Investors should all care about diversity

Only 3% of venture capitalists surveyed by LinkedIn rate diversity as a “top concern” and only 14% of venture capitalists rate diversity as one of their top 2 concerns, when compared to macroeconomic conditions, raising capital, hitting revenue targets, or hiring the right people.

59% of venture capitalists say that their firms do not support any diversity initiatives for founders, while an even greater 69% of founders report that their startups do not support any diversity initiatives for employees

If you are a smart investor, and you are good at seeing the future, then take a good hard look at what people are expecting in the years to come. These are two statistics to think about that came out of a recent survey done by LinkedIn.  I find these stats insane considering the overwhelming data that has shown that companies with gender diversity have better returns on investment (ROI).  That most companies and investors don’t seem to care about diversity issues is plain stupid.

Everyday we are reading about bad behavior of a new powerful man.  Each generation has a different reaction to this because older people have witnessed this for years and perhaps have become numb where as people in their 20’s are incredulous that this behavior exists.  Let’s focus on the 20 year olds.

What is unique about start-ups is that they are generally ahead of their time.  Successful start-ups are creating companies that are filling voids for the future.  Great investors get where things are going and the hope is that by betting on that company, they will see growth and engagement in a very different place three to five years down the line.  When most people begin to realize that a particular product exists, people in the start-up world have seen it years ago.  

It is mostly the youth that make up the majority of these companies workforce and many times it is the youth that start them.  This generation is not ok with bad behavior and they not only believe in equality, diversity and gender balance they don’t see the world without it .  

That says to me that VC’s should care very deeply about hiring the right mixture of people to  work in their investments.  They should be supporting diversity by making it a top priority for all the companies that they invest in including the firm they work in.  The importance of making diversity a top priority now, just like investing in start-ups, is the payoff will be 3-5 years down the line.  

So let’s make this clear of where we need to be.  Bad behavior is unacceptable and companies where powerful men sexually harass women will be taken out of the equation immediately.  Nothing will be swept under the carpet anymore.  A myriad of faces is what people who work in companies want to see including new hires.  Diverse companies will have it easier recruiting good people. Diversity is expected in our workplaces and the C-team must be gender balanced.  Those are the companies of the future because it is not just about a good idea and a tenacious founder, it is about a culture that can execute on that vision and the culture of the future is a very diverse workforce.  

These stats tell me that too many institutional investors are not doing a very good job when it comes to thinking about the future and if I were a limited partner I would not be considering those VC firms a very good investment.  

I wrote about this on LinkedIn

Comments (Archived):

  1. pointsnfigures

    You have to expose yourself to figure out diversity. Especially different ideas. Some of that will be exposing yourself without confirmation bias to people that have a different skin color, gender etc than you but you can do yourself a world of good by spending time in a rural/suburban area and talking to people if you are an urban person. Or, vice versa. That goes for politics too.

  2. Bridget Goodbody


  3. JLM

    .I want everything you say to be true, but the sad truth of the matter is that limited partners are not attuned to either diversity or gender balance and are not going to nudge the VC industry in that direction.The VC business itself is moving with a sense of chagrined reluctance.How long did it take USV to anoint a woman investment partner? Their hearts were in the right place. They spoke the right words. It took them a long time to act. This is not a criticism of USV, but a note on the reality of the situation.It takes a long time to effect change.What is attainable is a gentle turn toward simple decency and fairness. The sexual harassment and hostile workplace issues are not failed attempts at diversity or gender balance. They are cesspools — legally actionable — of bad acts.Diversity and gender balance feel like discussing the right fork to use with various kinds of shellfish while what is really going on feels like ax work and chainsaw work.We will not have peace on this subject until we have war, a lot more war. Until the actionable consequences become normal, ordinary, and accepted. Until the notion of a powerful man abusing his female colleagues or subordinates is unthinkable.I don’t see any likelihood that the 20-somethings will effect this change. They have no power in the situation. It will take adults, people with power, who have to erect a spoils system which says certain behavior is unacceptable and will be an impediment to success and advancement on a personal basis.There have to be consequences such that the halls of power are closed to such men.There is a COLORED restroom in a 1930s public building in ATX. I showed it to a young person, who said, “Wow, that really happened.”That is where we have to get. Abuses have to become unthinkable. Only then will we begin to be able to discuss the right fork with shellfish.I wish it were otherwise.JLMwww.themusingsofthebigredca…

  4. Heather Wetzler

    OY – those numbers – 3% and 14% – that makes me crazy. I was on a diversity and women in tech panel this am in LA and we started off the panel with the Time Cover – – Person of the Year – – The Silence Breakers. We have to drill it into the VCs heads about Diversity. Hello UBER? How much did lack of diversity and bad company culture cost the INVESTORS? A LOT. I hate to make it about money, because for me it is not – – but some times we have to speak their language. If there was more diversity at Uber and it was less of a “bros club” maybe their market cap would still be at $70 billion instead of the now $50 billion. And what Intel is doing is amazing – -I think we need to point out the positive examples as well:

    1. Gotham Gal

      Totally agree. Millions wasted. That speaks volumes for sure

  5. Elizabeth Spiers

    I don’t see how we end up with more diversity among founders and c-level operators until there’s more diversity at the investor level. If only 7% of VCs are women, it’s no surprise that their portfolios skew that way too. Between pattern matching, “cultural fit” and social proof–all of which significantly influence investment decisions–the first people to get screened in are people who resemble the VCs themselves, and are a few degrees removed from them naturally.

    1. Gotham Gal

      I hear you but I want to believe that men investors want diversity now more than ever