The venture capital industry is by no means diverse, but more firms are implementing strategies to hire and retain women and minority investment executives, the second edition of the National Venture Capital Association-Deloitte Human Capital Survey shows.
There's been some improvement in inclusion strategies and they are more purposeful in how they hire and grow their teams since the NVCA and Deloitte first teamed up for the survey in 2016, said Heather Gates, San Jose-based national managing director, emerging growth company practice at Deloitte & Touche LLP.
"It's a modest improvement," Ms. Gates said.
The survey was conducted between Oct. 16 and Dec. 15, with 203 venture capital firms completing the survey. The survey was released June 25.
NVCA and Deloitte's second survey found that 32% of venture capital firms surveyed said they have a diversity strategy and 31% have an inclusion strategy. That's roughly double from 15% and 17%, respectively, in the first survey, and which had 217 respondents.
Meanwhile, only 35% of venture capital firms said they have a human capital strategy, or a strategy targeted to promoting diversity and inclusion, up from 24%. And only 34% of firms reported having an executive tasked with promoting diversity and inclusion, up from 16% in 2016.
"This study confirmed the big takeaway of the first study," said Bobby Franklin, Washington-based president and CEO of NVCA. "When people make it a focus, it moves the needle."
Venture capital firms also took a few baby steps toward adding female executives to their ranks of investment professionals. At the small number of venture capital firms that reported having a diversity or an inclusion strategy or both, 20% of investment partners were women compared with 11% at firms without either strategy.
Overall, women comprised 45% of the venture capital workforce, unchanged from the 2016 survey. However, 21% of investment professionals are women, up from 15% in the 2016 survey.
Like in 2016, women were overrepresented in administration and marketing and communications posts. Ninety-five percent of administrative positions at venture capital firms are held by women, and women make up 74% of positions in investor relations, marketing and communications. That's similar to the 2016 survey, when women held 95% of administrative and 75% of investor relations, marketing and communications roles.
NVCA participated in the first survey as part of its push to make diversity in the industry a priority, Mr. Franklin said. "We wanted to do a statistically valid survey and to make the commitment to repeat it over periods of time."
This year's survey validates what NVCA executives and members said they have been seeing.
"There's been some movement in the industry," but it still has a way to go, Mr. Franklin said.
There has been a bit of improvement in racial diversity, but black and Hispanic individuals are still underrepresented, survey results show.
Some 4% of all employees are black, holding a mere 3% of investment partner positions, such as general partners, managing partners and managing directors. Five percent of all employees are Hispanic, making up only 3% of investment partners.
In the first survey, black employees accounted for 3% of the workforce, but held no investment partner positions, while Hispanic employees made up 4% of the workforce and 2% of investment partners.
One reason for the slow pace at venture capital firms is that turnover is lower than other types of companies, Mr. Franklin said.
The annual turnover in senior management positions is 7% among this year's venture capital survey respondents. Turnover was 19% for junior investment positions and 20% for junior finance, operations, and administrative positions.
This is vastly different from private equity, which has a higher turnover rate, Mr. Franklin said.
The role of the general partner in venture capital differs from that the general partner in private equity, because the companies are newer and venture capital executives are "entrenched" in the companies to help them become successful, Ms. Gates said.
There's a lot of hand-holding in venture capital, she added.
What's more, smaller venture capital managers that outsource most of their back-office functions are not likely to have junior executive or analyst-type positions, Ms. Gates said.
One factor beginning to make a difference in the diversity of venture capital firms is that millennials are beginning to move into senior positions, he noted.
Millennials, individuals between the ages of 22 and 35 as of June 30, 2018, now make up 41% of all venture capital firm employees, up slightly from 40% in 2016. Among the respondents' investment professionals, they make up 42%, an increase from 35% in the first survey.
Some 20% of senior-level positions are held by millennials, flat from the first survey, and 8% are investment partners, up from 6% in 2016.
"Millennials tend to be a little bit more focused on inclusion as a business imperative," Mr. Franklin said. "We believe part of the shift is a shift in mindset."
