Greed Will Drive Diversity

The NVCA released a census report created with help from Dow Jones (a Thomson Reuters competitor in some verticals) that shows that the venture capital industry is predominantly made up of white men.

The heterogeneity of the industry in itself is not surprising to anyone who has spent time in offices on Sand Hill Road.

At the GP level, 86% of those who responded to the survey were men. That number drops to 56% when all other investor positions are considered, suggesting that junior executives in firms are more diverse than their senior counterparts. The next decade will likely see these more diverse venture partners, associates and other junior professionals step into GP positions, the NVCA concludes.

There may be many factors driving diversity into the venture capital industry, but I suspect greed will be the most powerful. Successful firms have systematically attracted and promoted women and non-white investors, other firms will emulate this move over time.

Consider Kleiner Perkins. The firm is certainly well regarded and will likely continue to be successful (despite the fact it can’t seem to keep its China team together). John Doerr has been pushing the firm to hire women since 2001, according to one of the partners. Now it has seven female investors (Aileen Lee, Ellen Pao, Jessica Owens, Beth Seidenberg, Risa Stack, Trae Vassallo and Juliet Flint).

Or take GGV Capital (formerly Granite Global Ventures). It’s 2001 vintage first fund returned 38.7% according to CalPERS. Just three of its nine managing partners are white men. Two of its nine managing partners of women.

The flip side might best be demonstrated by Sevin Rosen Funds, which threw in the towel on its 10th fund in 2006. Each one of the general partners was a white male.

Some reading this will see causation while others will see correlation. I won’t argue either side.

I will say this: success begs imitation. Firms will continue to follow the leaders and try to mimic their makeup.