Over the last three months, the venture firm Social Capital has worked with the media outlet The Information to put together a look at the most diverse venture firms for the second year in a row. The teams say they gathered more than 6,000 data points about 580 senior investment professionals at the 72 most active U.S. venture firms to draw their conclusions.
What they found, broadly speaking, was a tiny bit of change in the right direction. The number of women working as investors within venture firms increased 2.5 percent over last year. That sounds grim, but it turns out that women represented slightly more tha
As for the number of non-white senior investment professionals, that stat — which is 2.4 percent higher than it was a year ago — sounds grim and looks even worse on close inspection. Just one percent of senior VCs involved in investment decisions are black. And only 1.3 percent are Hispanic. If there’s a silver lining, it’s that the percentage didn’t slip backwards from last year.
Those numbers didn’t surprise us. Nor did the study’s findings that 89 percent of investment decision-makers at the top 72 firms are (still) male and 75 percent are (still) white, even while those numbers are slightly improved from last year, when the numbers were 92 percent and 78 percent, respectively.
What we found more striking is that among the top ten most diverse venture firms, nine have been founded in the last decade or so. That’s pretty significant to our mind.
One could argue that younger venture firms are almost by definition smaller venture firms, meaning diversity can come a bit more easily.
Lowercase Capital, for example, receives top billing as the most diverse venture firm in this study. But Lowercase has just three partners: Chris Sacca, who’s a white man, Matt Mazzeo, another white man, and Sacca’s wife, Crystal English Sacca, who’s both a woman and Asian. Because the Saccas are eight years older than Mazzeo — they are both 41 and he is 33 — Lowercase also scores much higher in terms of age diversity than many of the firms in the list, most of which have more than three partners.
One could further argue that to date, diversity hasn’t been necessary in producing strong returns. Union Square Ventures, which is managed by five middle-aged white guys, ranks dead last on this new list, and most investors would kill for its track record.
But as the saying goes, past performance does not guarantee future results. And as the world of founders grows more diverse, it’s hard to see how venture firms that don’t shake up their ranks will be able to compete, especially when study after study underscores the degree to which diversity improves financial performance.
Newer firms in particular seem to grasp as much, constructing teams meant to maximize the number of varying viewpoints (not to mention networks) around the table.
Ten-year-old Felicis Ventures, for example, which ranks second on this new list, was founded by former Googler Aydin Senkut, who was born in Turkey. Felicis’s other managing directors were also born outside the U.S., including Renata Quintini (Brazil); Sundeep Peechu (India); and Wesley Chan (Hong Kong). In April, the firm closed on a $200 million fund — double the size of its last fund.
Much the same can be said for ten-year-old SoftTech VC (ranked 4th overall). The four-person firm is run by two men, Jeff Clavier and Andy McLoughlin, and one woman, Stephanie Palmeri. The firm also features as venture partner Charles Hudson, who is black. (Hudson was a full-time partner before leaving last year to launch his own venture firm.) Thanks to some smart bets, SoftTech also raised a record amount this year.
As with any list of this size, there are outliers. Y Combinator, for example, was founded 11 years ago and ranks 9th overall. But it isn’t tiny. In fact, it’s something of an accomplishment that it scores highly across gender, ethnicity, and age despite its growing sprawl. Meanwhile, 18-year-old BlueRun Ventures comes in 6th place overall. It’s the oldest firm in the top 10. To our earlier point, however, BlueRun is managed by just three people: two male general partners and one female partner.
Indeed, not every “old guard” firm fared poorly. Battery Ventures, a 33-year-old firm whose senior investors remain predominantly male, received sufficiently high marks on ethnicity and age diversity that it is ranked 13th on this new list. Some other highly ranked firms that have been around for more than one cycle include 16-year-old GGV Capital, which nabs the 14th place spot.
Also worth noting: while the most diverse funds tend to be younger funds, plenty of their contemporaries look a lot like their traditional, male-dominated, and almost exclusively white predecessors. Among them is 11-year-old Founders Fund (48th), seven-year-old Slow Ventures (ranked 52nd), and 12-year-old First Round Capital (49th).
You can check out the study and draw your own conclusions. The data is worth looking over.
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