2019 was a record year for venture capital investment in the UK, with a total of $13.2bn invested in startups across the UK. But are all startups treated equally?
According to a new report from Extend Ventures, the answer is no. In this report – Diversity Beyond Gender – they look back over the last 10 years to establish “how money has been invested according to race, gender and educational background”. Read on for a snapshot of the findings.
The report is based on research that includes 3,784 entrepreneurs who founded 2,002 companies between 2009 and 2019. The top-line data reveals that, of the $13.2bn invested in UK startups, under 2% went to all-ethnic entrepreneurs. In addition, the report’s authors found that black entrepreneurs experience the poorest outcomes, with just 38 black startup founders receiving VC funding in the last 10 years.
In total, black founders received just 0.24% of all venture funding in this time frame, while women received just 11%. These figures are surprising, with these two groups making up 3.5% and 51% of the population respectively. This under-representation is the case at each of the three funding stages.
The report also pulls in data from other sources, which suggests that it is not just black startup founders that are under-represented, but black investors, too. Diversity VC research shows that 3% of UK VCs are black and 5% mixed race, and that very few have decision-making capability within their firms. This suggests, say Extend Ventures, a link between underfunding of black startups, and under-representation of black investors.
What does this mean for the future?
Extend Ventures recommend that venture funds should make investment data publicly available, to enable the industry to track diversity on an ongoing basis. They are also calling on the government to create an Investing in Ethnic Founders Code (similar to the Investing in Women Code), as well as to create a Diverse Co-Investment Fund to improve equity investment levels in under-represented groups.
What they are keen to point out, too, is that while the report may highlight some negative statistics, it can be used in a positive way: encouraging investors, financial institutions and policymakers to do better going forward.
To read the report in full, click here.
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