10 Practices of Sustainable Diversity in VC Partnerships

Preface Ventures
Preface Ventures
Published in
5 min readJun 11, 2020

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The last several weeks have been eye-opening into the systemic racism that exists across our society. Unfortunately the recent events are not a new phenomenon — just more visible in a world of social media and smartphones. From Congress to the Police to even our small industry of venture capital, the decision makers who impact livelihoods are far from representative of the total populace.

I have been very troubled, but at the same time, incredibly touched by the outpouring in the wake of George Floyd’s killing. Folks have shared their stories about how they don’t feel safe in our society, or have been threatened because of their skin color alone. It happens all the time. Yet despite these tragedies, other upstanding citizens have stood up for others toward justice at their own risk. What I hope is becoming clear to many of us in hearing these stories, particularly those in the VC industry, is that we are incredibly privileged. As such we have a duty to be stewards of positive change. In being business leaders and capital allocators, we can choose who to fund and what problems are addressed fastest. Given that 1) almost ½ of public companies today were initially VC backed 2) enterprise value creation in technology happens fast 3) equity is more frequently distributed to employees in the technology vs. other industries, the actions we make today directly facilitates large-scale economic empowerment and therefore addresses income inequality. We can think globally and act locally.

I co-founded Diversity.vc (launched in 2016) alongside a few passionate and talented professionals, which exists to increase diversity of thought in the venture industry. The organization, based in London, has grown successfully cross-continentally with a reach of tens of thousands globally. Our objective is to help the venture capital industry represent the rich tapestry of society, which generates better decision making, higher returns and meritocratic access to entrepreneurship. We’ve executed on several meaningful initiatives such as accurately measuring the experiential diversity of investment teams. We started by highlighting gender inequality, in which there are encouraging changes since 2017, but there is an even longer road ahead for minorities and people of color.

When VC’s make their investment decisions, they naturally do so based on imperfect, incomplete information of a young company which is a rich tinder for biased thinking. Given this and the aforementioned privilege we have as well as potential impact, it puts even more of an onus for us to have better structural guardrails to mitigate bad practices. In an effort to encourage sustainable and lasting change, I’ve compiled a list of what I believe to be “table stakes” for encouraging diversity in VC. Many of these practices are common in corporate settings, but the application to venture firms has nuance. Here are some tactics for effecting change at your firm:

  1. Ask your teammates. This is the easiest and least often done. Simply inquire if your team feels they are doing enough to provide equitable access for internal recruiting and funding entrepreneurs. Do they answer comfortably? Do they have good examples, or is there an interaction they remember with regret? It is worth performing this exercise periodically (as often as folks have “off-sites”). Be open to your colleagues’ feedback and suggestions — discomfort brings change. Ask your minority and POC colleagues what they are working on in this realm, and support the hell out of them.
  2. Communicate as a firm. Reaffirm messages and communicate proactive actions to underrepresented communities — not just individually. In recent days, I’ve seen plenty of individuals tweet and retweet, donate generously, etc. It is meaningful, but their respective firms are often silent. Highlighting that “we’re committed to X” is important but what is being done differently as a firm now is key. Racial bias causes fails concretely in group systemics, not just in 1–1 interactions.
  3. Benchmark your firm’s diversity metrics. Measure diversity (gender, ethnic, experiential) of the investment decisioning team i.e. voting and check writing ability. Compare yourself in the same way as TVPI / DPI / IRR in Cambridge Associates reports.
  4. Be honest about who is a check writer. The Information’s Diversity Index attempts each year with good intent to enlighten diversity in US VC Partnerships with reasonably specific inclusion criteria. However, multiples of participants who contributed data unfortunately lie by omission most often via inflating “Partner” titles. Elliot Robinson’s post captured this succinctly. The truth might be bad, but if it isn’t allowed to be visible that’s even more problematic.
  5. Have a meritocratic policy for promotions. Examine your track record in promoting folks. To start, rank your highest, most performant investments in the last five years. The investments which your LP’s are proud of too. Look at the historical voting (if you have a voting system) — who voted for the affirmative? Who sourced, sponsored or worked on it? Were they promoted? Where are they now? Is there a correlation between that? Who were naysayers or voted against? Is the carry split or management company ownership reflective of these conclusions? Economic performance isn’t the only factor, but it’s a critical one and there should be correlation here. If not, please think about why.
  6. Start regular office hours for underrepresented groups. If you keep them, work to open it to entrepreneurs regularly, and make it accessible to more underrepresented groups. Meet diverse founders where they are — and don’t assume they occupy the same spaces and channels that you do. Work it and keep it going in perpetuity.
  7. Reexamine your HR policy. From generating pipeline to onboarding, from benefits packages to periodic implicit bias training — all of these factors are inputs to an inclusive work environment, where different people can thrive and be retained in your organization. An easy first step is to publish your next job posting online. Don’t just use a recruiter accessible to few. And question your hiring criteria. Distribute it to lots of channels toward a more representative applicant base. A minority student or person of color should be able to discover your job. Examine if the language written in the job description is biased or non-inclusive.
  8. Ask portfolio companies to measure diversity metrics in the board decks. Doing so by function is ideal, but aggregate figures across the organization is a start. It can highlight adverse turnover via poor culture which can be problematic as we’ve seen in many cases.
  9. Be willing to give explicit feedback on why you are passing on an investment opportunity. Consider making several introductions for founders to those who could be interested. Many of our peers will say no to founders based on the surface, so be one of the good folks to do more in light of it.
  10. Pitch and partner with diverse LP’s (for those who are fundraising). Given the attractiveness of venture capital as an asset class, inclusiveness matters. Unfortunately there is far too short of a list of common LP’s in top funds. LP’s are important stakeholders in venture and there are scores of emerging and established partners from the non-profit, endowment, UHNW world who might not look like the others. They should be active LP’s. Find them and work with them.

The Diversity toolkit from Diversity.vc has fuller content which I’d encourage others to listen to. I am holding myself to these standards at a minimum, and would be thrilled to engage with other firms who want to have a dialogue for shared learnings. I believe we can all do better.

— Farooq Abbasi // General Partner, Preface Ventures

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