the state of GENDER DIVERSITY in the LIMITED PARTNER ecosystem

a bird’s-eye view from nina’s own platform and network

NOVEMBER 2022

by Yahel Halamish & Marta Gaia Zanchi

A little over a year ago, we decided to shed some light on the state of gender diversity in the private equity and venture capital (PE/VC) industry in Spain. We found a strong and like-minded partner in not-for-profit organization “Level 20”. Together, we clarified our research objectives and disseminated the results as part of a much bigger effort to map the state of the PE/VC ecosystem in Europe.

female representation is (slowly) growing in the PE/VC industry

However opaque and difficult it may be to collect data on the PE/VC industry, the effort pales in comparison with that of collecting data on the world of Limited Partners (LPs) — which is the side of the venture ecosystem that, looking from our vantage point, stands opposite the entrepreneurs and whose financial goals make our work possible. LPs are the investors in the funds managed by PE/VC firms. They provide capital for the managers of these firms to “call” based on their needs for investment in privately-held companies. The most common types of LPs are high net-worth individuals (HNWIs), Funds of Funds (FoFs), pension funds, Family Offices (FOs), sovereign funds, university endowments, and corporations, both big and small — to name a few.

LPs are often called “silent partners” in that they tend to have a passive role in the PE/VC firm’s daily operations and decision-making. Except for FoFs and a few others, they are usually quite silent on public channels. Also — you will not find many of them on Twitter, LinkedIn, or other public databases. In our experience, many of them don’t even have a website — and if they do, they talk about their core businesses, not about their investment activities in funds. The reason why they are so difficult to find is complicated, would require us more guesswork and generalization than we like, and it is not the topic of the research that culminated with this article. That said, LPs are well-positioned to facilitate and implement change in the PE/VC ecosystem. By prioritizing investments in diverse teams or emerging managers, LPs hold power to accelerate the change from top to bottom.

Against this challenge, our objective was to understand the state of gender diversity in the world of LPs. Because of this challenge, we decided to make the scope of our research on LPs much smaller than our previous one on PE/VCs, by analyzing only the approximately one thousand (1,000) persons representative of nina capital’s own unique and broad LP ecosystem. Not only that, but we also accepted its more numerous limitations, which we made the best effort to describe at the end of the article. Its limited scope and robustness notwithstanding, we hope that you will find the results of this research interesting and that they will inspire you to dig into the data as we did.

TL:DNR

The key highlights that emerged from our work are:

1. Our results confirm other market reports identifying a lower overall representation of women in the LP ecosystem included in our study than women in the PE/VC ecosystem.
2. The representation of women in Nina Capital’s LP base is slightly higher than women in the much broader LP ecosystem included in our study. This result could be attributed to the fact that Nina Capital was founded and is managed by a woman.
3. Our results also confirm other market reports identifying a lower representation of female decision-makers in the LP ecosystem than female decision-makers in PE/VC.
4. Family Offices and individual investors tend to have a lower representation of women than Funds of Funds.

METHODOLOGY

To meet our research objectives, we decided to analyze data that we started collecting in the early days of our first vintage, specifically our proprietary dataset of persons associated with our knowledge of and interactions with the world of LPs. The list is rather extensive — it represents a sample of 1,002 persons, many of whom we have never had any interaction with, yet we know they exist and are active in the LP ecosystem, either because they are themselves individual investors in funds or because they are employed by organizations that invest in funds.

For each person, our dataset includes, at the minimum,

• Person’s Full Name
• Person’s Organization Name

When the person is an individual investing directly in funds, the Organization’s Name is the Person’s Full Name.

For most persons, our dataset includes, also

• Person’s Organization Type
• Person’s Organization Address
• Person’s Position in the Organization
• Person’s Decision-Making Responsibility in the Organization

A Person’s Organization Type is, for example, FoF, FO, etc., across the full spectrum of types of LPs. A Person’s Organization Address is the country where the organization’s headquarters or main place of business is located. A Person’s Position in the Organization is the person’s job title (if one is available) or our best attempt to characterize in a word their role in the hierarchy of the organization. Finally, a Person’s Decision Making Responsibility in the Organization is a binary description of whether the person has a final vote in the organization’s decision to invest in a fund.

A small subset of these persons represents our LPs in either one or both of our funds. For these persons, our dataset includes additional information, which was not necessary for this research.

From August to November 2022, we proceeded to identify incomplete, incorrect, inaccurate, or irrelevant parts of the data and then corrected or deleted the coarse (“dirty”) data. After this process of “data cleansing,” we embarked on painstakingly tagging all persons by gender. We recognize that this is by far the most subjective and fallible part of the process, the results of which are not fully proven or confirmed and are up for discussion. We did our best to infer gender based on names and the way these persons represented themselves in online conversations or self-written presentations across public websites, including their LinkedIn profiles, their organizations’ websites, and events or other announcements. While we know that gender is not binary but fluid, we kept it simple and only tagged each person as man, woman, or other (when we were unsure or when the person self-identified as LGBTQ).

Finally, we had a reduced dataset of 895 persons, each tagged as either a man or a woman, of which 170 persons are part of our own ecosystem of investors.

It is worth noting that some of the organizations represented by persons in our database are significantly overrepresented with respect to others. For starters, we know a significantly higher number of persons (on average) per organization investing in our funds when compared to others. In our own LP ecosystem, we often know everyone inside the organization — from the office manager to the intern analyst, associate, general counsel, and managing director. Outside of it, we may have in our database only one or a few entries per organization.

Even in our own LP ecosystem, the spectrum is very broad. For example, we know 10 people in one FoF and a similar, slightly smaller group of persons working in other FoFs that invested in our Fund II. However, there are only two persons in one small FO that has been one of our earliest investors (and by definition, our individual investors are an organization of one).

Then, we looked into the gender makeup of

• the LP ecosystem composed of the entire sample
• the LP ecosystem composed of Nina’s investors
• the pool of decision-makers in the LP ecosystem composed of Nina’s investors

Finally, we offered some personal observations based on these results.

DEFINITIONS

We introduced one definition in our research: “decision-maker.” We define a decision-maker as a person who is a member of the Investment Committee or has a vote in any other form when it comes to making investment decisions in the relevant organization.

Gender was determined by the Nina Capital team based on objective observation or self-identification of the individual using the following references:

• Linkedin or any other public profile
• Self-declaration

RESULTS

In aggregate, we analyzed 895 data points, each representing an individual from 734 organizations.

LP ecosystem, entire sample: % of women vs. men

Of the 895 female or male persons in our dataset, at the time of our analysis, only 27.9% were identified as female.

As part of our data collection, we also included a distribution by the following organization types:

• Bank: financial institution
• Family Office: a privately held company that handles investment management and wealth management for a wealthy family
• Multi-Family Office: privately held company that handles investment management and wealth management for multiple wealthy families
• Fund: regulated investments vehicle making primarily direct investments
• Fund of Funds: investment vehicle holding a portfolio of other investment funds
• Individuals: high net worth individuals investing out of their private wealth
• Company: commercial business for profit
• Corporate: commercial business for profit publicly traded
• Wealth Manager: advisory firm providing services to a wide array of clients ranging from affluent to high-net-worth and ultra-high-net-worth individuals and families
• Private Equity Firm: investment vehicle, generally organized as limited partnerships, that buys and restructures companies
• Other: any other entity and entities not identified

As a platform of micro-VC funds, we are mostly backed by FoFs, professional FOs, and professional individual investors, which collectively represent a majority of the capital committed to our funds. We reviewed the gender breakdown inside these groups:

We compared this data to other market reports, and we found it consistent with other findings. A recent report published by European women in VCs in May 2022 reviewed LP-VC interactions and found that only 20% of the interactions of VCs with LPs were with women on the LP’s side. The report also reviewed the interactions with LPs that are specifically FOs, and found that 17% of the interactions of VCs with FOs were with women. Our dataset suggests higher participation of women in FOs; this difference may be due to our study’s limitations, as presented below.

Fund of Funds showed the highest participation of women. This is consistent with the data we previously published on the state of gender diversity in the private equity and venture capital (PE/VC) industry in Spain, showing overall female participation in PE/VC is 30% on average. A similar report (survey) conducted in the UK by Level 20 in collaboration with BVCA showed higher participation at 38%.

Fun Fact!

The ten most popular Spanish names for men account for 124 entries in our database, that is, half of the total number of women (of any name).

LP ecosystem, Nina’s investors: % of women vs. men

Of the 170 female or male persons in our dataset, 29.4% have identified as females.

Nina Capital’s LP ecosystem shows a slightly higher representation of women compared to the overall database. That being said, the representation of women is still lower compared to our previous report on gender diversity in the Spanish PE/VC ecosystem (30%) and substantially lower compared to the survey performed in the UK (38%).

decision-makers, Nina’s investors: % of women vs. men

Of the 170 female or male persons in our dataset, 86 have decision-making responsibilities.

A recent report published by Level 20 on gender diversity in the European PE/VC ecosystem suggests that women hold 10% of senior positions. Nina Capital’s LP base exhibits a similar, albeit higher, participation of females in the decision process.

Fun Fact!

There are more names of male decision makers with a name starting with the letter “J” than female decision makers.

STUDY LIMITATIONS & SOME REMARKS

limitation #1: investment role in the organization

Our dataset includes all individuals with whom we engaged, some belonging to the same organization. For the organizations that are not Nina Capital’s investors, we did not track whether a person holds an investment role or an administrative role. Our sample to infer the participation of female decision-makers is, therefore, relatively small. Our work could be expanded and made more robust by mapping the decision-makers and members of the investment team in the broader LP base beyond Nina Capital’s own investors.

limitation # 2: geography

Our dataset is biased by our geographical location and pre-existing geographical networks. A stronger study would include a number of persons from each country in number representative of the LP activity (number of deals closed or deal volume) for that specific country relative to the others.

limitation # 3: venture capital

Our dataset is biased toward a pre-selected group of LPs who are well-positioned to invest in a fund managed by Nina Capital, an early-stage VC firm considered an emerging manager. A more diverse group of LPs investing across different types of PE/VC firms — ideally, a sample of PE/VC firms large enough to represent the spectrum of PE/VC managers — would strengthen the results of this study.

limitation # 4: nina capital’s fund size

Nina Capital is a micro-VC fund best positioned to serve certain types of LPs — such as FoFs and professional FOs, as mentioned above. Our LP base does not represent well some of the most powerful sources of LP allocations, for example, pension funds, sovereign funds, and university endowments.

limitation # 5: nina capital’s attributes

Nina Capital is a female-led fund with a diverse team. Our LP base is potentially biased toward investing in gender-diverse teams.

OTHER STUDIES

• IDC European Woman in Venture Capital 2022 by IDC
• Diversity & Inclusion Survey 2021 Europe/UK by Level 20
• European gender diversity report 2022 by Level 20

CONCLUSIONS & FUTURE STUDIES

The main takeaways from our research are,

1. Our results confirm other market reports identifying a lower overall representation of women in the LP ecosystem included in our study than women in the PE/VC ecosystem.
2. The representation of women in Nina Capital’s own LP base is slightly higher than women in the much broader LP ecosystem included in our study. This result could be attributed to the fact that Nina Capital was founded and is managed by a woman.
3. Our results also confirm other market reports identifying a lower representation of female decision-makers in the LP ecosystem than female decision-makers in PE/VC.
4. Family Offices and individual investors tend to have a lower representation of women than Funds of Funds.

More and more LPs are demanding increased diversity in the GPs of the VC firms whose funds they invest in. However, they are not leading by example. Gender diversity ratios seem to be even worse for LP entities than they are for PE/VC firms. The opacity of the LP ecosystem makes this a particularly difficult subject to research. However, there is a way in. Each PE/VC firm holds a different, albeit narrow, view of the LP ecosystem. With our work, we hope to set an example for more PE/VC firms to look carefully at their LP networks and share insights on their gender diversity as a way to hold the proverbial mirror up to their own funders so that they can reflect upon themselves and work collaboratively towards greater transparency and accountability of their joint efforts and results towards increased gender diversity.

Yahel & Marta-Gaia