For venture capital firms:
This report provides a blueprint to the industry on pathways to improve diversity in venture capital investment. We recommend firms consider the pathways set out in this report, choose an approach that works for them, commit to that approach with consistent action over a sustained period, and track and monitor progress. Meaningful action, and avoiding tokenism, is critical to success. Joining initiatives such as the Investing in Women Code1 and the Diversity VC Standard2 are examples of ways to take action with support from others in the industry on a similar journey.
We recommend entrepreneurs look for venture capital firms to back their companies that have an investment thesis that matches their business, and actively seek feedback and further referrals.
For impact measurement:
More rigorous evaluation of actions should be undertaken to formally assess their impact on diversity outcomes. Evaluation of actions should also seek to assess whether different actions are more/less effective for different groups of entrepreneurs and for different types of venture capital firm. Detailed research with venture capital firms to understand the barriers to implementing actions and to investing in entrepreneurs from underserved communities would help support and drive the adoption of actions by the industry.
How the British Business Bank is taking action
For the British Business Bank:
As the biggest venture capital Limited Partner in UK, the British Business Bank is committed to ensuring equity in opportunities and support for all talented entrepreneurs and would-be entrepreneurs across the UK through the investments we make, through our own internal practices, and through our capacity to shape the attitudes and actions of the wider market.
The Bank is committed to a range of actions in line with the findings of this report to help achieve this:
- Sharing the report findings with industry and the wider ecosystem: The Bank will engage with the venture capital industry to disseminate the findings of this report. We will support our partners and funds across the UK to adopt the right approach to diversity and inclusion for them. Whilst this report focuses primarily on venture capital firms, we will engage with and acknowledge the significant role of players in the wider finance ecosystem who influence diversity in venture capital investment, including business support organisations, accelerators, advocacy groups, and crucially other Limited Partners.
- Further research focused on tracking actions through the Investing in Women Code: The British Business Bank deliver the venture capital arm of the Investing in Women Code, an initiative run by the Department for Business and Trade. Signatories make annual data returns on their investments disaggregated by gender, with the option to also return ethnicity data, and a description of the actions being taken to improve diversity of investment. Actions can now be tracked in line with the recommendations in this report to assess their ongoing impact.
- Transparency on diversity in our investment portfolio: We have begun asking our delivery partners to report on the diversity (including gender and ethnicity) of their organisation at all levels, as well as the diversity of their funding recipients and applicants. From 2024 we will report this data publicly alongside the data we publish on the state of markets overall through our ongoing research and data publications. We ask potential recipients of Bank funding to demonstrate diversity at all levels of their business as part of our investment processes, and view organisations with a clear commitment to diversity and inclusion more favourably in our investment decision making.
- Diversity among our senior leaders: The British Business Bank is a signatory to the Women in Finance Charter and has targets to achieve and maintain 50% gender diversity among senior leaders. We are committed to bringing in new targets on ethnic diversity, and applying the same diversity principles to our Investment Committees. We publish a mandatory gender pay gap report and will begin voluntary ethnicity pay gap reporting from 2025.
- Diversity in our investment teams: We have launched an internal programme on inclusive leadership to support the progression of colleagues across the business. We recently updated our Diversity, Equity, and Inclusion Policy to strengthen our commitment to internal best practice, and we have launched a diversity dashboard to monitor progress. Key metrics such as pay, promotion, access to opportunities (such as our leadership development programmes) and exits, are all monitored through a diversity lens. We recruit for capabilities, rather than experience; tactics include minimising overly-specific experience requirements in our job advertisements, and emphasising our interest in capabilities and transferrable skills.
- Internal accountability. The British Business Bank has recently revised its corporate performance framework around four strategic objectives, one of which is “unlocking potential in the UK economy by supporting entrepreneurs to access the finance they need, no matter who or where they are”. We will continue to report to our Board and to our Shareholder, the Secretary of State for Business and Trade, and our performance will be assessed on the extent to which we can make progress on this objective, including through delivering the recommendations in this report. We recognise that we are on a journey in partnership with the wider industry. We are committed to continually learning and improving, both as an employer, and as an investor supporting innovative entrepreneurial talent across the length and breadth of the UK.