Report: Diversity gap persists in senior ranks of Canadian VC firms

BDC Capital data shows almost half of venture firms are entirely male owned.

Despite year-over-year gains in the representation of women and visible minorities at Canadian venture firms, senior-level diversity in the industry is still lagging, according to a new report from BDC Capital.

BDC’s latest report tracks how its portfolio funds and companies are performing with respect to diversity, equity, and inclusion (DEI) and environmental, social, and corporate governance (ESG) goals at both Canadian venture firms and their portfolio companies. This is the firm’s first such report tracking ESG performance across its portfolio, and its second for DEI.

Almost half of BDC portfolio companies surveyed have a board of directors consisting entirely of men.

BDC Capital’s report found that overall, diversity at the senior levels of the private asset industry remains low—almost half of venture firms are entirely male owned, while eight percent are entirely visible minority owned and two percent are entirely woman or Indigenous owned. Only 31 percent of venture firms reported having gender parity.

Alison Nankivell, senior vice president of fund investments and global scaling at BDC Capital, said while diversity in the senior leadership positions of private asset firms is not where she wants it to be a year from BDC’s first DEI report released in January, she noted that improving this metric is a long-term exercise.

“Venture in particular is an apprenticeship business [where] you have young investment professionals join and rise up the ranks,” Nankivell told BetaKit. “…The time it’s going to take for them to move through and up into the [senior] investment ranks is a constraint on how fast we can see a transformation of the level of diversity at the senior ranks.”

BDC Capital collects data from its portfolio VC firms, internal funds, and both groups’ underlying portfolio companies. BDC said the data covers 72 managers and 1,921 portfolio companies, equating to roughly 63 percent of all active venture capital funds in Canada.

Diverse representation, or a lack thereof, is a longstanding issue in Canada’s tech sector, and its impact extends far beyond venture capital. Per the report, almost half of portfolio companies surveyed have a board of directors composed entirely of men, and 50 percent do not have a visible minority on their board. Only 20 percent of portfolio companies were reported to have gender parity in their management teams.

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BDC’s report did identify a few positive trends, notably that diversity appears to be of growing importance to VC firms when it comes to hiring. The report found the proportion of firms where diverse employees make up at least half of team headcounts rose to 31 percent in 2023 for women (compared to 21 percent in 2022) and 17 percent for visible minorities (compared to just nine percent in 2022).

BDC’s report also noted a marked year-over-year improvement in the percentage of venture firms with investment committees that had at least one woman member (73 percent in 2023 compared to 63 percent in 2022) or visible minority member (68 percent in 2023 compared to 55 percent in 2022).

“I think after year one [of BDC’s DEI report], there was a lot of soul searching, and I think some of that transformed into people being more proactive about areas where they could make improvements,” Nankivell added.

While representation continues to fall short in Canada’s venture industry, BDC Capital noted this could change as more diverse and women-owned VC firms continue to enter the market. “When you have emerging managers, you have more chances to move younger diverse people into the senior investment ranks,” Nankivell added.

In the last few years, several new diversity-focused funds have been launched in Canada, including BKR Capital, which BDC Capital has supported, StandUp Ventures, focused on women-led startups, and Raven Indigenous Capital Partners, which closed $100 million for its second venture fund earlier this year.

BDC Capital is Canada’s most active limited partner, but the Crown corporation has faced criticism of its own from some Canadian VCs for not supporting enough seed funds, which are typically run by emerging managers.

Speaking to BDC Capital’s support for emerging women managers, Nankivell pointed to the corporation’s Thrive platform, a component of which is dedicated to providing indirect investments into women-focused or women-led venture firms in Canada. She also said 43 percent of the VC firms in BDC’s portfolio are either women-led or co-led, which she noted is “probably double the average for the industry.”

Companies focusing on the “S” and “G” of ESG

BDC’s report also included metrics on ESG, which encompasses a broad set of criteria that evaluate how effectively a company or team mitigates risk and addresses issues such as climate change, data privacy, ethical governance, and labour practices.

Per the report, 64 percent of venture firms said they have requirements to report on ESG to their investors. Roughly 40 percent of these firms claim to already produce an annual ESG report on their fund’s portfolio, while only one-third provide training for staff on recognizing ESG-related risks and opportunities.

BDC’s direct and indirect portfolio data indicates that there are a number of companies currently paying attention to their ESG performance, even if they lack dedicated ESG policies. According to the report, 22 percent of portfolio companies were reported to have an ESG policy in place and 13 percent have an individual or board committee responsible for ESG oversight, yet 31 percent do track and report ESG metrics in some form.

BDC’s report also found that many are putting a particular focus on the social and governance components of their ESG strategies. The report found that 88 percent of companies have procedures in place to protect against cybersecurity risks and data privacy, 57 percent conduct employee engagement surveys, and 55 percent report having an independent board member.

While BDC Capital does not yet have year-over-year portfolio data related to Canadian ESG performance, recent headlines indicate this area of governance is not popular with everyone. A recent report from The Logic noted a growing disdain for ESG, particularly as some US states seek to outlaw ESG investing at a public funding level. In Canada, this mostly politically-driven ire has been more muted, though some investors have described ESG as vague and confusing.

“[ESG is] actually an awkward acronym for a whole bunch of aggregated, very specific risks that deeply affect the competitiveness and the potential profitability of either a company or a GP and how they run their portfolio,” Nankivell argued. “We need to recognize that, really, this is just risk management.”

Isabelle Kirkwood

Isabelle Kirkwood

Isabelle is a Vancouver-based writer with 5+ years of experience in communications and journalism and a lifelong passion for telling stories. For over two years, she has reported on all sides of the Canadian startup ecosystem, from landmark venture deals to public policy, telling the stories of the founders putting Canadian tech on the map.

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