Diversity VC: our Level 2 Certification

Sharing our experience and learnings

Diversity in climate tech

You’ve probably heard the stats before. In 2021, just over 1% of capital raised in Europe went to all-women founding teams, just 8.8% to mixed-gender founding teams, and only 1.3% went to ethnic minority founding teams. More men called John have raised venture funding than Black women. As a venture fund, it is a privilege to hypothesise on the future and add fuel to it - but it’s clear that venture capital has a diversity problem. 

We believe all industries should be working on removing systemic bias from decision making, and climate tech holds a specific duty. The climate crisis affects everyone, and as climate change worsens it is set to impact people and places differently and to increase inequalities - both between nations and within countries. Climate solutions have the potential to either narrow or exacerbate these inequalities, and we believe diverse teams have a better chance of building inclusive solutions that take more interests into account. There is clear evidence that diverse teams also perform better - and diverse boards deliver more on climate.

Despite believing in the importance of diversity, we recognise we are currently a white, mixed-gender investment team. We will have blind spots and, studies suggest, implicit bias in decision making. So we set out to do whatever we could to assess, restructure any systems or processes that might promote bias over assessment of talent and potential. 

Diversity VC 

When looking to take action on diversity and inclusion, the obvious place for us to start was Diversity VC. Diversity VC has already changed the conversation in VC, and in less than ten years they’ve built an industry standard on what diversity, equality and inclusion looks like in venture capital. Diversity VC offers a certification based on rigorous assessment of a VC’s recruitment, culture, dealflow, and policies. We applied to be certified by Diversity VC - knowing it would make us accountable to progress and give us a data-informed structure to follow. 

We are a small team, and for transparency we had one general partner - Heidi Lindvall - spend around two hours a week for six months, working on improving our processes and implementing new ones. We were really happy to be awarded the Level 2 Certification. We have more to do, and we will continue to learn and likely make errors, but we wanted to share some of the things we have done so far to build a more inclusive team, culture and portfolio in case they are useful to others.

Building our team

When it comes to recruitment for our own team, we have hired four roles so far and we have been intentional about removing bias from the process. We’ve taken steps to widen the applicant pool beyond traditional sources and we use a detailed, standardised recruitment policy to ensure we have the same interview questions for all and a clear and fair process to assess talent and skills. 

Employees are recruited on the basis of their ability and experience, and when we list roles - as well as the standard requirements - we make sure the description is evaluated for language bias using a text analysis tool. When the job does not require it, we remove requirements on education, references to travelling or anything else that may limit the candidate pool to more privileged candidates. Any key jobs are published to external job boards, including job boards with a focus on diversity.

Our team environment

Once people have joined the team, we have flexible work policies - and we encourage employees to take breaks when needed, and to build a schedule around their own needs and energy levels. We offer 6 months parental leave with 90% pay. We don’t differentiate between maternity or paternity leave - and this includes anyone who identifies as a parent: for example whether you adopt (a baby or a child), have a surrogate carry the baby, identify as a non-binary parent, or if your partner carries the baby. We would love other firms to adopt this policy.

We have developed harassment policies, we track promotions, attrition and equal pay annually and we have run diversity and inclusion sessions with external partners. There are other pieces we haven’t got in place yet, as a small team with just a few hires, and there are new initiatives we will bring in when we grow as a team. These are things like employee culture surveys and increased assistance for our portfolio companies on their diversity policies and initiatives.

Investing in diverse founders

We know diverse teams perform better. Our ideal is for as many companies as possible to have a mixed team - and we have a policy in place for diverse investments. For example, we want at least 30% of our investments to have at least one female founder. Right now, 40.9% of our portfolio companies have at least one female co-founder (to date), and 29% of the total founders identify as female (as measured at the end of Q1 of 2022).

When sourcing investments, we assess cold deal flow (via the website form), accept introductions and also run diversity office hours. We have invested in companies who have sent cold emails or LinkedIn messages, have applied through the office hours and those who have applied through the website. We do not need a warm intro to invest, and 26% of our investments so far have come from cold inbound.

When we invest in a new company, we have an ESG questionnaire that we ask each team to fill out as part of the due diligence process. Additionally, we have both an internal ESG scorecard that the partners fill out as well as an external one that we ask the company to fill out. These include things like the makeup of the founders, the board of directors, any ESG risks and the founders’ own thoughts on ESG and impact. We track this all internally and we also have KPIs written into our D&I policy that are measured annually. We have also done training in how to be better in noticing biases in assessments and will continue to run these on an annual basis. 

Next steps

We are proud of the steps we have taken early on as a fund to try to level the playing field in venture, but we know there is still lots more to do. We are always looking to learn from others, so if you have done something that has improved your recruitment process, team culture, policies and portfolio processes, please let us know. If you have any organisations you’ve worked with, or any resources that have helped you, we’d love to hear recommendations too.

If you want to talk about your own progress on D&I or your application for the certification, we’d be happy to help share our experience. We spoke to other funds when we were working through the process, and found it very helpful. 

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If you have questions or suggestions, reach out to Heidi: heidi@paleblue.vc, our General Partner who has led the work on diversity for the fund as well as the Diversity VC assessment application process. 

If you are a founder from any background looking for investment, please apply via the form on our website, we’d love to hear from you.