Ivy League bias: Venture capital’s major diversity problem

1 Aug 2018

Undergraduate housing at Harvard University. Image: Jannis Tobias Werner/Shutterstock

It is a well-known fact that Silicon Valley has a diversity problem. Following the money leads to a possible reason why.

The lack of diversity in Silicon Valley and tech across the board is a pressing problem, and new analysis from Equal Ventures partner Richard Kerby shows there is still a massive hill to climb to achieve both equity and equality.

Venture capital (VC) makes or breaks tech firms, but who holds the money?

According to Kerby’s analysis of approximately 1,500 US venture capitalists, more than 80pc are men, and 70pc of all these individuals are white. While this is anecdotally known, the educational backgrounds of the VC professionals examined shows a glaring privilege problem.

What school did you go to?

A whopping 40pc of those surveyed went to either Harvard or Stanford – two prestigious, expensive Ivy League universities.

Kerby said: “Everyone wants to work with those they are most similar to, and education, gender and race are attributes that allow people to find similarities in others.

“There is clear problem here in that the insular nature of the educational backgrounds means other forms of diversity will also suffer, as well as the more well-known lack of women and people of different ethnic backgrounds.

“With 82pc of the industry being male, nearly 60pc of the industry being white male and 40pc of the industry coming from just two academic institutions, it is no wonder that this industry feels so insular and less of meritocracy but more of a ‘mirrortocracy’.”

A major issue

Kerby is one of the VC world’s few black figureheads and he has been conducting research into diversity in the area since 2016.

Things are slowly improving in certain areas, according to him. White venture capitalists at 70pc is a 4pc decrease on 2016’s figures, while Asian representation grew from 23pc to 26pc in the two-year period. Women saw a 7pc increase in representation. However, black representation only grew a single percentage point to 3pc, and Hispanic representation sits at a meagre 1pc.

Kerby concluded: “This insularity of the venture ecosystem has ripple effects throughout the tech industry. It is not a coincidence that the amount of capital raised by minorities and women closely resembles their representation among venture capitalists.

“And, furthermore, it is no surprise as to why the demographics of most venture-backed start-ups also reflect the demographics of the venture capitalists that fund these companies.”

There are some companies, such as Backstage Capital, trying to change the notion of what a venture capitalist looks like, but the task ahead is challenging.

Undergraduate housing at Harvard University. Image: Jannis Tobias Werner/Shutterstock

Ellen Tannam was a journalist with Silicon Republic, covering all manner of business and tech subjects