February 15, 2023

VC diversity needs to change — and white men need to take responsibility

The diversity numbers for startup funding and VC decision makers have been stagnant for years. We need to try a different tactic

Johannes Lenhard

The startup and VC funding numbers for 2022 are out — and when it comes to diversity, they are devastating:

  • In the US, the funding for female founders (1.9% in 2021 in the US vs 2.4% in 2020) as well as for black founders (1% vs 1.3%) went down again last year.
  • The same decline is apparent in Europe (from 3% to 1% for female teams with a slight increase from 10% to 12% for mixed teams).
  • And when the pie of available funding grew, women didn’t actually get any more of it, according to Atomico’s State of European Tech Report. 

For VC decision-makers (GPs/partners), the stats are also abysmal: 

Why has progress been poor? 

For years, the industry has been talking about the “diversity problem”, but given the lack of progress, something must be missing from our approach to the issue. 

We have been putting “hope”, responsibility and work mostly into the hands of the groups who are underfunded and overlooked — women and people of colour, for example. That’s not our best bet. Female founders who take money from female GPs are less likely to raise money again later.


Relying on underrepresented and overlooked populations to create the change themselves, always struggling to gnaw off pieces of capital and power from the people on top, also doesn't make any sense. How are the people with less money and less influence to begin with going to change the system by themselves, especially if they aren’t even let into the room?  

Change is dependent on white, elite-educated men 

Changing any system is complex and needs to involve multiple stakeholders, especially existing gatekeepers. The gatekeepers for the VC and startup funding system are mostly white, male and elite-educated; we need them to help solve the problem.

Despite clear evidence that more diversity leads to better bottom line returns for VCs and LPs, and an abundance of (bad!) DEI training, key stakeholders — GPs and asset owners (limited partners, LPs) choosing the GPs — haven’t changed the way they allocate their money. At least not fundamentally enough to make a difference in terms of who VC decision-makers are and who startup funding is invested in. 

Increasing accountability is important (and DEI-washing needs to be called out) but I want us to also try a different tactic in 2023: white, elite-educated men need to take responsibility and lead more conversations with other white, elite-educated men, because they need to be a part of the solution. They need to listen, understand and then they need to convince their peers to do the same. 

Here’s what that could look like

We do not need more mentorship and we also do not need more office hours without explicit financial commitments. Both have been tested and though they might make people feel slightly better, they’re not good enough. Instead:

  • As a VC, reflect on and change how you run your own fund: Ask yourself where your decisions are biased, and take explicit steps to diversify your pipeline, your hiring, your decision-making, the boards you sit on, your network and ultimately your cheque-writing. If you need help, look at the likes of FairHQ or Inklusiiv. Go through the Diversity VC standard. You could start with an internship programme — like FutureVC — but you need to really change the way you make decisions from the top down. It all starts with change at home, and that change takes real work. 
  • Don’t require warm introductions: Warm introductions reproduce existing networks; as a VC, you don’t want there to be barriers stopping founders from finding you. Make it easy to contact you via your website — and actually look at the pitches founders submit. 
  • Create space for others, from the top down: If you’re invited to speak at a conference, pass the opportunity to a colleague from an underrepresented group. If you pitch an LP, take your junior colleague with you and let them speak, too. If GPs are the only ones who have a say in how you allocate money, change it, and experiment with non-unanimous decision-making. And don’t hog your carry — distribute resources fairly, not hierarchically; that is the E in DEI. Make space in situations that matter and share your power and economics. There is plenty of it to go around. 
  • Become an LP and enable the next generation of VCs: A bunch of (mostly historically overlooked) US GPs have come together to start an LP, Screendoor, focused on investing in underrepresented and emerging managers. With their collective track record at funds such as Homebrew, Cowboy, Forerunner and Precursor, these GPs convinced big endowments and foundations to give them $50m for a first fund-of-funds in 2021. Tech lawyer and long-term diversity activist Ed Zimmermann has also helped lead this kind of LP formation out of New York with First Close Partners. It's time for a bunch of successful GPs in Europe to do the same — use your privilege, get money from the LPs who trust you and help others who aren’t as privileged as you to raise a fund and build a track record. That is true allyship. 

We’ve been talking long enough and the first generation of successful European GPs and VCs have it in their own hands now — do we want the VCs and founders of the future to all look like you or not? Success breeds responsibility — take that seriously, become an ally and finally, finally make change happen by sharing power and wiring the money differently.

Dr Johannes Lenhard is an affiliated researcher at the University of Cambridge and co-director of VentureESG. He is the coauthor of Better Venture and is currently writing a book about the ethics of VC. He tweets at @JFLenhard.