Current Events - Week 7 - Diversity

Study Signals Slow Shift Toward VC Diversity

July 8, 2008

A first-of-its-kind demographics survey of venture-capital professionals underscores many of the industry's stereotypes, but indicates venture firms may be slowly shifting away from the norms.
The National Venture Capital Association and Dow Jones VentureWire teamed up to survey a group of professionals at U.S.-based venture capital firms, asking them 20 questions on topics ranging from race, gender and age to college degrees, investment sector focus and hours worked.
The results, compiled from 526 responses, an 8% rate, paint a picture of the venture capital industry's makeup, and could serve as an annual benchmark for observing how VC is changing.

Do you log as many hours as a VC? Read Wendy Bounds's latest post and share your thoughts.
Venture capital firms, not surprisingly, employ mostly white males. Of the survey respondents, 88% are white, 75% are male and 66% are white males. When the results are narrowed to exclude non-investment professional titles, the percentage of white people stays at 88% but the percentage of males increases to 86% and the percentage of white males increases to 77%.
However, the data suggests that more diversity may be on the way as the industry spreads globally. Younger venture capitalists, while still overwhelmingly white and male, are more likely to be female, Asian or born outside of the U.S. than older ones, according to the survey. Of the 179 respondents with less than five years of experience, 82% are white and 80% are U.S.-born, compared with 90% and 91%, respectively, for the 347 respondents with five or more years of experience. A sizeable 84% of non-white professionals are 44 years of age or younger, compared with 53% of those who are white.
"While historically, the U.S. venture capital industry has been comprised of a relatively homogeneous group, we see a growing diversity emerging within the asset class," said Mark Heesen, president of the National Venture Capital Association. "We have entered an era of venture globalization which will require different perspectives and experiences and we believe the face of venture capital in 2020 will be much different than it is today."
Overall, 87% of those surveyed were born in the U.S., followed by Asia/Middle East at 5%. Eight percent of those surveyed label themselves as being Asian/Pacific Islander or Asian/Pacific American, while just 2% are Hispanic/Latino and 1% African/African American.
The survey also looked at educational background, finding that 52% of respondents hold a master's degree in business. That percentage climbs to 62% when separating out the traditional investment professional titles. A higher percentage of the overall group, 64%, have some type of advanced degree, whether a master's or a PhD. By gender, 70% of males have advanced degrees, compared with only 45% of females.
The top three alma maters for VCs will come as no surprise as they boast top-ranked business graduate programs: Harvard University (12% of those surveyed), Stanford University (9%) and University of Pennsylvania (8%). That 26% total across the three schools climbs even higher, to 35%, when looking just at traditional investor jobs. Duke University and Massachusetts Institute of Technology also turn out a lot of venture capitalists, with 5% of those surveyed hailing from each of those two places.
As for what they did before joining their current firm, 20% of VCs worked at another venture firm prior to their current position, while 16% worked at a large private or public company, 12% worked at a start-up company and 10% worked as a C-level entrepreneur.
One note that perhaps highlights the dearth of female entrepreneurs: 17% of men with traditional investor titles previously worked as a C-level entrepreneur, while only 2% of female counterparts, or one person in this study, previously held that position.
While venture capital can prove to be a lucrative profession, that doesn't mean VC professionals are working absurdly long hours, at least according to the survey. Only 2% of those surveyed work 81 to 100 hours per week, while 30% work 61 to 80 hours, 58% work 41 to 60 hours, and 10% work 40 hours or less. The work week doesn't fluctuate much by title in the survey, though those in lower positions tend to work fewer hours than those with higher titles.
The majority of U.S. venture capital firms, according to the study, tend to be smaller partnerships, staffed with five or less professionals (35%) and less than $500 million in capital under management (51%), although 30% of those in this study work at firms that have managed six or more funds, the highest percentage. This underscores that the venture industry still leans toward early-stage investing despite the trend these days for firms to move further downstream: 51% of the firms in this study focus solely on seed and/or early-stage companies, and 85% dabble in early-stage. Only 11% invest solely in late and/or growth-stage companies, while the remaining 38% have a multi-stage strategy.
The regional focus of the firms involved in this study is spread rather evenly across the U.S., with Northern California listed as a focus for 69% of the firms, topping the list, while the Southwest was at the bottom with 49%. Only in the past decade or two has the venture capital industry spread across the globe; 39% of the firms in this study invest abroad.
Write to Scott Austin at moc.senojwod|nitsua.ttocs#moc.senojwod|nitsua.ttocs

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