Venture capital firms have a very clear purpose - to identify companies with the biggest potential for success, and give them the capital they need to accelerate their growth.
Investors have found that the best way to identify these companies as early as possible is to look within their own personal networks. But a huge amount of talent sits outside these privileged communities.
Talent is everywhere, but opportunity is not.
Ignoring this lack of representation means that VC firms are unintentionally doing the exact opposite of what they are set up to do - overlooking and missing opportunities.
However, whilst the European tech ecosystem was setting new records for funding rounds and investment, there was no incentive to change. The privileged networks of investors were delivering founders capable of creating tech unicorns.
That has changed. Now, in the midst of the tech winter, we need to recognise the fact that the European VC ecosystem has a diversity problem.
It is a problem that is solvable, and would directly lead to more investment opportunities, stronger leads and better returns for investors.
The challenge is not making the business case for a more inclusive VC ecosystem, it’s equipping investors with practical and achievable advice to create more inclusive environments. Under-represented founders are not being overlooked because investors don’t want to back them - they are being overlooked because investors don’t know how to find them.
There are VC firms in Europe doing incredible work that the entire industry can learn from. Ada Ventures in the UK, for example, has established a network of scouts plugged into non-typical founder networks to source the best investment opportunities from diverse demographics.
At Antler, we recognise that this is an issue and we’ve committed to driving positive change. To that end we have created an investment model that aims to address many of the barriers that prevent diverse founders from becoming entrepreneurs.
We provide a stipend to cover costs whilst founders get their startup up and running; we provide access to a network of investors to secure angel and seed funding for those that don’t have wealthy relatives or an Oxbridge alumni group to tap into and we invest in emerging markets as well as developed economies.
But there is always more we, and every other venture capital firm, could do.
To attract inclusive founders, they need to feel supported by a VC firm. This means that VC firms need to introduce inclusive scouting processes that go out into local communities.
They need to review their websites, marketing materials and pitch decks to make sure they include inclusive messaging and inclusive visuals. This is not rocket science - as a member of the LGBTQ+ community, I know what a difference seeing a rainbow flag on a company’s website makes.
Going beyond messaging and visual indicators, we have to learn to invest in the second most valuable commodity in the industry - time.
We need to host events specifically for under-represented founders. We need to offer office hours for founders run by people diverse founders will recognise. We need to commit to mentorship programmes and make introductions into our own networks and communities.
There are lots of excellent initiatives in the industry for women in tech - even if female founders are still too often overlooked for investment. We need to continue celebrating our female role models, but also do more for the LGBTQ+ community, for ethnic minorities and people with disabilities.
Ultimately, the VC industry needs to lead by example and make sure that partners and associates reflect the diversity of the founders we want to attract.
For the VC firms that get this right, there is huge potential. By turning overlooked opportunities into investments there will be high returns for those willing to break through the barriers of their traditional privileged networks.
My hope is that the tech winter forces investors to expand their horizons - opening the door forever to under-represented founders, new communities and a new generation of diverse talent.