Diversity VC Digest
Your (monthly) digest of all things DEI in venture capital (August’s edition)
Welcome to August’s Diversity VC Digest. Your take on all things diversity, equity and inclusion in venture capital. Read on for insights into the state of legislation and regulation development, including our full and unequivocal support for Fearless Fund, our disappointment and fears for the industry with the set back of affirmative action in the US, and the impending (at time of writing) SEC Private Fund rule vote.
August, usually a quieter month in the investment industry calendar, has proven anything but this year, with a seismic Me Too investigation: the Founder of VC firm DN Capital has been accused of sexual harassment by former employees, allegations he denies, but the firm felt enough to open a formal inquiry into the allegations against Nenad Marovac as the investigation went to press. This is believed by some to be a mere glimpse into the troubling handling of sexual harassment and assault within the largely unregulated venture capital world.
The rules package governing PE, VC, and hedge funds that could significantly alter the relationship between such funds and their clients (hint: there is no mention of “LP” throughout, instead focusing on “client” and “investor”). The SEC’s proposed overhaul would require private funds to provide their investors (their limited partners) with quarterly statements and annual audits, increase their liability for mismanagement or negligence, and prohibit them from giving some limited partners more favourable terms than others. Already, some managers have threatened to sue the SEC if it follows through with the changes outlined in the proposal. WSJ have more here. Coincidentally, the timing of our own push into the advantages of a more transparent venture capital system made the newswires in the same time period: Diversity VC and Equality Group launch collaboration to build a more diverse and inclusive venture capital ecosystem.
We lend our full and unequivocal support for Fearless Fund and all those who work in solidarity for the equitable (re-)distribution of capital. We are heartened to see this open letter signed by venture capital funds denouncing the lawsuit, quoting our research showing both the chronic lack of funding - under 2% of the $31 billion held by the 200 venture capital funds surveyed for the study, was allocated to startups with women and minority leaders - alongside a persistent under-investment in diverse fund managers. We (probably) should not ignore Sifted’s most recent op-ed arguing that “Europe’s venture diversity machine is out of control”, and whilst clearly written as a provocation - absolutely there is much to be said about revisionist history wielded as a tool in equality and justice movements - we would question the logic outlined and the lack of alternative solutions offered, that seemingly plainly gives away the authors intention in writing such a hasty piece to take advantage of the zeitgeist.
In light of the Fearless Fund lawsuit, we are pleased to invite you to join Diversity VC and Cooley for a conversation to unpack the Fearless Fund case. Presented alongside 2Gether-International, AllRaise, BLCK VC, Chicago:Blend, Latinx VC, VCFamilia, and VetsInTech. The event will take place on 30 August, you can register here: https://lu.ma/ppa0c3ie
Access2Funding launched their groundbreaking 2023 Report, with incredible insight into access to funding for disabled entrepreneurs. The stats are shocking, perhaps more so than even we had suspected, and we strongly urge you all to download the report and sign up to the Charter here: “Transforming Opportunities and Outcomes For Disabled Entrepreneurs”.
We are pleased to announce that we’re community partners for Sifted Summit. Join us this October 4-5 at Magazine London for Europe’s hottest startup event.
🤌 The exclusive Diversity VC Community discount code is in your inboxes. Remember to sign up to our mailing list to receive exclusive discount codes.
We look forward to meeting many of you there. And watch this space for the launch of our Term Sheet Diversity Rider to kick off the Summit with some DEI resolve.
📣 Future VC is the first of its kind paid VC internship programme that operates at the industry level, enabling all participating funds to have the benefit of working with talented individuals from all parts of our communities. Look out for details of our 2024 applications opening soon on our website.
Policy trends
The SEC’s Private Fund rule (still to be voted on at time of writing) has had a number of hot takes as to its import to venture capital’s management fee structure, impact on emerging managers, and largely ignoring its wider industry ramifications. Our read is that this is intended as a course correction to normalise venture capital as an asset class, i.e. it is not exceptional in the alts market), and should be subject to the same standards of (better) practice already held in the broader private equity space. It is long overdue and venture funds with the correct strategies in place will be able to take full advantage of any disclosures (conflicts of interest), compensation and remuneration schemes scrutiny, amongst others, that this rule passing will require. A less hysterical take, in our view, is found in Techcrunch here.
However, there will be little point in governments implementing these types of measures if these funds and their portfolio companies continue to go on and create other costs that the public sector (governments, municipalities and the third sector) then have to go on to use whatever gains (tax revenue in particular), to fix the issues and any value decimation wreaked by the short-term gains maximisation privatised by venture capital funds.
The US could learn a lot from how the UK is crafting DEI policy for venture capital.
An SBA overhaul going into effect tomorrow will make it easier for fintechs and other nonbank lenders to issue loans, prompting worries about defaults, more here. For a more upbeat view Axios talks through the SBA’s intention, through this expansion of the SBIC scheme, to open up more investment into US startups, particularly those that fall outside the VC ‘safe space’ of B2B SaaS, you can read more here.
In a bizarre, and frankly cynical, turn of events: Last week, a group of art investors announced they were suing Sotheby’s for allegedly colluding with a blockchain firm to inflate the price of non-fungible tokens (NFTs) during a 2021 auction. The class action lawsuit -- filed by a group of anonymous NFT buyers -- was originally filed against a wide range of celebrities and influencers in December, accusing big names like Steph Curry and Madonna of being paid to raise the profile of the Bored Ape Yacht Club NFTs. Quartz has more here.
Biden Orders Ban on New Investments in China’s Sensitive High-Tech Industries. The executive order bans American investments in key technology industries that could be used to enhance Beijing’s military capabilities. The order will prohibit venture capital and private equity firms from investing in Chinese efforts to develop semiconductors and other microelectronics, quantum computers and certain AI applications.
VentureESG LP white paper launched — ESG for VC is here to stay.
The Treasury Committee Venture Capital Report, 2023.
Diversity VC is sponsored by Morgan Stanley, Amazon Web Services, Cooley, and HSBC Innovation Banking.
Diversity in venture news
Disabled founders are 400 times less likely to receive VC funding, says newly released Access2Funding report. Forbes dives in here.
Level 20 has launched a new research project, exploring family leave practices and policies and their impact on European private equity and venture capital firms. Insights from the research will provide a baseline for firms to benchmark themselves and to see how industry practice evolves. Take part in: the policy and impact survey ➡️https://lnkd.in/e5byBdb7 and the reward survey ➡️https://lnkd.in/eBfMJ5Pw.
Emergence of peer networks for female founders, VCs in SE Asia a welcome sign: Monk’s Hill Partner Susli Lie.
Startups Are Dying, and Venture Investors Aren’t Saving Them. In an unfortunately all too common theme, there continues to be a focus on ESG and DEI as fundamental issues that are suggested to be leading investors retrenchment due to their shareholder (LP and LPA) obligations.
Venture volatility is triggering racial bias, challenging diversity, equity and inclusion.
Investing in Diversity: How Venture Capital Can Help Create a More Inclusive Tech Industry?
European VCs see exodus of women investors.
Funds and funding news
The head of a New York venture capital firm has pleaded guilty to conspiracy in connection with an alleged scheme to defraud investors with false promises of pre-IPO shares. Last year, the SEC charged Vika Ventures and its CEO and co-founder, George Iakovou, for fraudulently selling more than $6 million of securities to investors, purportedly to invest in shares of private companies ahead of their IPOs. More here.
Private Equity asset management consolidation.
‘Impact transparency’ is the tipping point for an impact economy.
To counteract some of the (understandable) foreboding prompted by the suit brought against the Fearless Fund by the group behind US affirmative action cases; that it might be a precursor to an attack on DEI efforts overall, we turn to non-US trends: an MGI report found that advancing women’s equality in Asia-Pacific could add as much as $4.5tn to the region’s collective annual GDP in 2025, a full 12% increase over its base-case growth trajectory. One of the many examples of a more expansive investor perspective increasing overall deal flow and quality, cornerstones of successful venture investment.
According to data compiled by the Sapphire Ventures team (and shared on LinkedIn): H1 2023 median first-time fund size in the US was $25m, down from $39m for 2022 and $42m in 2021. Only 16 funds of $500m or more were closed in H1 2023, versus 43 in the same period a year ago.
Institutional investors fastest growing source of capital investment for impact investment managers. The article outlines increased capital flows from pension funds and insurance companies demonstrating “expanding appeal” of impact investing – but investors favour high-income countries over Global South in face of economic volatility, latest GIIN research shows.
Why economic forecasters got their recession call wrong.
Community spotlights
Be sure to check out the 🔦Community Spotlight🔦 interviews if you haven’t already!
Harry Briggs, Partner at OMERS Ventures
Janneke Niessen, Partner at CapitalT
Watch out for the next in the series coming later in August!
Congratulations to
👏 Keen Venture Partners are Level 2 certified
👏 Rubio are Level 1 certified
👏 Astanor are Level 1 certified
👏 Speedinvest are re-certified at Level 2
Welcome to our new members
👏 YFM
👏 Puma PE
👏 Future Planet Capital
👏 HV Capital
👏 Dutch Founders Fund
Future VC
📣 Future VC is the first of its kind paid VC internship programme that operates at the industry level, enabling all participating funds to have the benefit of working with talented individuals from all parts of our communities. Look out for details of our 2024 applications opening soon on our website.
New roles for those in your networks looking for junior, including associate and intern, roles at VC Funds - be a guardian angel and share this link: Future VC Jobs Board
Want to post a role? Get in touch here.
Mark your calendars
D&I dates:
National Inclusion Week - September 25 -29
Yom Kippur (Jewish) - September 24
International Day of Sign Language - September 23
Bi-Visibility Day - September 23
International Equal Pay Day - September 18
World Suicide Prevention Day - September 10
International Day of Charity - September 5
East and South East Asian Heritage Month - September 1 - 30
National Food Bank Day - September 1
Grief Awareness Day - August 30
International Day of Remembrance of Slave Trade and its Abolition - August 23
World Humanitarian Day - August 19
International Day of the World’s Indigenous Peoples - August 9
VC Conference dates:
Catalyst Cap Intro: Alpha Active Investing - Sept 18
TechBBQ, Copenhagen, September 13-14
TechChill Investors, Bologna, Sept. 21-22
TechChill, Milan, Sept 25-26th
Italian Tech Week: Premio Business Angel dell'Anno 2023, Torino, Sept. 27-29
Bits & Pretzels, Munich, Sept. 24-26
WVC:E - Oct 2-3
Sifted Conference, London, Oct. 4-5
Money 20/20 USA - Oct 22-25
NORDEEP Summit, Espoo, Oct. 11-12
SaaS Stock, Dublin, Oct. 16-19
Valencia Digital Summit, Valencia, Oct. 26-27
Resources
You can add the Diversity VC 2023 calendar for a list of the conferences and diversity & inclusion days for the year ahead: here
Human Rights and Venture Capital — towards a pragmatic tool
Impact Investing and the SFDR Toolkit
Turning intention into action: ESG_VC & BVCA Report
How to write an ESG Policy for VCs
Diversity VC is sponsored by Morgan Stanley, Amazon Web Services, Cooley, and HSBC Innovation Banking.