Show us your numbers: Why Europe must follow California’s lead in legislating diversity

Thea Messel and Nora Bavey, General Partners at Unconventional Ventures examine why and how Europe needs to adopt California's Senate Bill 54.
Show us your numbers: Why Europe must follow California’s lead in legislating diversity

This week, the State of California made it illegal for VCs not to declare diversity numbers for their portfolios.

Coming into effect on 1st March 2025, the new Senate Bill 54 is a huge and historic leap for levelling the playing field for diverse founders and founding teams. And European jurisdictions must follow.

For too long, we’ve been talking about unconscious bias as a key reason why diverse founders aren’t getting investment for their innovations. The California bill is a prime example of how we can take action and turn the unconscious into the conscious.

Here’s why it’s needed:

  • Transparency and accountability: Mandating VC firms to share diversity data about their investments is mandating transparency. With transparency comes a greater likelihood of accountability. And with accountability, we will see more firms inclined to pursue diversity initiatives to meet regulatory requirements actively.

  • Following the data makes for better decisions: Data is power, and access to diversity data enables investors, founders, and policymakers to make better-informed decisions. Only when we understand where investments end up can we identify potential biases and areas of improvement. When we understand this, we can better allocate resources and opportunities.

  • Broader access to capital: Legislating diversity reporting can highlight disparities in funding for groups such as women and minorities. With this information, VC firms can choose to diversify their portfolios and take action to provide more equitable access to capital for a broader range of entrepreneurs. And a bonus for VCs: greater diversity means improved opportunities to attract LPs which are increasingly seeking out funds that can share diversity data and documentation.

  • The gateway to more inclusive practices: Legislation might encourage VCs to take a closer look at their investment processes and to review how they can make them more inclusive. This could include increasing diversity on the investment teams and actively seeking opportunities among underrepresented founders. 

And there are societal benefits too. If we legislate diversity in VC we increase the chances of encountering:

  • Reduced socioeconomic disparities: Policies like SB 54 can help reduce socioeconomic disparities. When capital is made more available to a greater range of entrepreneurs, this increases the chances of more businesses and jobs created in underserved communities which drives economic growth and stability.

  • Innovation and market expansion: Encouraging a variety of viewpoints frequently results in increased innovation and the discovery of fresh market prospects. By promoting a broad spectrum of entrepreneurs, this policy has the potential to spur innovation and broaden the spectrum of consumer products and services, ultimately benefiting society in its entirety.

  • Enhanced social equity: Making the VC landscape more equal can lead to increased social equity. If we strengthen the position of underrepresented groups to set up businesses and thrive as entrepreneurs we will also improve their abilities to contribute to their communities. This could make for a fairer society and address historical injustices.

  • Greater representation: Role models are crucial to inspire future generations of entrepreneurs. With increased accountability in VC, we would hope to see greater representation of marginalised groups in the world of business. The more diverse founders and investors visible in the world of tech and VC, the more we will see young people follow in their footsteps.

  • Data-driven policymaking: The data garnered from VC firms has the potential to better enlighten policy makers regarding the status of diversity and inclusivity within the entrepreneurial landscape. This valuable information can serve as a compass for crafting policies and launching initiatives that actively advance diversity and equity, safeguarding the continuous expansion of societal advantages in the long run.

Here are our numbers. Unconventional Ventures’ portfolio consists of 100 percent diverse founding teams. 89 percent of them have all-female or mixed-gender founders. 34 percent of the founding teams are ethnically diverse and 11 percent have founders who identify as LGBTQ+.

Now show us yours.

Lead image: Public domain

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