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Updated February 11, 2023Kat Borlongan (Contentsquare, formerly La French Tech)
Gurpreet Manku (British Private Equity & Venture Capital Association)
Gesa Miczaika (Auxxo Female Catalyst Fund, German Startups Association)
Kat Borlongan, Gurpreet Manku, and Gesa Miczaika represent the who-is-who of tech policymaking and influencing in Europe. What can the world learn from European best practices in this respect? Where are we still lagging behind and where is there most potential to do better? We speak about quotas, the state as an LP investor, and maternity and paternity leave. The biggest issue: while the state has a lot of power, it is often slow to decide and use that power. But if it does, it has massive potential to—with the right policies—push DEI forward in the tech world.
Interviewed January 2021
Johannes Lenhard (JL): What does diversity mean from a policy perspective? Is it about systematic disadvantages for some groups, or it about active discrimination? What is the objective for policymakers?
Gesa Miczaika (GMi): The objective of DEI policy is to leverage the strengths of each group, if we are talking about diversity. Studies (e.g., in HBR or by McKinsey) have shown that diversity in all areas leads to better outcomes, and on all levels.
Gurpreet Manku (GMa): If you think about where diversity matters, our context is investment managers/firms and the portfolio companies they invest in. The question is about representation and whether the makeup of those firms actually reflects the society in which we operate and live. From our perspective, there has been a lot of focus on the lack of women in venture capital, and a lack of money going into female-founded businesses. We always point to the stats that 51% of the population in the UK is women. There is an increased focus now looking at ethnicity as well. When you look at the composition of the industry from an ethnicity perspective, there are few statistics, and what do you compare this to? The UK, or perhaps to London, where a number of firms are based? In March 2021, the BVCA [British Private Equity & Venture Capital Association, where I work] and Level 20 published the results of a survey of private equity and venture capital firms in their membership, [which showed that ethnic representation in the industry still needs work].
Kat Borlongan (KB): From a policy perspective, what is important to say is also what diversity is not. It is not social correctness. It is not charity. If we look into the very specific context of where we are [in 2021], in the middle of the economic and health crisis, it is one of the smartest strategies we have to make sure that France, that other countries, recover well. If you look at the recovery plan that is dedicated to startups in France, you will notice that a lot of it has to do with making sure that the best entrepreneurs can come from all across the country, especially as we want to invest in a new generation of startups that are coming up today. It is true that we have a lot of great entrepreneurs that have PhDs, come from the elite schools, McKinsey, and so on, but we also really believe that they can and should come from the suburbs, the inner cities, or the countryside, amongst the refugees, the urban poor. For the French tech team inside the Ministry of Economy, diversity is about making sure that we can have the best talent regardless of where it comes from.
Erika Brodnock (EB): On the minimum level, one goal for diversity, inclusion, and equity in tech would be to get more people to start thinking about entrepreneurship, VC, and technology. How would you achieve this?
KB: I can tell you what we have done and what we are working on in France. It is great to have these intentions, but the truth is that when you actively try to recruit from communities that have been estranged from tech, you come across a whole bunch of problems. I know because we ran a recruitment campaign for a program that we created called French Tech Tremplin. We created it last year, and it is essentially designed to mimic the advantages that an entrepreneur from underprivileged communities might have, had they come from a well-to-do background.
There is a boot camp and originally €17K in funding. They are paired with a great founder in the country and if it works out, they move on to the second phase where they get 42K of non-dilutive funding. They are placed in one of the best incubators and accelerators across the country. They have that cohort support throughout the year. You launch something like that, and you are super proud of it. The overall budget for the program is €15M, and we were really excited about the fact that we can have hundreds of applications.
When we launched it, nobody applied for a long time. We did paid advertising and we launched this massive campaign on underground trains. We realized that even when people did see it, and they were interested in it, a lot of them just thought, “That is not for me, because I look nothing like the tech entrepreneurs we hear about.” We had to suddenly start really investing in a lot of outreach and awareness programs. We started pairing and funding a lot of grassroots organizations to work with us.
When we started a second attempt, we worked with people representing the communities we were targeting and deployed them as our recruiters on the ground. They were reaching out to people that they knew via phone calls, and to anyone that had exhibited some form of entrepreneurial interest. We then put them into the boot camps as early as possible. It was during the boot camps that they realized whether or not entrepreneurship, or tech entrepreneurship more specifically, was really for them. It really is about building the pipeline and sending the right messages and not being this ivory tower that is far from everybody else. It is really about working with the communities themselves that have these entrepreneurs as a part of them.
GMa: This is about how you can open up access to the industry. I am talking broadly here in terms of whether it is becoming a VC investor or an entrepreneur. I would go back to education, as I do not know how much is currently taught about financial literacy or entrepreneurship at schools. Some people may not agree with me, but I do think it would help to start early when promoting career opportunities in finance, business, and entrepreneurship. You might not necessarily follow a straight path into entrepreneurship, and may take a different route first before you decide to set up a new business, and before you decide to go and work for a venture capital or other investment firm. You should still know that that career opportunity is there for you. We are thinking quite hard about how you get the message out to people still in education, from schoolchildren to graduates.
To promote career opportunities to younger people, you would need a broader program involving other stakeholders and industry participants. For example, Initiative 7 in the Rose Review of Female Entrepreneurship is about accelerating the development and rollout of entrepreneurship-related courses to schools and colleges. It will be interesting to see how this initiative develops, especially as there is quite a bit we can do virtually nowadays.
On the point around schemes and trying to look for diverse talent, it is really important to get out and look beyond your firm’s typical and traditional networks. There are a lot of networks and communities in the UK, and London in particular, including YSYS and SEO London, and VCs have been collaborating on events and resources for female founders. It is important that venture capital firms reach out to groups beyond their normal networks to explain what they do and what career and investment opportunities can look like. Diversity VC has been running a very successful internship program called Future VC, and they have lots of applicants that apply each year. That is an example of a really good program that is reaching out to individuals from different backgrounds.
GMi: I have been discussing the topic of education here in Germany, too. Bringing coding courses and entrepreneurship courses into schools nationwide, as part of the standard curriculum, would really help in this respect. Another way to get more people to start thinking about entrepreneurship is showing as many as possible diverse role models who are successful entrepreneurs. I have this podcast here in Germany, where I interview a very diverse group of female founders. One example is a female founder who is really successful but has an anxiety disorder. I want to show that even if you have a condition, or if you have any kind of package that you bring along, it is still possible to become a successful entrepreneur.
There are also ways that don’t focus on formal schooling and education we should think of. I am a venture partner at Entrepreneur First, and they would also accept you to the program if you dropped out of school or if you did not go to school at all. They want to find talents who are extraordinary compared to their peers. I liked that, because we do have several founders who did not actually go to university and went through the program.
KB: There is one really important component that we have to keep in mind. Entrepreneurship is expensive. It means quitting your job and plunging into some form of deep uncertainty for up to 18 months, at least, to get something out into the market or start raising. While the cultural aspect of it is important, you also have to make funding accessible to people who do not look like the people that normally would be lining up to meet VCs, or have friends that they went to school with who can send them the right intros. Those things happen at such a systemic level and as governments, those are the times that we really need to step in. Those are the times when behavior change policies aren’t enough.
We were talking earlier about how it is different in the US. In the US, you have this big barrier between discussions about race, and then discussions about class. In Europe, and it is certainly the case in France, you cannot dissociate them. The discrimination is rooted in both and they have such a difficult history of immigration, so if you are not looking at social justice, free education, or proper health care, then the idea of diversity just seems bogus.
JL: How can policy help to specifically support women to take a step into entrepreneurship? What is a better way of doing parental leave policy, for instance?
KB: Parliament recently voted to increase paternity leave in France. We went from 11 to 28 days; 25 of those 28 days are entirely paid for by social security, i.e., by the state directly. That is a win for us. We are excited for what that means. It comes into effect this July, which, while it could be sooner, is a big move. Eighty-five percent of single households in France are run by women, so while paternity leave is important for families that are affected by it, there is also the other issue that has to go beyond simple policy and also has to do with facilities such as daycare. We spend a lot of time talking about funding VCs and discrimination, and at the end of the day, when you speak to a lot of people who are struggling to become entrepreneurs, it is something as simple as their daycare was booked out. They need to take public transport for an hour and a half to a different area to drop off their kids and lose three hours of the day during which they can possibly think about launching their company.
GMi: There are studies (for instance, one study in German) that show that childcare is one of the main drivers for female entrepreneurship. Just granting better quality and quantity of childcare would really help, and then also the parental leave policies. In Germany, you can take one year, and the government pays a specific percentage of the wage that you used to have. Mostly it is women who would take the parental leave. I do not have a perfect solution for this, but I would like those parental leave policies to have more parity in terms of having both parents join in on that.
GMa: There is a lot of variation in terms of maternity and parental leave policies in the UK. Corporations have a big role to play to voluntarily go beyond the minimum statutory requirements if they can, as the impact can be significant. Governments can create the framework for people to take leave, particularly shared parental leave, but then individuals need to feel that they can take this, including men. I have two men working on my team that both recently became fathers at the same time. They are now taking parental leave (in addition to their paternity leave), which is great. That is what you need to really move the dial on this particular point, you actually need to see people taking leave if they want to, particularly senior leaders, both men and women.
KB: Yes indeed, it is a very good thing to do that very visibly. My boss is the minister for digital affairs, and he had a baby right when he started, about a year and a half ago. I remember him telling his staff, in the first few months in office, “I am not going to come into the office until 11 o’clock for the next few days because I split the duties with my wife on taking care of the kids.” He goes into these ministerial meetings, stands up and very vocally says, “I need to go home. It is my shift with the baby.” They seem like small things, but coming from people such as these ministers in very public meetings really helps to set the standard.
GMi: Not only should the men be good role models with this respect, but there should be more female role models who decrease the time of their parental leave. In Germany, the culture is more, “You are going back to work after three months? How? Why do you have kids?” It would also help to show that it is totally possible as a mother to go back to work after a short amount of time.
EB: Speaking of role model organizations in the state and setting examples, in many European countries the state is also an LP. That comes with a lot of power over GPs, but also a massive status as a role model organization. Unfortunately, often they fail to take this responsibility seriously; for instance, the European Angels Fund (EAF) investment portfolio is 95% white men. How does that need to change?
GMi: It needs to change quickly. They should have quotas to crowd in as many females and non-white investors as possible. This is my personal opinion. It is not only the EAF, but the state as an LP. There are also state funds in Germany like Coparion, KfW Capital, and HTGF, and they should ensure that there is also a diverse group of general partners.
GMa: At a LP level, the biggest state investor in the UK is the British Business Bank and British Patient Capital. When it comes to due diligence on the funds that they are investing in, they do include questions around the makeup of the team and D&I policies. They have templates that firms need to complete on a regular basis and have adopted the ILPA DDQ on D&I. What we have been doing here in the UK, whether it is ourselves, Level 20, or Diversity VC, is collecting and publishing information on the number of men and women and other genders in investment and non-investment roles within venture capital and private equity firms.
In 2021, we (the BVCA) have been surveying firms on gender and on ethnicity, which is often difficult to get. Just publishing the information in itself is the catalyst for conversation, because we have set targets of around 20% of senior women in senior roles. It does not feel that high, but because of the way these firms are structured (as partnerships), they have founders who own the business and are likely to be in place for quite a long time; it can take these firms a bit of time to change the makeup of the senior leadership team. What we are seeing is that there are more women certainly coming in at more junior grades, and mid-level grades. The next point is just to what extent they stay in the industry and move up into those senior roles. Interestingly, investors do have a lot of influence here. They are funding these firms and if they are asking questions around diversity, firms will need to respond.
EB: I am not sure if questions are enough at this point in time and I am also quite concerned about the fact that most of the hires are made at junior levels and then people have to work their way up for firm in a way that their male counterparts just do not need to, or indeed if it is on the ethnicity side, their white counterparts do not need to. I struggle with the ethnicity data being difficult to obtain when we have done some research in which we have been able to obtain it.
KB: Information around ethnicity is not just difficult to attain, it is also illegal. It is a different approach where France, at least administratively and legally, does not recognize race. This term, widely used by Americans, tends to be considered offensive by the French. In France, race is a word that is more appropriate when discussing dogs or cows, but when it comes to human beings, there is only one race, which is the human race. The word diversity in English is not used the same way in France. When we say “diversity” in France, what we really mean is, equal chances, meritocracy, and socio-economic justice; our policies reflect this. For example, we choose to orient affirmative action or, what is referred to in French as “discrimination positive,” based on economic needs: preferential admissions in our top schools are given to the brightest kids from the poorest neighborhoods, regardless of the color of their skin.
On gender balance, one of my favorite projects in France is the SISTA charter; it is a collection of commitments. It includes things such as measuring gender balance in portfolios, reporting data annually, or recruitment practices such as rethinking existing processes, like the language of job descriptions and interview questions, or setting up office hours. This was developed a little less than a year ago by a nonprofit called SISTA, which was founded by some of the most amazing female entrepreneurs in France. It was done with the government, so I am pretty sure that a good 95% of all of the GPs in France have signed it; the French government has as well. We are after all a massive investor; we invest €1.3B into startups directly or indirectly via our fund every year.
JL: If you could do any policy to increase D&I in tech and venture capital, what do you think is the most needed and the most effective for right now?
GMa: This is a hard one because if you want change, you need people to buy into that change and make that change happen. If you force it, you do not always necessarily get the right result, but where we are heading to is actively encouraging transparency and targets. Once you start measuring diversity in your team/investments and tracking progress, you are more likely to implement policies and change to improve upon those metrics—“what gets reported gets done.”
KB: This is a tricky one, because then you have to decide if you look at the entire pipeline. If we are talking short term, such as trying to inject more diversity over the next five years, then I am going to have to go with policies of not necessarily imposing quotas but obliging a lot of VCs to actually be transparent about their pipeline. How many women or people from diverse backgrounds did they actually meet in the first place? How many have they actually invested in? What numbers? What is the average ticket invested in a company launched by a woman or co-launched by a woman? We should be making that just as normal as performance and a general standard, which is something that LPs can do. It is a policy that the state can put in place as an LP, but it is also something that LPs themselves can start doing.
GMi: I like what Kat did, talking about long run and short run. For the long run, the part about bringing entrepreneurship to schools is definitely my favorite. In the short run, I would really like to have more data available about how successful non-white, non-male teams are with their startups. There are several studies, such as one by the Boston Consulting Group, who found out that female founders generate a high return on investment, have fewer write-offs, and take less time to exit. I would really like to have more and broader studies that really show that investing in diversity is good for you as a VC also.