Why diversity matters to us
SFC Capital on the importance of diversity in the early-stage investment scene
The COVID-19 crisis has been an opportunity to reflect on social issues and our role in addressing them. There is currently a healthy debate taking place on the lack of diversity in entrepreneurship and venture capital, which is undeniable, and the work that needs to be done to address gender inequality, regional imbalance and ethnic minority underrepresentation in our industry.
We at SFC Capital want to be at the forefront of this debate as diversity is at the heart of our culture – starting with our team, which is made up of talented people coming from various countries and backgrounds, something we see as a strong asset to deal with a wide range of stakeholders and issues.
For SFC Capital, diversity does not just start with who is part of the team, it is also a pillar of our investment strategy: we aim to achieve a high level of diversification to mitigate the high risk associated with seed investments and maximise returns. We diversify our investments across sectors and are not afraid to invest in industries seen as less fashionable, allowing entrepreneurs from various backgrounds to access funding and bring new products to numerous markets.
We also aim to diversify the profiles of the entrepreneurs that we back and have always taken the view – backed by plenty of evidence – that diverse teams tend to perform better than homogeneous ones. The more diverse the team, the more the company can benefit from critical thinking when facing challenges.
Our analysis of a team is a key component of our investment due diligence and it is not uncommon for us to turn down opportunities when we feel that a company lacks a diversity of profiles and personality types in its leadership. We know from experience that only management teams that have complementary experience, skills, and points of view can succeed in the long run.
Regional imbalance is also an issue close to our heart. We have always sought to break out of the “London bubble” and seek attractive opportunities across the UK, particularly in regions traditionally ignored by the venture industry. Our regional track record was one of the reasons why SFC was awarded £10m in March 2020 from the British Business Bank as part of their Regional Angels Programme.
This approach has led us to build one of the most diverse portfolios of early-stage investments in the UK, with over a third of our c. 220 portfolio companies led by women entrepreneurs – significantly more than the industry average – and over 40% of our investments to date have been made outside of London.
However, we are not satisfied with these numbers and we know that we have the responsibility to play a role in promoting diversity in entrepreneurship. In late 2019, SFC signed the Government’s Investing in Women Code and appointed one of our senior team members, Chief Investment Officer Joseph Zipfel, as the Champion of Diversity who will set our organisation’s standards in this area.
Joseph will be in charge of introducing processes that will allow for greater diversity and inclusion, and will be responsible for monitoring our performance from this point of view.
In the coming weeks, we will publish “SFC Capital’s Investing in Diversity Code,” which will provide more details about our internal policies and goals. This will be followed by updates on our actions and results.
To be seen to say and to be seen to act are two very different things. Here at SFC Capital we look to act upon what we say as we strive to achieve further diversity across our investments and across our own team. We recognise that achieving this can not only lead to greater success for SFC Capital but make the venture space a better place in which everyone should want to be a part of.