Venture Capital Diversity Reports

Reports for Venture Capital Roundtable Discussion

Below is a list of reports utilized in preparation for the Venture Capital Roundtable Discussion.  The list does not represent all potential reports on the topic of Venture Capital and diversity, but is a great resource for anyone delving into the subject matter.  If you have additional reports to share with the JEDE Committee, please do so using the Contact Information set forth previously.

American Made 2.0: How Immigrant Entrepreneurs Continue to Contribute to the US Economy (National Venture Capital Association, 2016)

The report uses data to illustrate the nativity of publiclly traded companies that IPO’d from 2006-2012 that were launched from venture funds.  The report also surveyed private venture firms on the issue of immigration policy and the impact to start-up venture investments.  The report reveals that 33% of venture funded companies that had an IPO during 2006-2012 also has an immigrant founder.  These companies have a market capitalization of over $167 billion today, and include companies such as ZipCar, Tesla Motors, and Facebook.  India is the most common country of origin, with 20% of the companies having an Indian founder, followed by the United Kingdom, Canada, France, Israel and Germany.    Of private enterprises with immigrant founders and venture capital funding, software companies account for 41% of the businesses, following by biotechnology, IT services, business services, consumer goods, media/entertainment and energy/clean energy.  California is the preferred destination of privately funded companies with immigrant founders, with 36% of the businesses, followed by Massachusetts, New York, and Pennsylvania.  The report suggests addressing four areas of immigration policy:  (1) How can foreign national entrepreneurs reliably remain in the US; (2) Talent retention is challenging due to long waiting time for green card (employment) approvals; (3) An insufficient number of available H-1B temporary visas;  and (4) The process for sponsoring skilled foreign nationals is time consuming and full of red-tape.

Building a More Inclusive Entrepreneurial Ecosystem (National Venture Capital Association 2016)

This report provides synopses of various organizations that have taken steps to help advance inclusion.  The majority of organizations covered in the report are venture capital firms that took action during the course of 2015-16 to increase the number of women and underrepresented minorities within their firms (hiring) and among their portfolio companies (investments).  These firms are participating in the National Venture Capital Association Diversity Task Force, a leadership effort in the venture capital industry to promote inclusiveness and diversity.  The report addresses other organizations in the ecosystem, such as the Hackbright Academy, BUILDUP and MergeLane.  The firms that took the Diversity Pledge to participate in the Diversity Task Force seek to: (1) Change internal HR policies to promote diverse work environments; (2) Fund and participate in programs that promote venture capital and entrepreneurism as a career path to women and underrepresented minorities; and (3) Share best practices to promote diversity and inclusiveness with others in the venture capital eco-system and firm portfolio companies.

Commitment to Diversity & Inclusion Report Fiscal Year 2015-16 (CalPERS 2016)

This report from CalPERS details their Diversity & Inclusion (D&I) program, which seeks to impact CalPERS’ workforce, workplace, and marketplace.  The report states that 50% of CalPERS’ staff is women.  Nearly half are Gen Xers (commonly defined as born between 1965 to 1980).  Nearly two-thirds of its staff is white (62%), followed by Asians (19%), Hispanics (16%), Pacific Islanders (1.5%), and African-American (1.4%).  CalPERS’ D&I program impacts its workforce through talent development with programs such as an informal mentoring program, employee career services, and an organizational health index (which represents employee attitudes).  CalPERS operates a Diversity Outreach Program to implement D&I initiatives throughout all operations.  Over 1,300 employees participated in diversity workshops and outreach events.  D&I resources are promoted on CalPERS website, and Cultural investments is a featured monthly electronic newsletter that helps managers and their teams create inclusive environments.   An employee resource group, the CalPERS Diversity & Inclusion Group, holds monthly meetings and occasional networking events to help promote openness and exploration of varying ideas and cultures.  In May 2015, CalPERS’ Investment Office created a D&I Steering Committee, which approved the Investment Office Diversity and Inclusion 2020 Plan.  This plans sets forth CalPERS’ strategy to grow diversity and inclusion in corporate boards, external managers, and talent acquisition and retention.

Diversity and Inclusion: Evidence of Corporate Performance (The Barthwell Group and Credit Suisse 2016)

This report provides the print versions of PowerPoint slides from a presentation given to CalPERS’s Diversity Forum in September 2015.  The slides detail corporate benefits from diversity and inclusion, focusing on enhanced business performance.  Corporate diversity and inclusion benefits are identified as: attracting and retaining the best talent; increasing innovation; enhancing financial performance; competing more effectively globally; enhancing US market share.   The report states that because US companies increasingly must look at global markets for growth, a multi-cultural competency is required.  Diversity of thought through workplace diversity provides a risk reduction to the negative impact of groupthink.  The report notes that workforce diversity and inclusiveness should start at the top of leadership.  Diversity on corporate boards leads to improved competitiveness, better talent management, greater access to capital, more stable revenue streams, and better relationships with equity stakeholders.  In terms of a direct relationship to financial performance, the report states that boards with a woman delivered a return on equity of 14.1% compared to 11.2% for all male boards since 2005.  Profitably is higher at those companies in all sectors except for energy (underperformed by just 1%).

Diversity in the Management of Investments 2016 Annual Report (CalSTRS 2016)

This is a mandatory report produced by CalSTRS to present CalSTRS’ progress toward achieving diversity goals which are set forth in a 5 year plan to increase emerging investment manager participation (SB 294, Chapter 701, Statues of 2011) and diversity within CalSTRS employment.  The report provides detail on CalSTRS staff of diverse investment managers, whether gender or ethnic based.  It also notes staff efforts to provide diversity in investment management by working with portfolio companies and speaking at conferences and events on the topic.  The staff in 2015 totaled nearly 130 people with a myriad of cultural, ethnic, worldview and investment perspectives.  The report illustrates CalSTRS activities to meet goals in the following areas:  Diversity in its own internal investment staff; increase the awareness of investments as a career path to California high school and community college students; increase diversity of external real estate fund managers; increase diversity across corporate boards of portfolio companies; create a direct bridge for developing managers to be hired into the core portfolio; increase diversity among brokerage firms that provide CalSTRS with financial services.  The report reviews actions taken by CalSTRS as part of its 5 year strategic plan to improve diversity and inclusiveness within its own employees by: (1) developing a recruitment strategy to attract a diversified workforce; (2) develop training for all asset class managers, and create a system to hire from California universities; (3) Increase retention of employees that reflect diversity by creating new training and career development programs; and (4) launch a local university internship program.  In terms of promoting diversity within all asset class fund managers, CalSTRS launched the Developing Manager Program in 2004.  As of 2016, CalSTRS works with six manager-of-manager firms, five of which are women or minority owned.  In turn, those managers work with 48 developing fund managers, of which 25% are minority owned and 21% are women owned.

Diversity Matters (McKinsey & Company 2015)

This report looks at the relationship between diversity (the number of women and minorities) within leadership positions at large companies, and the financial performance of these companies from 2010-2013.   The report found statistically relevant relationships between companies with financial performance above the median for their respective industries and companies that fell in the top 25% of identified diverse workforces.  While the relationship correlative, the report states that the link in the US between diversity and performance is direct and linear – meaning competitive and financial advantages are realized with more diversity.  The report notes that diversity helps companies with:  talent recruitment, improved customer orientation, higher employee satisfaction, and improved decision making and innovation.  It states that successful diversity programs have five similar traits:  (1) determine the value proposition; (2) define existing set of facts and data; (3) build diversity target goal to meet different groups’s facts; (4) manage the governance model; (5) create an environment for inclusiveness within management’s mindset.

Intel Diversity and Inclusion Report (Intel 2016)

This report captures actions taken by Intel to promote diversity within its business units, vendors and the technology industry at large.  In 2015, Intel committed $300M company-wide to increase diversity and inclusiveness among women and underrepresented minorities.  The report details Intel’s efforts during the first full year of the company’s efforts to reach specific company goals, based on actual Intel hiring and retention data.  Specific to venture capital funding, in 2015, Intel launched its Intel Capital Diversity Fund, which invests in women or minority owned technology companies.  Over five years, Intel is investing over $125 million in companies where at least three members of the senior management team are women and or underrepresented minorities.  In 2015 Intel placed $19 million in investments across five businesses.  Intel has met with over 200 companies and expects to make up to six investments throughout 2016.  A recent addition to Intel Capital Diversity Fund’s portfolio is LISNR, a start-up based in Cincinnati.  Rodney Williams, LISNR’s African-American CEO said, ”One of the advantages of the Diversity Fund is that it looks for talent and opportunities beyond the usual locations and networks.”

The Multicultural Edge: Rising Super Consumers (Nielsen 2015)

This report provides an analysis of the marked increase in shopping (buying) power from Hispanic, African American, and Asian American consumers in the US.  There are over 120 million multi-cultural consumers.  Growth is driven primarily by Hispanics accounting for over half of all population growth by 2020 and 85% by 2050.  By 2030, the non-Hispanic white population in the US will be in an annual decline, and multiculturals will fuel all domestic population growth.  Due to this population growth and the influence that increased buying power has across all markets, multicultural consumers are at the forefront of converging social and demographic.  These new market forces impact how advertisers and marketers reach their intended audiences, and to a large extend, whom makes up that intended audience.  Multi-cultural consumer are market drivers, with the top 10% of households accounting for over 30% of sales, 40% in sales growth and 50 % of revenues.  The impact from multi-cultural consumers extends to non-multiculturals:  (1) Geographically, where the two populations share product and brand affinities due to “Super-Geos” that form due to geographic population densities; and (2) Demographically, where multi-cultural consumers are younger, market trendsetters across a range of categories.  With young multi-cultural consumers maturing and starting families, brands have an opportunity to create long-term, generational connections to these consumers.

The Value of Ethnic and Gender Diversity in Private Equity and Venture Capital (Fairview Capital Partners, 2016)

This report, prepared by Fairview Capital Partners (a private equity fund of funds), provides an overview of woman and minority owned private equity firms in the US.  The report contains some duplicative information from the Fairview report titled “Woman and Minority-Owned Private Equity Firms”, but also culls out new facts specific to venture capital.  Of the top 71 venture capital firms that have over $160 billion in assets under management in 2015, more than 92% of executive investment professionals were men, and 78% of them white.  Asians comprised 20% and African-American and Hispanic or other minorities combined total just 2%.  The report notes many identified benefits from diversity within a business including intangibles such as talent recruitment, employee satisfaction, better decision making and innovation.  On financial performance, the report cites a 2015 McKinsey & Co. report titled “Why Diversity Matters” where it was found that for every 10% increase in racial and ethnic diversity in an executive team, earnings rise 0.8%.

Woman and Minority-Owned Private Equity Firms (Fairview Capital Partners 2016)

This report, prepared by Fairview Capital Partners (a private equity fund of funds), provides a market overview of majority owned (>50 %) woman and minority-owned private equity firms in 2015 that actively raised capital and are located in and invest primarily within the US.  Fairview Capital maintains a proprietary database that includes over 150 active woman and minority owned private equity firms.   The report states that during 2015, 42% of these firms were in market for venture capital investments, making for a 50% year over year increase, and continuing a trend that Fairview notes comports with a trend in venture capital – new firms being formed by diverse managers, often as spin-outs from already established venture capital firms.  These new VC firms aim to be “millennial friendly”, reflecting the entrepreneurs and the markets where they will invest venture capital dollars.

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