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Diversifying VC Portfolios Starts at the Top of the Funnel

Name: Diversifying VC Portfolios Starts at the Top of the Funnel
Uploaded: 2020-08-04T17:50:40+00:00
Duration: 1 min 51 s
Channel: Royston G King
Description: In this segment, Speaker A argues that the diversity of venture capital portfolios is fundamentally shaped by the top of the deal‑sourcing funnel. They…

4 Aug 2020 · 2 min

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1:51

In this segment, Speaker A argues that the diversity of venture capital portfolios is fundamentally shaped by the top of the deal‑sourcing funnel. They contrast two sourcing styles: a broad, inbox‑driven approach versus reliance on a trusted, homogenous network (e.g., alumni or similar backgrounds). Citing Grand Challenges Canada, they note that over 60% of project leads are women—a stark contrast to the typical 20‑30% in other global‑health funders. The speaker emphasizes a science‑based evaluation of problems to be solved, and describes their own fund’s dual strategy of co‑investing with known sector partners while also mining wider lists to uncover solutions. They identify two main reasons diversity gaps persist: lack of awareness of the issue and over‑reliance on narrow networks, which shape the demographic makeup of the top‑of‑funnel leads and consequently limit the proportion of diverse deals downstream. The speaker concludes that realistic diversity outcomes require intentional diversification of the initial deal pipeline.

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My own view on this is that it's really about the top of the funnel. How do you source your investment ideas? Do you do like Manisha, she says everything that comes in my inbox I look at, or do you only get your leads from your trusted network of people that look like you went to the same school as you? So for us, whether it's Grand Challenges Canada itself, we, in our most recent calls, were over 60% women project lead, which is very unusual. Because other global health organizations achieved 20% or 30%. So it's sort of interesting. And it's, again, a very science-based approach to are you solving a problem we care about? And on our fund, it's really about, you know, we're sourcing deals both from investors we know, trust in our sector that we'd like to co-invest with, but also looking at broader lists and really digging into the solutions as opposed to necessarily relying on a specific network. So I would say that the reason some of the issues persist for many VCs is one, lack of awareness that there is an issue, two, too much reliance on a very specific network that is not necessarily changing a lot for your top of your funnel. If your top of the funnel has a certain demographic profile, how do you expect your deal— that your deals done to look different from that? So it would be fairly unusual to say that you had 5% of your top of the funnel being women-led and that you'd end up with, you know, a 30% allocation to women. It would be— I don't think that's a realistic stat. So you've got to look at ways to diversify your pool.