New research looking into how UK VC has been invested over the past decade according to race, gender and educational background makes for grim reading — with all-ethnic teams and female entrepreneurs receiving just a fraction of available funding vs all-white teams and male founders.
The finding of baked in bias holds true across all funding stages, per the findings.
The report, by the not-for-profit community interest company Extend Ventures, looked at how VC has been invested in the UK between 2009 and 2019 — providing data on 3,784 entrepreneurs who started 2,002 companies over this period. It found that all-ethnic teams received an average of just 1.7% of the venture capital investments made at seed, early and late stage over this decade.
The UK’s Black and Multi-Ethnic communities, meanwhile, now comprise 14% of the UK population.
“While all ethnic entrepreneurs are underfunded, those who are Black experience the poorest outcomes of all,” the report notes, finding just 38 Black entrepreneurs received VC funding over this decade. “Alongside their teams, they received just 0.24% of the total sum invested,” it adds.
Extend Ventures used machine learning and computer vision technology as a tool to understand demographic factors — “including age, perceived gender, ethnicity and educational background of founding members” — relying on a perception of ethnicity or gender to categorise founders for the research, based on analysis of publicly available images of entrepreneurs.
“Despite ethnicity usually being a self-determined categorisation, we believe this is justified because the data we collect is subsequently anonymised and is being used to improve access to capital,” they note on that, adding: “Ethnic or gender prejudice is dependent on the perception of the person holding the purse strings to funds.”
On gender the research underlines the scale of the challenge UK female entrepreneurs face in accessing VC funding vs male counterparts.
The report found that a large majority (68.33%) of the capital raised across the seed, early and late VC funding stages went to all-male teams; 28.80% to mixed gender teams; and just 2.87% to all-female teams, with female teams also raising lower sums of money than their male counterparts at each funding stage.
The picture is starkest for Black female entrepreneurs in the UK who were found to experience the poorest outcomes.
“A total of 10 female entrepreneurs of Black appearance received venture capital investment (0.02% of the total amount invested) across the 10-year period, with none so far receiving late-stage funding,” the report notes.
It also found just one early stage (Series A or B) venture capital investment recorded for a Black female, compared to 194 early stage investments in White female entrepreneurs.
Extend Ventures’ research also looked at educational background — spotlighting the role of elite universities in the distribution of venture capital in the country.
Here the report found that 42.72% of UK VC invested at seed stage during the period was invested in founding teams with at least one member from an elite educational background (narrowly defined to mean Oxford, Cambridge, Harvard, Stanford and their respective business schools).
In the UK, the debate about how to widen access for underrepresented students to the country’s top two universities has been raging for years — with progress towards diversification of the Oxbridge student body still hard to see.
The report illustrates one impact of this long-standing inequality around access to the elite education — as it shows it carries through to decreased opportunity, post-university, for accessing VC funding.
The implications for social justice and social mobility are clear.
“The data we have shown today is stark and makes for uncomfortable reading,” Extend Ventures’ co-founder and technology entrepreneur, Tom Adeyoola, told TechCrunch. “Only 0.24% of venture funding over the last 10 years going to (38) Black founders, 0.02% going to Black female founders. In addition 43% of all seed funding went to teams with at least one team member who went to an elite university.”
The report makes a series of recommendations — including calling for all venture funds to make data on their investments publicly available so they can be tracked to enable inclusive ongoing reporting on the industry’s performance on diversity.
It also suggests VC firms need to do more work to understand and establish what it describes as “the possible resilience criteria independent of race, gender and education that are indicators of success” — to use in their filtering processes going forward, as a way to guard against biased decisions.
Another recommendation is for the UK government to create an ‘Investing in Ethnic Founders Code’, mirroring the existing Investing in Women Code.
The report also calls for government to support inclusion via the creation of a Diverse Co-Investment Fund — which it suggests should be set at £1.8BN (14% of the $13.2BN annual UK VC total) — as a strategy to de-risk and improve the deployment of equity investment into Black, Asian and Ethnic-led venture capital funds.
We’ve reached out to the Treasury for comment on the recommendations.
“There is no longer any excuse for transparency and action to overcome clear biases,” said Adeyoola. “You can’t improve what you don’t measure and for all the talk around the Rose Review [UK Treasury-commissioned report into female entrepreneurship] and Black Lives Matter, action needs to translate into real investment into diverse founders to ensure that as a nation we are making the most of the diverse talent and resources we have.”
“The British Business Bank report released last week has already shown that there is no lack of ambition — just, as we now lay bare, a clear lack of financial capital,” he added.
Ada Ventures partner Check Warner, who is also co-founder and CEO of Diversity VC which supported the report, told us: “It’s extremely overdue getting this data, just like it was overdue getting data on the gender split of management teams in pipelines of VC funds and who received investment, which was a report that Diversity VC co-published with the British Business bank just last year, February 2019.
“The stats are extremely sobering. I would urge any Venture Capital fund who wants to meaningfully change these stats to explore the Diversity VC Standard in order to put in place the infrastructure to change these numbers by building inclusive pipelines, more diverse teams and supporting their portfolio companies to prioritise including and fostering diverse talent.”
Tweeting in support of the report, ex-Dragons Den investor and black businessman, Piers Linney, wrote: “We are leaving tens of billions on the table that would benefit the wealth of every citizen. We now have undeniable and depressing data showing that something is very wrong. Quietly filing these reports away is unacceptable.”
We are leaving tens of billions on the table that would benefit the wealth of every citizen. We now have undeniable & depressing data showing that something is very wrong. Quietly filing these reports away is unacceptable.
Reached for a response, UK founder network organization Tech Nation, which is credited with supporting the research, told us: “The Extend VC report highlights that just 12% of funding went to female founders, which is why Tech Nation is proactively working with Playfair Capital to provide office hours for female founders with leading VCs on November 5 and 12.
“Today’s report also showed that 91.5% of seed stage funding went to white founders compared to 1.1% to black founders, so Tech Nation has also partnered with 10×10 VC and Founders Factory to host black founder office hours on November 26,” CEO Gerard Grech also said, adding that the organization “will continue to support research when it comes to increasing inclusivity in tech and support I&D programmes and interventions which will make a real and positive difference”.
Passion Capital partner Eileen Burbidge — a female VC who, in 2018, was named on a list of the UK’s top 100 black and ethnic minority leaders by the Financial Times — also welcomed the research when we reached out.
“It’s great to see this data out there and I’m so glad that Extend Ventures, Impact X Capital Partners and Tech Nation have taken the time to collect and analyse the data,” she told TechCrunch.
“Sadly I’m not surprised by the findings and at Passion, given that one of the founding partners is of an ethnic minority group, we’ve always tried to be as inclusive as possible. But you can’t change or affect what isn’t measured, so this is a fantastic first step.”
“I’m glad this report will expand and further develop the conversation about how to make venture capital more accessible to all… across all educational backgrounds, social classes and ethnic & gender groups,” Burbidge added, saying she supports all the recommendations — “especially the ones that can have immediate action/impact” — and said she’d welcome being part of conservations aimed at making progress.
(As it happens, one of Passion Capital’s portfolio companies — the insurtech startup Marshmallow, which is led by two black twin co-founders, Oliver and Alexander Kent-Braham — has just announced a $30M fund raise on a $310M valuation for a product that also focuses on serving underserved segments of society.)
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
