How Can VCs Look Beyond ‘Pale Male And Stale’ When Hiring?
7 May 2019
It’s no secret that the venture capital sector is what some might call ‘male, pale and stale.’ Figures show that only 13% of VC decision-makers are women, while research in the US has found that 60% of VC employees are white and male. But as the sector expands in both size and reach, particularly here in Europe, we’re slowly waking up to the fact that this imbalance needs to change – and fast.
It isn’t about being politically correct. VCs are realizing that our success in spotting the best investment opportunities and making sustainable profits, increasingly depends on attracting people from all walks of life – be that different genders, educational backgrounds, ethnicities or nationalities. Because while VC requires an understanding of figures, trends, markets and business cycles, success also very often comes from thinking differently and seeing something that others haven’t spotted. That’s much more difficult if we’re all cut from the same mold.
Thinking new is a major requirement to succeed and it’s becoming more important, as opportunities start to come from much more diverse industries, places, and people. We need to remember that VC is ultimately a people business. We talk about backing the ‘jockey not the horse’ because founders are so critical to startup success – as much, if not more, than the business idea or market opportunity. And to do that well, and spot those opportunities that nobody else has, we need a variety of personalities, perspectives, and outlooks.
We’re also facing a war for talent, which means that finding great people is really hard. The VC industry is expanding rapidly – recent figures show it has trebled globally in the last decade – and firms across Europe and around the world are all looking for great people. So, if nothing else, we need to look outside the usual circles, to ensure we can continue to fill those roles and continue to grow individually and together, by supporting promising entrepreneurs and making profitable investments.
Most VCs are still using old-fashioned recruitment methods, placing too much importance on their existing networks, looking for a polished CV with the ‘right’ educational background, and sticking to the old tried and tested interview questions. We need to start thinking and acting differently. Here are a few ways we can start:
Spread the word: The first step in attracting a broader range of talent is by raising awareness of the fact that venture capital exists, what we do and the opportunities available. As a VC, I know that it tends to be a certain type of candidate that approaches us, or sends us their CV, because as an industry, VC is a mystery to most people. If you don’t move in the right circles, you wouldn’t even consider it as a career. We need to do more to reach new communities, through organizing open days, speaking at events and engaging with a broader range of colleges and universities.
Look beyond the CV: It is understandable that people end up recruiting people like them because we’re all naturally drawn to what we know, and what feels safe. Studies have shown that unconscious bias exists in recruitment and impacts the workplace in a multitude of ways, but the nature of it is that we usually aren’t aware of it. We need to find ways to move past that, by asking for anonymous profiles or conducting blind recruitment, where identification details are removed from CVs and applications.
Be clear about selection criteria: Another way to ensure objectivity is to agree what we’re looking for and how we’re going to test for it, right at the outset. That way we are more likely to judge all candidates the same, and less likely to rely on gut instinct, which is likely to be more susceptible to bias. Interviews should be based around the selection criteria agreed, with the same questions for each candidate that delve into skills, experience and ask for specific examples of these.
Practical tests and internships: And we shouldn’t just rely on interviews, but also use aptitude tests and practical assessments, to provide a 360 view of each candidate’s abilities, not just their ability to ‘talk the talk’. We should be using trial days, project work and internships more, to give candidates an insight into VC while giving both sides the chance to try it each other out and test fit before making a longer-term commitment.
Be strategic about hiring: Anticipating future recruitment needs isn’t easy but taking a strategic approach to hiring means we’re less likely to go for the easy option and fall for unconscious bias in the process. By thinking about roles that we’ll need to fill in a few months or even the next year or more, we have more time to think more broadly what kind of person would excel in that role, and how we can look outside the box to find them. Putting the feelers out early means more time to spot potential talent, so as to nurture those relationships and keep an eye on talented individuals as they develop.
The venture capital industry is still just at the beginning of this journey and we at Concentric, as much as any of our colleagues in the sector, have a long way to go to improve our diversity credentials. But the more we champion the cause, the more we’ll move the needle towards a sector that can offer a fulfilling career to anybody, regardless of background, gender or whatever else. And the more that happens, the more the whole start-up ecosystem as a whole will benefit.