Diversity, equity and inclusion metrics for BDC Capital’s portfolio

8 minutes read

The need for a more diverse, equitable and inclusive Canadian venture capital (VC) ecosystem is undeniable and BDC Capital has put it at the forefront by developing a national Diversity, equity and inclusion (DEI) reporting template for Canadian GPs in February 2022.

Our template was based on the global framework of the ILPA1 Diversity Metrics Template to track metrics related to gender, race, ethnicity, and identification and aligns with Statistics Canada’s definitions.

The tool helps general partners (GPs) and their portfolio companies track quantitative and qualitative data about self-disclosed gender, race and other relevant characteristics, as well as details on DEI policies and practices. The tool was also built to create a common data collection framework to help GPs across Canada consolidate requests from limited partners (LPs) for DEI data; in that sense becoming a helpful tool in fundraising as they look to share their DEI progress with current and prospective investors.

A proxy for the Canadian VC industry as a whole

Our promise when we launched the reporting tool was to create a benchmark of data from which we could take stock of the state of DEI in the Canadian VC ecosystem and share our findings with the industry. As Canada’s most active VC investor, BDC Capital’s portfolio can, to some extent, serve as a proxy for the industry.

By sharing this data, we are looking to begin a conversation about how we can move forward to improve as a community. Our year one findings will help us identify priority areas for discussion and action with the industry.

DEI metrics from over 50 GPs and 500 companies

We sent our reporting template to all our GPs (71 GPs including internal BDCC funds and external funds) and their underlying portfolio companies (1,115 companies).

A year on, we are pleased that 80% of our GPs responded (57 GPs), with 93% of data being self-reported (meaning that team members willingly disclosed DEI information to their employer).

Response rate from underlying portfolio companies was far lower than it was for GPs, with only 49% of companies responding (544 companies). This lower response rate reflected some degree of uncertainty as to why this data was being collected for what use—something we will look to improve upon through better communication with the industry.

A complete presentation of our results can be found here:

Download the presentation

Below is a summary of the key observations emerging from this initial exercise.

1. Diversity is lacking in senior investment roles but is more prominent in junior investment and operational roles

Our survey indicates that a large majority of Canadian GPs have at least one woman and/or visible minority2 on the team. Only 6% of GPs reported having an Indigenous person in their firm. At least one employee with a disability was present in 21% of GPs.

Diversity is much greater at the junior investment level, where gender parity was reported by 43% and racial parity by 44% of reporting firms. Gender parity was also reported by 81% of GPs on the administrative/operations side (i.e., finance, accounting, legal).

Graphic 1: Percentage of GPs that have at least one female or visible minority on their team, per role

Graphic 2: Percentage of GPs that have at least 50% women or visible minority representation on their team, per role

2. There is a lack of diversity in GP ownership and on investment committees

43% of GPs are owned entirely by men, compared to only 4% that are owned entirely by women. Only 6% are owned entirely by visible minorities. Indigenous ownership is even lower, only 2% of reporting GPs have any level of Indigenous ownership in the firm.

The same trend plays out on the investment committee (IC). A total of 63% of GPs have a woman member in the IC and 55% have an IC member who is a visible minority. Moreover, only 4% of GPs have an Indigenous person on their IC.

Graphic 3: GP ownership percentage by women, visible minorities and Indigenous individuals

Graphic 4: Percentage of GPs with ICs that include women, visible minorities and Indigenous individuals

3. GPs are taking steps to increase diversity in their teams, but retention is difficult

We were encouraged to see that women and visible minorities make up at least half of new hires at 49% and 45% of GPs, respectively.

However, 48% of GPs reported that at least half of their employee departures were women, while 38% of GPs reported that at least half of their departures were visible minorities. This would perhaps make sense if half of the GPs had gender and/or racial parity, but as we saw in graphic 2, that’s not the case. The elevated level of diverse employee departures is likely a symptom of current competition in the labour market, which is making talent retention difficult. However, some GPs may also be having trouble creating inclusive cultures that offer diverse employees a sense of belonging and paths to promotion.

Graphic 5: Percentage of GPs whose hires, promotions and departures included at least 50% women or visible minorities

4. GPs are aware of the importance of diversity but need to push DEI practices deeper into their investment processes

While our survey indicates that 89% of GPs have a standard code of conduct or anti-discrimination policy, only 30% have diversity targets for portfolio company boards and management teams. And only 30% have organizational culture surveys and methods to track progress.

Evidence shows the importance of implementing strong diversity metrics and making it a priority on company boards and management teams, leading to multiplying effects on investment practices.

5. DEI data at the company level suggests a similar lack of diversity at the decision-making level

With over 1,000 unique companies in our direct portfolio and through our fund investments, we knew that collecting company-level data would be a challenge; venture funds typically make only minority investments and have less influence on portfolio companies as a result.

In spite of this, we were still able to collect data from over 500 portfolio companies (49%). This lower response rate means that findings must be interpreted cautiously.

Nonetheless, a clear, recurring trend emerged from the data: There is a lack of diversity in senior decision-making positions. Only 21% of companies have at least gender parity on the management team and 41% don’t have any visible minority individual in management. Only 3% of portfolio companies have an Indigenous person in their management team.

Boards have even less diversity, with almost half of boards composed entirely of men and only 11% with at least gender parity. This stands as a key issue, since boards have so much influence on making diversity a priority for companies. Most importantly, these results underscore the important role GPs must play in advancing diversity in their portfolio companies.

The beginning of an important initiative

While this first iteration of the DEI data collection exercise had its limitations, we want to thank our partners who participated in this year’s survey. With an 80% GP response rate, managers across our portfolio have demonstrated that they understand the importance of DEI not just for their firms, but for the VC industry collectively.

We will continue to support the community by working with like-minded partners such as the CVCA, our fund of fund partners in the Venture Capital Catalyst Initiative (VCCI) and companies such as Diversio to create a more diverse and inclusive private asset class in Canada.

We are planning on providing additional opportunities and tools for the community, for example creating a core of policy templates. As an industry leader, we aim to bring transparency to the industry to ensure all communities feel welcome in the Canadian VC ecosystem.

Finally, as we look to launch this exercise again next year, we will seek to address concerns around privacy, especially at the portfolio company level. We note, for example, that a few fields were left blank more often than others, notably those dealing with sexual orientation and veteran status. We recognize these questions are extremely personal and will look for ways to build greater trust and awareness about the importance of this data collection exercise.

We believe more education is needed to underline the importance of this exercise and the contribution DEI practices can make to building stronger and more resilient companies that reflect the full diversity of talent available in the Canadian market.

This is just the beginning of an important initiative we will continue pushing forward. BDC Capital is fully committed to improving DEI standards within the VC industry and recent announcement of the new Thrive Platform is a great example of the size of our commitment and ambition towards a more sustainable economy.

1 Institutional Limited Partners Association is a global association of close to 600 members representing small and large institutional investments institutions focused on best-in-class education, research, advocacy and events.

2 We use the Statistics Canada definition for visible minority, with the exception of Indigenous people who were separated to highlight their participation in the ecosystem.