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Q&A: Ada Ventures partner on how LPs can promote gender diversity among UK VCs

UK-based funds owned exclusively by men have secured about 10 times more LP capital than those led only by women in the last six years, new Ada Ventures research shows.

Ada Ventures' Check Warner (Noam Galai/Getty Images)

UK-based venture funds owned exclusively by men have raised around 10 times more capital than vehicles owned only by women in the last six years.

According to a new report led by London-based VC firm Ada Ventures, just seven pence in every pound raised from LPs between 2017 and 2023 went to all-women funds. Mixed-gender vehicles received 17 pence in every pound.

The UK is lacking women-only-led funds as many women aren’t able to access LP capital and those that do tend to raise less than their counterparts owned by men, the report shows.

We spoke to Check Warner, co-founding partner at Ada Ventures, to find out why the gender divide between VC funds in the UK is so wide and what can be done to narrow the gap.

PitchBook: Why don’t female VCs get as much funding?

Warner: There are so many layers to this. There’s a huge amount of bias that we know influences the investment decisions that people take. LPs don’t want to add more risk than they need to, and women investors and founders are perceived as more risky.

I think the other part of this is that because of the historic composition of the industry, there are just so many more male partners that have experience in VC and then are able to be in a position to raise.

There’s also the question of GP commit—how much capital you as the GP are expected by the LPs to put in the fund. Male GPs have much greater access to carried interest when they work for a VC and so have a greater economic share of funds. This means that when they’re ready to launch their own vehicle, the GP commit is already lined up.

What is the impact on the wider VC and startup ecosystem?

Women investors are three times more likely to invest in women founders. A heavier female presence on investment committees also leads to more deals for female-led startups.

Not having these women either running their own funds or being significant decision-makers impacts how much capital is going to female-owned and diverse businesses. That’s why we see such dire statistics about the amount women founders raise and why nothing’s really changing.

A major reason behind this report was really that we wanted to put this problem much more to the LPs because without an understanding of where their capital is going, I don’t think we have a chance to address it further downstream.

The report talks about “diversity washing” being an issue in the UK’s VC ecosystem, how does that present itself?

What I see is that funds who are trying to appear to be more diverse and inclusive will often bring on board what they call a partner, who is a woman, but actually that partner will not be on the investment committee, will not have significant carry and will not have significant ownership of the management company. Our report found that only just 23 of those who own significant proportions of management companies are women.

It’s extremely frustrating for that woman because they’re out there in the market and the founders think that they are partners with the same decision-making capacity and power within the firm as their other partners, but yet, they don’t. They are repeatedly blocked on companies that they want to invest in and they don’t receive fair economics.

Quite often what has been happening is that those women are just leaving the industry because they’re just getting so incredibly frustrated. It’s really important that women get an equal shareholding and not just a title.

What are the motives behind diversity washing?

I think it is greed. A lot of these funds have recognized that there are more questions now in due diligence questionnaires about diversity of teams. They know they have to bring more women in but they do not want to give up their economics.

It’s much easier to give someone a title, and because it’s such a competitive industry to get into, people will very happily accept that title. They won’t really push for the economics that they are actually entitled to. But again, it goes back to the LP and they need to ask more questions about the carry allocation for whole teams, gender pay gaps and ownership.

These are questions which, in our experience, LPs have never or very rarely asked. And that is really problematic, because unless those questions get asked nothing will change.

Do LPs want that change?

It’s a good question. What I have seen is that there have been a lot more questions over the last probably one to two years from LPs in terms [of] asking managers they’ve already invested in to provide more information about their team’s diversity.

I think the big question is, will they not invest in funds that have been making the money for years? Will they not re-up into those funds if they are not making progress on these issues? I don’t see LPs taking their decisions yet, maybe accepting a few, but those are rare cases.

I think publicly funded funds, like the British Business Bank, are really leading in this area by pushing fund managers on their performance in this area. But it’s not widespread and that’s why we’re encouraging LPs to push for GP disclosure to signal that this is something that they care about.

What can LPs do to improve gender equality among UK VCs?

We need recognition that this is not just a woman issue but one for the whole industry and we all have to lean into this challenge.

LPs need to understand what their pipeline are right now and how many female-led funds they are actually meeting and getting through their processes.

If only 1 in 100 funds that they’re meeting is female-led then they have to work on pipeline building, maybe even funding a diverse manager accelerator or thinking about whether they should even ask for GP commits. These are the kinds of actions that you can take off the back of understanding your pipeline but right now, I don’t think LPs are necessarily tracking that information.

The second thing is to just ask the GPs you are already invested in tricky questions and consider whether you should not invest as a follow-on into future funds if they haven’t done enough to address gender equity or pay gaps.

The UK’s push for more pension funds to commit to VC is a massive opportunity for change. The government’s own estimate is that £50 billion would go to high-growth businesses by 2023.

This is a particularly big opportunity because, as a lot of funds in the US have recognized, the underlying pension holders actually want their money to be managed by people who reflect them and not just by an elite, completely out of touch group of people who are unrepresentative of the pension holders as a whole.

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