Investors: the future of the tech industry depends on us.
This week the UK Government’s Future Fund will open for business. The Future Fund is £250m of matched capital that will be made available to high tech, high growth start-ups impacted by the devastating Covid-19 pandemic. The operational launch is a result of an enormous amount of hard work from across Government, the Treasury, the British Business Bank and the private sector.
The companies funded under this scheme have the potential to shape the economy for many years to come. That’s why it is essential that action is taken to ensure that diverse founders have the same level of access to this vital funding as everyone else.
When the fund was announced, I wrote that it was critical that diversity was not sidelined in how it was distributed, otherwise existing inequities in funding would be exacerbated. This call to action was shared and amplified by many others including Deborah Okenla, YSYS, Denzel Walters, co-founder CGV, Emma Sinclair MBE and Hephzi Pemberton, founder of Equality Group with a petition to Rishi Sunak that has over 500 signatories so far.
To their credit, those designing the scheme have recognised that it has the potential to exacerbate existing funding disparities and proactively engaged with the industry to make sure that female, underrepresented and diverse founders don’t miss out. They’ve made changes to the original draft scheme and are continuing to work to ensure inequities are addressed as the fund is deployed. In the interests of transparency, they’ll be publishing anonymised statistics on the diversity of those who get funded.
However, it’s not down to the Treasury alone. In order to give underrepresented founders access to this important scheme, urgent action must be taken by the organisations providing the matched capital — the crowdfunding organisations, accelerators, angels and VC funds without which the Future Fund cannot be unlocked.
For many, the moment we are living through right now will be a hinge in history. As an industry, we’ve got a unique opportunity to influence the direction that history will take. The businesses that will be funded are the businesses that funders chooses to put forward. If we truly believe that diverse founders should be an integral of the tech industry for the next 10 years and beyond, let’s make it so.
Here are six simple steps that these investors must take to ensure that diverse founders get fair access to the Future Fund.
- All investors accessing the matched funding should sign the Investing in Women Code. The code commits an organisation to three simple things: firstly to assign a senior member of their team to ensuring equality in interactions with entrepreneurs; secondly to collect and share anonymised data on the number of pitches the firm receives from all-female, mixed gender and all-male teams; thirdly to publicly commit to best practices which enable female (and other diverse and underrepresented founders) to access tools, resources and investment. Despite these steps being straightforward to commit to, only around 4%, just seven VC funds out of a universe of at least 170 in the UK have signed the Code so far. Venture funds that have signed it include Frontline Ventures, Episode One, Ada Ventures, Playfair Capital, Downing LLP, Anthemis and Astia. The Future Fund itself is also a signatory to the Code. The sign-up form is short and it’s here. If you are unsure if you can sign it or would like any more information, please contact me (check@diversity.vc).
- All investors should commit to participating in regular, openly advertised open ‘office hours’. Office hours are a chance for founders to get in front of investors over Zoom and pitch for funding or feedback on their businesses. This is more important than ever now that meet-ups and conferences no longer provide founders with the serendipitous opportunity of interacting with and pitching VCs and angels. Several firms are hosting open office hours in the coming months. For example, Playfair Capital and Tech Nation are co-hosting Female Founder office hours with 30 other funds. Founders can find out more and register here.
- All investors should remove the need for a ‘warm introduction’ from someone in their networks and clearly state how companies may contact them and what they are looking to invest in. Warm introductions disadvantage diverse founders with less established networks. Investors should also attend virtual demo days such as those of Founders Door and Zinc.
- All investors should take proactive steps to meet diverse founders. This can be done either through partnerships with organisations like YSYS, Hustle Crew, Ada’s List, Foundervine, OneTech, Femstreet and many more, or through partnerships with angel investors and funds focused on diverse founders, for example Addie Pinkster’s Adelpha, CGV, Cornerstone, Impact X, Jane VC, 10x10, Alma Angels, Astia and Angel Academe.
- All investors should review their investment process (in addition to signing the Investing in Women Code) to mitigate bias and ensure that it is as inclusive to diverse founders as possible. For steps on how to do this, see the Diversity VC Toolkit.
- All investors should hire and promote underrepresented talent to cheque writing positions. In our study last year, 83% of VC firms in the sample had no women on their investment committees. Having diverse decision-makers of all kinds in a team is also good for fund performance. The success rate of acquisitions and IPOs from investment teams with ethnically diverse backgrounds was 22% higher than their counterparts (Gompers & Kovvali, 2018).
Most importantly, investors must continue to deploy capital during the Covid-19 crisis. UK tech accounts for 9% of the national workforce, with 2.93m of jobs created and is growing 6x faster than the rest of the economy (Tech Nation).
The tech industry is going to be a critical part of the UK’s economic recovery after Covid-19, but that cannot happen without fair and equitable investor support.
