Why VC advising is key to more diverse tech investments

When we interviewed Dr. Gillian Marcelle (Founder and CEO at Resilience Capital Ventures LLC), we asked her to share one thing she’d change about the way the venture capital industry works. 

She said: 

“It would be to have as much venture advising as there is financial capital being deployed.” 

Why would increased venture capital advising change the sector? 

VC advising is a specialised form of financial consulting that guides startups and emerging businesses as they navigate the investments ecosystem; or advises investors throughout the process of identifying new investments and adding them to their portfolios. 

The advice covers everything from strategic counsel and sector-specific insights to helping with due diligence, and connecting startups with potential investors. 

And better access to VC advising could help more diverse founders to leverage venture capital funds – while enabling more VCs to back diverse businesses, and drive increased diversity across the tech industry. 

“Startups around the world, particularly those that are led by women and people of colour, do not even get past certain barriers because of layers of bias,” Marcelle said. 

Quality advice for both startups and venture capitalists is an important way to break down those barriers and ensure that investments embrace the potential of businesses with diverse leadership teams. 

Diversity in venture capital is a work in progress 

Diversity VC is an organisation dedicated to driving diversity, equity, and inclusion in the VC space. It’s working to set global benchmarks for best practices, and building local ecosystems to close diversity gaps in different markets around the world. 

A cornerstone report published by Diversity VC in 2020 found that: 

• Underrepresented founders are being excluded from investment opportunities at a very early stage of business development.
• Black founders are particularly underrepresented in both pre-VC and VC funded startup cohorts.
• The least represented founders are Black and racially minoritised women.
• The majority of startup founders are graduates from prestigious universities – and founders who have attended prestigious universities are more likely to receive venture capital funding. 

An important aspect of the organisation’s work to change this is consulting – to enable VCs to understand the issues surrounding inclusivity, recognise their own limitations, and provide them with a toolkit that enables them to engage diverse founders. 

You don’t know what you don’t know

Ultimately, VC advising gives both investors and founders access to information they wouldn’t otherwise have. You don’t know what you don’t know – so working with an advisor is a way to fill in the gaps in your knowledge, identify blindspots and biases, and ensure you’re proactive in taking apart the barriers that prevent diverse company leaders from securing funding. 

Marcelle added, “If VCs had access to more knowledge and cultural capital (both GPs and LPs) there would be a set of wider search routines, more openness during the portfolio construction stage, and then a lot more guiding of the ventures post investment.”

Advising isn’t the only route to increasing diversity in the VC sector. We also need to see more diversity at the top of VC firms; inclusion built into investment pipelines; and measurable processes to ensure VCs are kept accountable as they work towards more inclusive portfolio development. But high quality advising can help with all of this – creating the awareness and networks necessary to ensure that underrepresented founders can find a footing in the investments ecosystem.