Ada Ventures, a UK venture capital firm, has recently released a first of its kind report, in partnership with Diversity VC and Google Cloud, examining where £6.6 billion of limited partner capital has been invested in the UK between 2017 and 2023. The research was designed to produce data on gender diversity in UK venture capital firms that receive funding from limited partnerships. Many will not be surprised that funding goes disproportionately to men-owned management company, but the extent of the lack of diversity is remarkable.
Ada Ventures used publicly available data sources such as venture capital fund websites, LinkedIn profiles and Companies House records. The report acknowledged that its data collection techniques do not allow for a perfect data set, as it was not fully inclusive of all genders, including non-binary. However, the report does provide insight into the difference between job titles and management company ownership and the allocation of capital by limited partnerships in the UK.
Job title and ownership
The research found that women in venture capital firms do not have the same level of ownership as their male counterparts despite comparative leadership titles. According to the report, job titles held by women in venture capital firms, such as General Partner, Founding Partner or Partner, imply a significant level of ownership which is not the reality. Women hold 22% of senior job titles but make up only 17.7% of those with significant ownership of venture capital firms (significant ownership was taken to mean more than 25% of the management of the company).
The report found that of the £6.6bn raised in the last six years in the UK, just 7p in every pound raised goes to all-women-owned management companies. Mixed-ownership management companies received 17p in every pound and the remaining 76p went to all-men-owned management companies. For every 1p raised by mixed-ownership management companies during the six year period, 4.5p was raised by all-men-owned management companies.
Size and number of funds
Ada Ventures' research also found that funds raised by all-women-owned management companies were three times smaller than all-men-owned management companies between 2017 and 2023. The data shows that all-men-owned funds were ten times the size of all-women-owned funds over the period.
The report found that all-woman-owned funds are raising just one fund in the time it takes for all-men-owned funds to raise eight. The data demonstrates that all-men-owned management companies raised approximately eight times more funds between 2017 and 2023 compared to all-women-owned funds in the same period.
Ada Ventures' findings show that despite progress on diversity, equity and inclusion in the last six years there is still a long way to go. The report points to several studies in Europe and the UK that have shown that the more diverse an investment firm, the better its performance. Data from European Women in VC suggests that financial performance of European venture capital funds increases with higher representation of women in senior management teams. Ada Venture's report highlights evidence that the more gender diverse financial services firms outperform the market and gives the example of one data set that showed that gender diverse teams on average have 20% better net internal rate of return, which is a performance measurement equal to the internal rate of return after fees and carried interest are factored in.
The report recommends that limited partnerships sign up to the Investing in Women Code. The Code is a commitment to support the advancement of women entrepreneurship in the United Kingdom by improving access to resources and finance from the financial services sector. As of yet only two limited partnerships have signed up to the code, which has over 230 signatories. Ada Ventures suggests that this would increase the transparency of financial services' firm data concerning support for women entrepreneurs. Ada Ventures also calls for more accountability and visibility on where Limited Partnership capital is going. The report recommends that the FCA and Treasury aim to establish a target that the venture capital industry should have at least 25% female representation in significant ownership positions and on investment committees by 2030.
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