finney/

  4. Hunt, V., Layton, D., and Prince, S. (January 2015). “Why diversity matters.” McKinsey and Company. Retrieved April 2016 from: http://www.mckinsey.com/business-functions/organization/our-insights/why-diversity-matters

  5. Ibid.

  6. Dawson, J., Kersley, R., and Natella, S. (September 2014). “The CS Gender 3000: Women in Senior Management.” Credit Suisse. Retrieved April 2016 from https://publications.credit-suisse.com/tasks/render/file/index.cfm?fileid=8128F3C0-99BC-22E6-838E2A5B1E4366DF