Diversity VC Digest ☕️😰
Your (monthly) digest of all things DEI in venture capital. March 2023 edition.
The Ides of March…🕊🔪
There were some strong contenders for this month's Diversity VC digest strap-line...the Ides of March seemed most apropos. Canaries in the coal mine, a close runner up 😳 Can we embrace the discomfort that comes with accepting that calls for VC reform are not going to go away? After all banks have shown, long before SVB, what happens to financial power players who didn’t accept the power and peril of being systemically important. For those venture investors willing to listen and learn, these demands are all opportunities.
A gentle warning that this month’s read is intended as a rallying call to continue reforming the venture capital system as it stands today. This means we will be drawing on some of the sector’s most challenging critics and continue holding up the Diversity VC mirror. It has been a rollercoaster couple of weeks for many of you affected by the SVB news and subsequent collateral damage - go easy on yourselves - and if you need to skip our regular opinion piece at the top, head straight to the regular funding and fund news sections lower down.
In case you are lacking in hot takes (!) you can read the Diversity VC response to the SVB crisis. We ran out of space to include the observation that a US and UK specific contagion is setting the agenda for venture capital worldwide, something we wish to explore further -email us if you want to share your POV here next month. Ongoing speculation continues to swirl, with reporters going as far to call out “venture capitalists…contradicting each other” and investigating the venture-led origins of the now infamous bank run. (The list of financial institutions speculated to be hanging in the balance continues to grow). We wanted to focus on what this means for a more inclusive and equitable venture system that would, by extension, positively contribute to economic resilience and fulfil venture capital’s obligations to drive a true innovation economy. Let’s dive in…
Del Johnson - known to many as the contrarian father of modern venture capital (highly recommend reading his back catalogue of hits, suggest starting with this)- has once again stepped up to address the glaring, potential catastrophe inducing, holes in the current venture capital system. He writes:
“The SVB crisis reveals how VC recklessness exposes the economy to systemic risk. New research shows VCs have “little or no" investment skill. Society must fundamentally rethink the power we give VCs & reimagine how we invest in innovation.”
His Wired piece outlines legislative and regulatory measures that address the rise of venture capital as a de-facto “shadow banking” system, and the systemic risks this poses (and were brought into sharp relief by the SVB events). This echoes other experts on the economics of the venture system here and here, including a veteran investor who urged calm whilst calling out bad actor VCs.
They all unite around the fundamental premise that venture capitalists, whether they accept it or not, have fiduciary and societal duties.
The main policy and reform takeaways are:
Publicly funded innovation laboratories (to move us away from “privatising rewards and socialising risks”)
Tax reform, including taxing VC compensation as personal income (much has already been written on this topic)
Closing VC-specific tax loopholes that banks exploit to invest massive amounts of capital into these structures
More investment being made available outside of the enmeshed VC ecosystem
If VC is now acknowledged as structurally important - something VC strongly and explicitly pushed for as they sought Government support - then we should also be subject to the professional standards and rules of responsibility, that this systemically important position justifies. See “Imprinting the economy: The structural power of venture capital”
Whilst this may be a difficult read for many of us, including our own Diversity VC Members, we believe that naming and facing legitimate criticism is vital to live the venture principles of innovation and constant learning. We can engage and start to meaningfully address the criticisms levelled against us. Investor competence and finance systems understanding, alternative funding sources, closing tax loopholes and LP incentivisation to increase their diversification so that we are not over-concentrating and have a chance to break VC herd-signalling - are all well known to many of us.
Can we embrace the discomfort that comes with accepting that these calls for change are not going to go away? After all, banks have shown, long before SVB, what happens to financial power players who didn’t accept the power and peril of being systemically important. This “new normal” of banking stocks in so-called ‘freefall’, a growing deposit backlash in the US, Stripe’s valuation down by half and Revolut’s $33bn valuation being called into question too. For those venture investors willing to listen and learn, these demands are all opportunities.
(Pre-) Policy trends
“Low interest rates fuelled a tech boom. What happens now?”
“Enhancing the Innovative Capacity of Venture Capital”
“Graceful way out”: Investors propose some struggling founders close shop and return funding
The Other Diversity Dividend. We know that varied teams make better decisions. Study shows they also make better investments.
Diversity in venture news
In Europe's sweeping tech layoffs, women are more affected than men. Data shows women are being disproportionately affected by layoffs - further reducing female representation in the tech industry. Read more here. (Major tech layoffs continue with Amazon announcing an additional 9,000 corporate job cuts, on top of its previously announced 18,000 layoffs. Just Eat Takeaway lays off 1,700 couriers)
A compelling panel with tangible calls to action from this stellar International Women’s Day panel, including Molten Ventures and SVB UK, in partnership with Women In Venture Capital: Europe and Cooley LLP. And a fantastic launch event for equity and inclusion in venture in LatAm, with Amazon Web Services and EDP
VC diversity needs to change - and white men need to take responsibility. Brilliant piece from our friends over at VentureESG
‘A mixed bag’: UK tech reacts to Budget 2023
GitLab and Remote backer Inkef Capital loses its sole LP. The Dutch VC has lost the backing of Europe's largest pension fund ABP, which wants to focus on climate investments instead
The United Nations Intergovernmental Panel on Climate Change (IPCC) report released on 20 March, found that the world is likely to miss its most ambitious climte target - limiting warming to 1.5 degrees celsius (2.7 degrees Farenheit) above preindustrial temperatures - within a decade. More here
Female check-writers alone aren’t enough to close the female fundraising gap. Research asserts that women-led startups whose first round was raised exclusively from female VCs were 2x less likely to raise a second round regardless of initial funding round size, industry, geographic location or prestige of the investor. Listen to more here
The New Gatekeepers: tech trends for 2023, particularly prescient on “the end of free money” section
Researchers examine how OpenAI's GPT technology could affect the workforce, and find 'the influence spans all wage levels, with higher-income jobs potentially facing greater exposure.'
The genie escapes: Stanford copies the ChatGPT AI for less than $600
Scratched EV battery? Your insurer may have to junk the whole car
One for our Future of Work and Healthtech investors in particular: The Centre for Mental Health published their policy briefing on poverty, economic inequality and mental health which highlighted evidence showing that not having enough money causes and worsens mental ill health in numerous ways
Startup Bank Had a Startup Bank Run
🤦♂️...another level reached in venture due diligence. The ‘no diversity in venture’ memes write themselves at this point:
Funds and funding news
Ada Ventures reveals £1 million regional angel investor programme, one of the most diverse angel programmes in any European or UK fund
Venture debt is about to get a lot more expensive (although the end of cheap equity is the new normal for VCs, never fear, a Founders guide to venture debt also exists!)
B Capital Closes Inaugural Healthcare Fund, Commits $500 Million to Healthcare Innovation
Syndi Health closed a $2m pre-seed round, including a £400k Innovate UK grant, to build their recommendation tool for digital health support
Mo.Health (formally known as Mosaic) are building a novel approach to employee health insurance with a community trust fund model
Sesamm bags $37M to give corporates ESG insights using natural language processing
Founders Factory spun out the first venture from their Nesta Mission Studio—Furbnow, an end-to-end solution for retrofitting homes. Founder Becky Lane reveals more in The Guardian
Nesta Ventures office hours are open. Join an experienced team of VC investors and sector experts, all focused on building successful businesses that deliver on Nesta’s three impact goals in education, health and sustainability
It could take three years for the market to ‘accurately’ reprice late-stage cos, according to controversial VC Chamath Palihapitiya. Excuse us a moment…*pinches top of nose, scrunches eyes shut*
Community spotlights - the quarterly celebration issue
🎉 Congratulations and welcome to our freshly minted Diversity VC Standard holder fund member 🎉
👏 Unovis
👋 Welcome to our newest members on the road to a full DEI diagnostic as part of the Diversity VC Standard 👋
👋 SHIFT Invest
👋 Rubio
Give them a follow and reach out for a coffee ☕
Get in touch if you have a passion for DEI in venture and want to support the movement from insights to action in your region.
Find out more about joining the Diversity VC Standard community and becoming a certified Fund here.
It wouldn’t be a Diversity VC newsletter without some gif action…but we’re mindful of what a tough few weeks it has been. So, its slightly low key for this month…Onwards, friends…
Future VC
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.
Got tips?
Have a tip? Want to be featured for some excellent diversity, equity and inclusion work your Fund wants to shout about? Email us your stories
Added value…
You can add the Diversity VC 2023 calendar for a list of the conferences and diversity & inclusion days for the year ahead: here
The 101 guide to Board meetings for early stage CEOs