Check Warner is one of the co-founders of Diversity.VC, a nonprofit started in 2015 that organizes for a more diverse and inclusive venture capital industry. She is also co-founder and General Partner at Ada Ventures, where she focuses on overlooked founders and markets. Check spoke with the authors of Better Venture, Erika Brodnock and Johanness Lenhard, about the power of statistics, and Diversity.VC’s Future VC program and new Diversity Standard, and the organizational and structural efforts needed to transform the venture capital industry for the better.
Check’s interview was conducted as part of the Better Venture book project. Written by Johannes Lenhard and Erika Brodnock, Better Venture will be a first-of-its-kind guide to diversity and inclusion in venture capital—who funds, who gets funded, why that needs to change, and how to make it happen. With data, history, and plenty of interviews with investors and founders, this book will demonstrate the needs—both moral and monetary—for a more diverse and equitable funding system. To support the creation of this book and be the first to know about new interviews and special offers, sign up for the waitlist or pre-order the book today!
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Johannes Lenhard (JL): Why and how did you start Diversity.VC? How did it all begin?
Check Warner (CW): I actually came into VC from a very unusual background for most associates in the industry. I started out in advertising and I studied English literature. When I got my first job in venture capital, it was through a series of fortunate events and some nepotism and introductions. After my first few months in the industry, I was really shocked looking around at all the founders we were meeting, everyone who worked in the investment teams, everybody who worked in the industry at large, when I went to networking events, and all the conferences: it just seemed like everyone was pretty much coming from the same background, which was either accountancy or finance or consulting, from the same handful of universities, from the same private schools before that.
And they were all white, and they were all male.
At that time, I assumed there was someone who was already doing something like Diversity.VC. And it turned out, there was nothing. I joined up with Lilian (Li), who was running a series of dinners for women in VC. We talked about the fact that something much bigger, something more structural needed to exist, that was actually going to address the root causes of this. It was all very well to have a couple of dinners getting together with the few females that already worked in the industry, but what Diversity.VC was intended to be and is, is a body that is created for the industry, run by people in the industry. Diversity.VC is actually empathetic to the context of venture capital, while helping VC funds to be more inclusive in how they operate, and addresses the root causes of the lack of diversity and inclusion in the industry, both in terms of the industry itself, but also the founders that get funded.
Erika Brodnock (EB): Since you started Diversity.VC five years ago, what three best practices for a more diverse and inclusive industry have crystallized?
CW: The first one, and what we started with, is actually understanding the state of play. We were quite horrified to find out when we went to talk to the industry body, the BVCA (British Venture Capital Association), that there was no data on, for example, how many women worked in the industry. That was our first port of call. We needed to actually understand what was going on in order to try to design good interventions that would drive change. We’ve done quite a lot of research since then, and in much broader areas, rather than just gender. I think in terms of best practices for VCs, actually understanding where they are at within their firms in terms of both who’s working there, and do they feel included? Do they feel like they have a voice? Do they feel like they can bring their whole selves to work? And on the flipside, who are they investing in? Who are they seeing at the pipeline stage? And how is that translating into invested capital? Collecting and understanding data is a really important and fundamental best practice.
The second piece is thinking about the pathways into VC firms. We decided to set something up called Future VC, an internship program. It is a first of its kind program, whereby we take all of the difficult parts of actually running an internship program—in terms of recruiting the talent, assessing the talent, teaching the talent, and building a network between them—away from the VC firms. And we have had at least 16 people who’ve now got jobs in the industry and another nine on internships who’ve come through the Future VC program. Future VC is still in its infancy, we’re in its second year. But we want it to be a program that enables people to come in at all levels—partner level, principal level, and associate level as well as intern. I think that we have been facing the perception of a cold start problem. VCs are currently saying “we need you to have experience, otherwise, we can’t hire you”. And with Future VC, we’re giving candidates a foot in the door to get to two months experience under their belts. Often that then becomes a six month long internship. It’s often also turned into an associate position that’s full time. What we want to do in the future is help operators to understand investing, so actually getting them up the curve of becoming a VC. Eliminating some of the basic blocks and tackling issues such as: What is a cap table? How do you assess financial models? If you’re looking at it from a VC’s perspective, how do you structure investments? That’s the kind of thing we want to do with Future VC to create a more senior pipeline going forward.
And then the third piece is about best practices and concerns on the inclusion side, within the firm. It’s all very well to recruit diverse talent, but actually, unless you change your organization to make sure that they are heard and included, and they feel seen, and they feel supported, then they’re not going to stay in your organization and thrive. So we’ve focused in a couple of ways on that, both in terms of a toolkit, and also in terms of the Diversity.VC Standard, which we recently launched.
JL: The toolkit is a set of practices for everyone who wants to change something but doesn’t know what, right? What does the toolkit concretely look like?
CW: The first thing we did was training and again, helping VCs to understand the nuance and complexities of these issues. Because a lot of the time I hear people saying “I want to do something about it,” but they haven’t actually taken the time to even really understand what’s going on, and what’s driving the issues. And you do need to engage with that if you’re going to be successful in helping people feel included within your organization. So we actually ran a training session where we had 16 European VC partners with a group called Fearless Futures. That would be the first really concrete thing I’d suggest people do: D&I training, including at partner level.
And then there are a huge number of evidence-based interventions that you can make, that ensure that you are being inclusive in how you operate. So what we’ve done with the Diversity Standard is actually just distilled those into an assessment and certification process with the funds. For example, when looking at your shortlist for the people that you intend to interview, have you got a 50/50 shortlist? Have you got a diverse shortlist of people to interview when you’re hiring for the new candidates into your fund? And many of them say, “Oh, no, we’ve never thought of that.” So that’s something that we know works to create a more diverse employee base and recruitment. And that’s just one example. And there’s 30 different policies across recruitment, pipeline, internal policy and culture, deal flow, and portfolio support.
This Standard was really an evolution of what we started out doing, which was the toolkit, but we found that people just weren’t using or implementing it. We did a study about a year after we had published the toolkit and over half of the funds that we surveyed—which already were a self-selected group of people who were quite interested—had no D&I representative, no one in the organization was responsible. They didn’t have parental leave policies, they hadn’t done the basic stuff. And so we thought, we have got to go much further than just creating a toolkit, which is a PDF that they can download from our website. We decided to look at how can we use behavioral science to drive FOMO (fear of missing out), or the competitive spirit of the funds. So The Standard is about trying to bring the whole industry up to a better level of compliance and implementing a lot of the things that we know work to increase diversity.
Concretely, we decided to work with a group called Diversio, which is an organization based in Canada, they’ve done a lot of work for big asset managers. And they’ve also done a lot of thought leadership work with groups like McKinsey. And with them we have designed this set of best practice guidelines, that is based on existing research and evidence. We take the VC funds through the assessment, and we ask them to provide evidence of what they’re doing. And we look at all of that evidence, and then we can then show them in terms of their industry, how well they’re doing in relation to other funds; we can benchmark them and they get a kind of industry average score, including a breakdown based on deal flow, internal policy, culture, recruitment, and portfolio support.
The benchmarking has already started to create so much more action on the part of the funds that we are trying to get to move. One particular fund, for instance, said: “We had D&I kind of on our roadmap, but there was no real forcing function to put any of it in place. So actually being part of the Diversity VC Standard has accelerated all of it, internally.” For the launch, we had 16 funds, five in Canada and the rest in the UK. Since then, we have had funds in the US, in France, in the Nordics, across Europe, already taking part in being assessed. Eventually, we want this to become a kind of global benchmark, which over time will move; we can make it harder to achieve level one and level two at The Standard.
EB: What do you see as being some of the big issues that are still outstanding in the UK and EU ecosystem? What are the next steps that you intend to take with Diversity.VC to tackle them, and indeed the data?
CW: I think we need to make progress across the board. I think we are right at the very start. And I wouldn’t want to let any of the issues off the hook by talking about things we need to move onto because actually, we need to do all of it. What has come through with the work with The Standard is that on two fronts, funds are doing badly. One is actually investing the capital. We’ve seen during COVID-19 that funding going to diverse founders who come from different backgrounds, has actually gone down and has gone down quite dramatically. And this is at a time when generally venture capital funding is going really well. And so I think a lot more progress needs to be made in terms of the mechanism of access, in terms of transparency, in terms of mentoring founders in what they need to look like, and what the business needs to look like.
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So far, we’re trying to help where we feel we can. And I think there are elements of this that are beyond our reach. Unfortunately, you know, and it makes me really sad to say that, but I think that the stories I hear, day after day on the ground, in terms of the feedback that the founders that I work with get from the market is just incredibly bleak and incredibly depressing. So I think a lot more work needs to be done there.
EB: So is the answer then to give the founders more mentoring and to shape their propositions better? Because actually, that kind of buys into the notion that there is a pipeline problem? And the founders aren’t educated enough or competent enough or running good enough businesses, as opposed to there’s an issue on the other side?
CW: Definitely. It is always a bit of both. But I’m not advocating for more mentoring, more mentoring, because the crucial change will come from sending the wire and making the hire. I think, currently, it’s not mentoring so much as transparency and clarity. Let me give you an example: I heard a stat this morning, from a pitch event I was at, which is that 80% of the female founders that were at this pitch event didn’t know the difference between angels and VCs.
I was surprised by that. But it is still a bit of a black box in lots of ways because funds don’t publish things like their average check size, what they are concretely looking for, what kind of sectors they invest in. None of that is visible on VCs' websites. Also very basic things like: how do you contact us? And then I think the other piece is, VC funds that have portfolio companies already, and they are pumping capital into those portfolio companies. They need to do a lot more to support, challenge, and ultimately restrict funding to companies that are not taking this issue seriously, or not doing the right things. And I think currently, because the VC funds themselves don’t feel that they’re there in terms of their own work, they’re not doing it. And that’s a big gap.
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Erika Brodnock is a multi-award winning serial entrepreneur, philanthropist, MBA, Research Fellow at King’s College London, and PhD Candidate at the London School of Economics and Political Science. Through her work at the intersection of technology and wellbeing, Erika specializes in building products and services that disrupt outdated systems. Erika founded Karisma Kidz, and is co-founder at Extend Ventures, where she is leading pioneering research that aims to democratize access to venture finance for ethnically diverse entrepreneurs.
Johannes Lenhard, PhD is Centre Coordinator of the Max Planck Cambridge Centre for Ethics, Economy, and Social Change at the University of Cambridge. He has spent the last three years researching the ‘ethics of venture capital’ with fieldwork in Berlin, London, San Francisco, and New York. His research has been published in leading academic journals and he regularly contributes to the journalistic outlets Prospect, TechCrunch, Vestoj, Aeon, Tribune, The Conversation, and Crunchbase.