by Ray Hayes
Despite research proving the financial and social benefits of diversity, many venture capital firms struggle in this arena. As many of you know, I’ve written several articles indicating the many benefits of employing women and minorities, but I believe that today’s article will strength my point more so than in the past.
According to a new report from the Harvard Business Review, “Venture capital firms that increased their proportion of female partner hires by 10% saw, on average, a 1.5% spike in overall fund returns each year and had 9.7% more profitable exits (an impressive figure given that only 28.8% of all VC investments have a profitable exit).”
The report is simple but reinforces my point that an increase in women within an organization, in particular venture capital firms, results in higher profits. Now, let’s be clear diversity is not the sole reason a VC firm is profitable, we also have to take into account the hiring process, investments, and the culture within the firm.
For those interested in learning more, below are a few more highlights from the report in question:
- Only 8 percent of VC investors are women, 2 percent Hispanic, fewer than 1 percent black, and 45 percent of VCs with MBA degrees come from just three business schools (25 percent from Harvard)
- The success rate of acquisitions and IPOs was 11.5 percent lower for partners with shared school backgrounds, and 26.4 percent lower for those with shared ethnicity.
If you’d like to read the report in full, click here.