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The UK report highlights the large funding hole confronted by varied founders

New research examining how UK VC has invested by race, gender and educational background over the past decade makes for dismal read – all-ethnic teams and female entrepreneurs are getting a fraction of the funding available compared to all-white teams and male founders.

The determination of bias applies to all funding phases as per the determinations.

The report by the not-for-profit Extend Ventures examined how VC invested in the UK between 2009 and 2019. Data was provided on 3,784 entrepreneurs who founded 2,002 companies during this period. It found that ethnic-only teams, on average, received only 1.7% of the venture capital investments made in the early and late stages of launch that decade.

The black and multiethnic communities in the UK now make up 14% of the UK population.

"While all ethnic entrepreneurs are underfunded, those who are black have the worst results of all," the report said. During that decade, only 38 black entrepreneurs received VC funding. “In addition to their teams, they only received 0.24% of the total amount invested,” he adds.

Extend Ventures used machine learning and image processing technology as a tool to understand demographic factors – “including age, perceived gender, ethnicity and educational background of the founding members” – based on their ethnicity or gender Founders for research to categorize analysis of publicly available images of entrepreneurs.

“While ethnicity is usually a self-determined categorization, we feel it is justified as the data we collect is then anonymized and used to improve access to capital,” they note, adding, “Ethnic or gender bias depends on it from the perception of the person who is holding the wallet with money. "

In terms of gender, the study underscores the extent of the challenge British women entrepreneurs face in accessing VC funds towards their male counterparts.

The report found that a large majority (68.33%) of the capital raised through the launch, early, and late VC funding phases went to all-male teams. 28.80% of mixed-gender teams; and only 2.87% for all-female teams, with female teams collecting lower amounts of money than their male colleagues in each funding phase.

The picture is worst for black women entrepreneurs in the UK, who have had the worst results.

"A total of 10 black-looking female entrepreneurs received venture capital investments (0.02% of the total investment amount) over a 10-year period, none of which have been late funded," the report said.

There was also only one early-stage venture capital investment (Series A or B) for a black woman, compared to 194 early-stage investments in white women entrepreneurs.

Extend Ventures' research also looked at educational background and highlighted the role of elite universities in the distribution of venture capital in the country.

Here the report found that 42.72% of UK VC invested in startup during the reporting period were invested in founding teams with at least one member with an elite educational background (narrowly defined as Oxford, Cambridge, Harvard, Stanford and their respective Business schools). .

The UK has been debating for years how under-represented students can expand access to the country's top two universities – progress in diversifying the Oxbridge student body is still difficult to see.

The report highlights an impact of this long-standing inequality in access to elite education – as it shows, it results in fewer opportunities for access to VC funding after university.

The implications for social justice and social mobility are obvious.

"The data we showed today is strong and makes reading uncomfortable," Tom Adeyoola, co-founder and technology entrepreneur of Extend Ventures, told TechCrunch. “Only 0.24% of the risk financing in the last 10 years went to (38) black founders, 0.02% to black women founders. In addition, 43% of all seed funding went to teams with at least one team member attending an elite university. "

The report makes a number of recommendations – including encouraging all venture funds to make data about their investments publicly available so that they can be tracked to allow for comprehensive ongoing reporting on the performance of the industry on diversity.

It is also suggested that VC companies need to do more work to understand and establish what is described as “possible resilience criteria regardless of race, gender and education which are indicators of success” to use in their filtering processes in the future from biased decisions.

Another recommendation is that the UK government create an “Investing in Ethnic Founders Code” that reflects the existing Investing in Women Code.

The report also calls on the government to support inclusion through the creation of a diverse co-investment fund to be used as a strategy to reduce risk to £ 1.8 billion (14% of the total annual VC of £ 13.2 billion). USD in the UK) and improve the use of holdings in Black, Asia and Ethnic venture capital funds.

We asked the Treasury Department to comment on the recommendations.

"There is no longer any excuse for transparency and action to overcome clear prejudices," said Adeyoola. "You can't improve what you don't measure, and with all of the conversation around the Rose Review and Black Lives Matter, action must lead to real investment in diverse founders to make sure this is a nation, in which we make optimal use of the diverse talents and resources that we have. "

"The British Business Bank report released last week already showed that there is no shortage of ambition – just as we are now disclosing, a clear shortage of financial capital," he added.

Ada Ventures partner Check Warner, who is also the co-founder and CEO of Diversity VC, who endorsed the report, told us, “It is extremely overdue to receive this data, just as it was overdue to receive data on the gender breakdown of Management teams in pipelines to receive VC funds and those who have received an investment. This was a report that Diversity VC published jointly with the British Business Bank in February 2019.

“The statistics are extremely sobering. I would urge any venture capital fund that wants to make meaningful changes to these statistics to explore the Diversity VC standard in order to put in place the infrastructure to change these numbers by building inclusive pipelines, building more diverse teams and helping their portfolio companies set priorities to employ and nurture diverse talent. "

Former Dragons Den investor and black businessman Piers Linney tweeted in support of the report: “We are leaving tens of billions on the table that would benefit the prosperity of every citizen. We now have indisputable and depressing data showing that something is very wrong. It is unacceptable to silently file these reports. "

We leave tens of billions on the table that would benefit the prosperity of every citizen. We now have indisputable and depressing data showing that something is very wrong. Quietly filing these reports is not acceptable.

It is time for changes.


– Piers Linney (@pierslinney) November 2, 2020

UK founding network organization Tech Nation, credited with supporting the research, said in a response, "The Extend VC report highlights that only 12% of funding went to women founders, which is why Tech Nation is proactively partnering with Playfair to provide capital of office hours for female founders with leading VCs on November 5th and 12th.

"Today's report also showed that 91.5% of seed funding went to white founders, compared with 1.1% to black founders. As a result, Tech Nation also partnered with 10 × 10 VC and Founders Factory to open on May 26th. November to host office hours for black founders, "said CEO Gerard Grech added that the organization" will continue to support research as it comes to increasing inclusivity in technology and supporting I&D programs and interventions make a real and positive difference ".

Passion Capital partner Eileen Burbidge – a female VC who was named one of the Top 100 Black and Ethnic Minority Leaders in the UK by the Financial Times in 2018 – also welcomed the research when we reached out to her.

"It's great to see this data out there, and I'm so glad that Extend Ventures, Impact X Capital Partners and Tech Nation took the time to collect and analyze the data," she told TechCrunch.

"Unfortunately I am not surprised by the results and at Passion we have always tried to be as comprehensive as possible as one of the founding partners is from an ethnic minority. However, you cannot change or influence what is not measured. So this is a fantastic first step. "

"I am glad that this report will broaden and develop the conversation on how to make venture capital more accessible to all … across educational backgrounds, social classes, and ethnic and gender groups," added Burbidge, saying she supported everyone Recommendations. especially those that can have immediate action / impact ”- and said she would welcome being part of preservations aimed at making progress.

(Coincidentally, one of Passion Capital's portfolio companies – the insurtech startup Marshmallow, led by twin black co-founders Oliver and Alexander Kent-Braham – has just raised $ 30 million for a valuation of $ 310 million. USD for a announced product that also focuses on serving underserved social classes.)

This report has been updated with additional comments

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