Action 9

Finding What Works:

Pathways to Improve Diversity in Venture Capital Investment

Read the report

Ranked 9 out of 14 actions

Venture capital firms should use accelerators as a referral mechanism to identify and support diverse entrepreneurs.

Overall effectiveness: Medium

Potentially an effective mechanism for venture capital firms to source a diverse group of founders; however, dependent on diversity within accelerators

Target Audience

Venture capital firms seeking alternative sources of deal flow to identify a diverse group of founders

Relevant investment stage

Venture and growth

Ease of implementation

Easy – this action requires venture capital firms to identify and build connections with existing accelerators.

Wider considerations

Venture capital firms may wish to consider the entry requirements for accelerators, and identify the levels of diversity when selecting those with which to connect.

A column graph showing that less than three quarters of the VCs scored this action a 3, and the remaining scores were split between 1, 2 and 4.
Venture capital firm ranking
A bar chart showing that half of entrepreneurs perceived this action as highly effective, while over a third percieved it as somewhat effective, and 13% as ineffective.
Entrepreneur perceived effectiveness

Perceived effectiveness score 1 = Least effective, 5 = Most effective

Findings by entrepreneur characteristics:

  • Venture capital-backed/venture capital-ready: A higher proportion of venture capital-ready entrepreneurs said this action is effective (58%), in comparison to venture capital-backed entrepreneurs (47%).
  • Gender: Four fifths (80%) of female respondents said Action 11 is effective, compared to over two thirds (69%) of male respondents.
  • Education (socio-economic): No major variance observed.
  • Ethnicity: White respondents were more likely to say that this action is either effective or somewhat effective in comparison to Ethnic Minority respondents (87% and 79%, respectively).
  • Age: Similarly, nearly all respondents aged 50-59 years old said this action is either effective or somewhat effective (91%), in contrast to just over three quarters (78%) of respondents aged 60 or over.

Venture capital firms’ feedback:

Venture capital firms were broadly positive about accelerators and said that they can provide a structured route into the venture capital industry for underserved founders, particularly those who do not have access to existing networks.

However, the ability to source underserved entrepreneurs is dependent on the levels of diversity among supported entrepreneurs; specifically, accelerators’ entry criteria. In line with this, due to their popularity, accelerators are becoming increasingly competitive.

Existing research:

  • The evidence on this action was mixed. Four papers were identified, based on author views, statistical analysis and examples of accelerators that have successfully supported underserved entrepreneurs.
  • Research found that female-led startups that participate in an accelerator programme increase the amount of debt they raise by nearly 2.5 times as much as female-led startups that did not participate in a programme (International Finance Corporation, 2020).
  • A venture fund in the US (Dreamit Ventures) operates four diversity-focused accelerators and has positively impacted on the amount of funding raised by underserved founders (Fortune, 2016).

Data Analysis:

Accelerator attendees are marginally more diverse than the wider population of venture capitalbacked entrepreneurs with higher representation of women and Ethnic Minorities among founders.

These differences between accelerator attendees and the rest of the venture apital-backed business population are statistically significant, though in absolute terms the differences are only a few percentage points.

A larger proportion (54%) of venture capital-backed businesses with both female and Ethnic Minority founders attended accelerators, compared to the whole population of venture capital-backed businesses (35%).