In recent years increasing attention has been paid to diversity and inclusion in the business world and with good reason. Most of us have an intuitive sense that it is important to include those who are excluded. It feels like the right thing to do. Happily, it is also the profitable thing to do. Research has shown that companies which are more diverse are likely to outperform their less diverse competitors on profitability. Companies with at least one woman on the board outperformed companies with no women on the board by 26% (Credit Suisse Report). So, if diverse companies outperform their less diverse counterparts, it would make sense to invest in diverse teams. Yet, funding for start-ups is overwhelmingly weighted towards white, educated men. Extend Ventures reported that while the UK’s Black and Multi-Ethinic communities comprise 14% of the UK population, all ethnic teams received an average of 1.7% of the venture capital investments made at seed, early and late stage between 2009 and 2019. Black founders received 0.24% of venture funding and female founders received 11% in the last 10 years. Only 0.02% of venture capital funding went to female black founders. The statistics reveal clear inequalities that need to be addressed.
Diversity and Inclusion has been incorporated into the business world as something that we should all strive for, yet when it comes to funding start-ups there is evidently a long way to go. One of the reasons for the inequality of funding, according to the Extend VC Report, is that UK VCs tend to invest in people who mirror themselves. Founders from certain communities may also lack a network of people who can invest in them at the very early stages of their business. Poor representation may also be a factor for underrepresented founders, summarised in the adage ‘you can’t be it if you can’t see it’. Diverse founders face challenges of bias and poor representation compared to their non-diverse counterparts, which compounds their experiences of disadvantage and inequality in the context of investing in start-ups. How can we level the playing field?
At Green Angel Syndicate we specialise in making investments which will arrest and reverse climate change. We believe that fighting climate change will be unsuccessful if it is not equitable. Julie Martin argues:
Because the climate crisis already impacts and will continue to impact us all, it is crucial to ensure the solutions we create are built by and for us all as well. Underrepresented communities are actually disproportionately impacted by climate change – the personal knowledge of specific challenges experienced by such underrepresented communities should be honed as crucial catalysts for change and as motivations for entrepreneurship.
How can we dismantle bias and poor representation, so that founders from all sectors of society have fair access to funding, and thereby include them in the solutions to climate change? One of the recommendations from the Extend VC report is that all venture funds make data on their investments publicly available. GAS agrees – we are in the process of collecting data on the diversity of our portfolio companies and we will publish our findings when we have them. We also are actively recruiting diverse members and we place diversity at the forefront of our hiring decisions. We know we can do more though, and we are always open to transfer any ideas or suggestions into meaningful action. Recently our latest diversity and inclusion training session resulted in an insightful discussion of how we can continue to improve access to funding for diverse founders. As a result, we are running a workshop on the 7th of June for underrepresented founders. Our GAS deal flow team will be on hand to tell you what we look for in funding applications, what things work and don’t work in presentation decks, and also to offer guidance and advice on all stages of the fundraising process. If you are an underrepresented founder, we invite you to join our workshop by registering here. We want to help you make more impact.
Photo by Alena Darmel: https://www.pexels.com/photo/man-in-black-suit-standing-between-2-women-8134189/