We are proud to announce that Nesta Impact Investments has been certified as a Level 2 Diversity VC Standard fund. Now we want to create even better outcomes for diverse founders and our investment teams.
At Nesta, we want to make sure that the capital we invest is accessible to everyone, and that the companies we invest in are supported in the best possible ways. As has been shown by multiple reports, over the past 10 years, teams led by minoritised ethnic groups or female entrepreneurs have received a fraction of the available VC funding compared to all-white teams and male founders. Funding is also skewed along particular socioeconomic lines, for example 72% of VC funded businesses have founders who went to "top tier" universities. Investors need to do more to address the barriers to funding that diverse founders may face and we are proud to be making progress in this area, both across our impact investment work and via our Mission Studio partnership with Founders Factory.
The benchmark for inclusivity in the investment sector is the Diversity VC Standard, an assessment and accreditation process that sets guidance for best practice when it comes to diversity and inclusion in the venture capital (VC) sector.
The assessment reviews a wide range of practices, ranging from how deals are sourced, to investment processes, recruitment and how organisations work with portfolio companies, alongside internal Equity, Diversity and Inclusion (EDI) policies and initiatives. The Standard was launched in 2020 by the nonprofit Diversity VC, in partnership with Diversio and OneTech, to improve practice across the industry and bring together a community of committed investors. As the accreditation is a holistic certification that recognises everything an investment fund does, it was important for us to view our VC practices in connection with Nesta’s wider ED&I commitments.
Nesta’s Impact Investments and Arts and Culture Finance teams have been certified as some of the highest performing fund managers that have participated in the certification process to date. In many ways, this is just the beginning of our journey, so we thought it would be useful to share how we got here and to assess the future potential.
Last March (2021), Nesta launched a company-wide EDI strategy.
As part of this strategy, Nesta’s Investment team carried out a literature review of the latest research on diversity in the venture capital industry. Then we reviewed over 35 different aspects of our own investment policies and processes. This included conducting a review of our own employee and portfolio company demographic data as well as our hiring practices and employee support programmes. We have also rolled out an environmental, social and governance (ESG) questionnaire, which includes questions on diversity, for our portfolio companies. With this data we will be able to benchmark and support our current portfolios’ ESG performance in line with the VC sector.
Some of the key policies and practices that enabled us to be accredited to a Level 2 standard included:
Our findings also indicated that there were some key improvements that could be made to ensure we continue to improve on our equitable investment processes. These are:
We are looking forward to joining Diversity VC Standard’s community of accredited funds, and to learning from and sharing with others how we can effectively improve EDI in VC. We have committed to an initial target – that by 2025, 25% of our investees will be led by those from minoritised backgrounds. However we hope to surpass this target!
Our initial priorities are to:
Our Arts & Culture Finance team’s strategy for increasing the diversity of their portfolio can be found here.
If you are a founder looking to raise capital and your business aligns with our investment strategy, please get in touch with us . We invest £500k-£1m in Seed-Series A ventures working in the areas of healthy ageing, edtech, foodtech, healthtech, climate tech, the future of work and productivity. These sectors reflect Nesta’s core impact goals:
Nesta is an impact investor, looking for high growth, commercial ventures that also deliver strong social or environmental impact.