A best-in-class DEI Term Sheet Clause from VentureESG and Diversity VC.

The VentureESG Team
4 min readOct 10


Over the last 6 months, Diversity VC and VentureESG have worked together to produce a best-in-class DEI term sheet clause with input from their respective communities. We spoke to 50+ VCs and LPs around the globe to land on the two-tiered (stage-specific) version we are now launching. We have contextualised the clause with a brief ‘business case’ argument, as well as a wealth of resources for both founders and investors.

In VC, the quest for diversity remains a work in progress despite myriads of pledges and dedicated funds. While the need for greater diversity in this industry has been acknowledged, implementation has been slow. For instance, in the Forbes’ 2023 list of the world’s top VC investors, no women made it into the top 10 (with only two in the top 30). While gender diversity numbers for general partners (GPs) give a slightly better picture, with 19% women in the US (VC Human Capital Survey 2023) and 15% women in Europe (European Women in VC), they still describe a severe, systemic problem. Moreover, racial representation remains a significant concern. In the US, a mere 4% of GPs are Black, with an even smaller percentage of Black women (VC Human Capital Survey 2023). It is clear that the statistics in the VC world are far from reflective of a diverse and inclusive society.

What is holding us back? Most substantially, it is structures that are helping to re-produce the industry’s makeup. Weak ties among (college) friends and former colleagues serve as one of the main sources of hiring (VC Human Capital Survey 2023); relationships between LPs and GPs build long-term relationships over time. A path-dependent mirror-tocracy is the result.

To move away from empty pledges and small side-vehicles focused on diverse founders, one potential tool in VC is the use of term sheet clauses. These clauses, while not widely adopted at the moment for DEI, have the potential to drive meaningful transformation. By tying investment decisions to tangible diversity-related goals, such as cultivating and retaining diverse teams, supported by VCs, startups and investors can collectively work towards more inclusive outcomes. However, it is important to consider the stage-appropriateness of such clauses, as too much red tape could stifle the early-stage innovation that characterises many startups.

Over the last 6 months, Diversity VC and VentureESG worked together to curate a best-in-class DEI term sheet clause with their respective communities. We spoke to 50+ VCs and LPs around the globe to land on the two-tiered (stage-specific) version we are now launching. It is important to note that we are not just launching a clause, but a clause contextualised with a brief ‘business case’ argument as well as a wealth of resources for both founders and investors.

In early October, we hosted an in-person launch conversation with participation from Diversity VC, the British Business Bank, and January Ventures. The conversation emphasised the importance of commitment and accountability in promoting diversity in the VC ecosystem. The “Woman Code” initiative from British Business Bank, which has garnered support from 130 firms. This initiative demonstrates that commitment to diversity, combined with data tracking and accountability measures, can lead to better outcomes. It also underscores the idea that merely dabbling in diversity and inclusion efforts is insufficient; firms need to genuinely commit to making a difference and continuously strive for improvement.

Another key insight from the event is that despite efforts to increase diversity in VC, progress has been slow. While there are more women in VC, they often manage smaller funds with less financial clout. Additionally, there is a lack of progression for individuals seeking to enter the VC industry. This highlights the need for a diverse pathway to help people break into VC and suggests that there is a willingness to address these challenges, even though the right steps are difficult to implement.

This clause will continue to be updated, including through a forthcoming collaboration with AllRaise in the US — this, as most of our work, is ‘in progress’ so we will continuously update both the clause and the resources. The next step for our collaboration will be focused on putting together geographically specific DEI metrics to take away investors’ fear about collecting ‘the right data’.

We have to find the right way to diversify VC and the startup ecosystem. We hope that this tool can be one step in that direction.

Please find the DEI Term Sheet Clause here.



The VentureESG Team

Creating a community around ESG in venture, and helping VC firms integrate ESG practices into their end-to-end processes