Diversity And Inclusion Evolution: The Limited Partner Perspective

November 5, 2018 | By: Jon Jackson

It’s been almost two years since the CVCA formed its Diversity and Inclusion Committee. Since then, we’ve hosted and have engaged in numerous discussions and initiatives in the name of equality. In June, we dedicated an entire half-day of content at Invest Canada ’18 which provided meaningful actions that can be immediately implemented into our firms and portfolio companies.

If you missed the session, Dave D’Oyen, Inclusion and Innovation Builder, Shopify and CVCA D&I committee member, provided a list of 10 things you can do right now to improve inclusion at, and through, our VC and PE firms. D’Oyen provides fantastic examples of how to change the current environment and challenge our current thinking.

The momentum to improve diversity and action inclusivity in the private capital community is unmistakable. In the spring, the government of Canada announced the recipients of Venture Capital Catalyst Initiative (VCCI). Applicants of the CAD $350M fund-of-funds manager program were tasked to show how they planned to support greater diversity and address gender balance in the VC community.

Today at an announcement in Montréal, Québec, the government released the names of the recipients of the second stream of VCCI; CAD $50M for alternative investment fund managers not typically considered by traditional fund-of-funds managers aimed at identifying woman, cultural minorities and other under-represented groups.

The recipients of the second stream of VCCI are Garage Capital, Build Ventures, TandemLaunch, Highline BETA, AmorChem, Pique Ventures and Brightspark Ventures.

In the spirit of this evolution of our industry, I caught up with Northleaf Capital Partners and Teralys Capital, two CVCA LP members, to review how they are embedding D&I in their own firms and in their partnerships.


“Like many successful companies, we see inclusion, diversity and gender balance as a competitive advantage and a key factor to ensuring sustainable growth.”


As an LP, does your firm consider D&I an important factor for better financial outcomes and for mitigating risk? If yes, how so? If not, why not?

Northleaf Capital Partners (NC): Absolutely. We understand the importance of diversity and inclusion across all facets of society and the economy, and our business. For Northleaf, the pursuit of diversity and inclusion as well as gender balance and equality is both a moral and an economic imperative for success. Recent studies demonstrate a strong positive correlation between the representation of women in leadership roles and the financial performance of businesses. Similarly, gender diversity in management correlates with better organizational effectiveness as well as better financial results. Like many successful companies, we see inclusion, diversity and gender balance as a competitive advantage and a key factor to ensuring sustainable growth.

Teralys Capital (TC): At Teralys Capital, we find D&I to be very important, both for us as team, but also for the GPs that we back. It’s just as important as having a strategy that makes sense or having a team with the right background and experience.

Teams incorporating a broad range of skills, opinions and ideas are poised to perform better. There are several examples of non-diverse teams that perform well, and D&I is not a panacea. However, when something is approached from various angles, risks are better assessed, innovation spurs, which in turn drives performance.

What are the downside risks present in non-diverse investment firms?

NC: We believe that diverse groups with a variety of backgrounds, experience and perspectives make better decisions and achieve better business outcomes than non-diverse groups. We believe that firms that fail to embrace diversity and inclusion on their boards or in senior management limit their own ability to grow, which could have a negative impact on their shareholders and other stakeholders.

TC: Non-diverse teams tend to perpetuate their “non-diversity” by hiring clones and by investing in people that they can identify with. In an environment where there is increasing competition for talent and deals, I feel that those who are focused on working with doppelgangers are missing opportunities. They are just shooting themselves in the foot.

Do you require your portfolio firms to create (more) diverse governance bodies, whether investment managers or corporate boards? If yes, what is your requirement?

NC: We do not have a strict requirement at this stage, but we do encourage managers and portfolio companies with whom we invest to embrace diversity and inclusion as a business objective, much like we do at Northleaf.

TC: We don’t have a strict requirement for our portfolio firms to create more diverse governance bodies, but we have engaged in several conversations and felt that there was an appetite from many of our GPs. Several of them have taken the initiative to seek our guidance on creating a more inclusive hiring process and imbed inclusion into their culture.

Are you requiring your GPs to document D&I policies?

NC: We don’t have such requirements in place right now. However, we do undertake a fund manager diversity assessment in the context of our Canadian investment opportunities during each due diligence process. This factors into our investment decision-making process. We use a similar assessment when analyzing environmental, social and governance (ESG) initiatives, and believe that D&I policies are an important element of an effective governance framework.

This assessment includes a discussion of diversity initiatives at the firm, including the policies they have in place or plan to implement. Many of our GPs already have policies or are in the process of developing them. For those who do not, we encourage documentation, especially within our Canadian fund manager universe.  We also offer assistance to our GPs in developing such documents, using Northleaf’s own policies as a blueprint.

Building on our own internal polices here at Northleaf, we, along with a number of other firms, have recently supported BDC with the drafting of a Canadian ecosystem-wide code of conduct, which covers areas such as diversity, workplace violence, discrimination and harassment. BDC is working to promote this across the Canadian venture capital ecosystem.

TC: We have initiated a process to assess the diversity and inclusion component of our GPs through a scorecard. This scorecard was internally designed with the help of impact and diversity experts. It not only takes into account the diversity numbers at the time of our due diligence, but also whether or not a firm has the right conditions to attract and retain diverse talents and to allow every team member to thrive.

Teralys’ scorecard is much more than a scoring tool: it identifies gaps and provides direction to firms which strive to create a more diverse and inclusive business environment. In addition, it allows us to continue tracking the progress of our GPs, both from a statistical standpoint, but also regarding qualitative aspects such as internal policies.

Are you requiring your GPs to regularly document diversity and inclusion statistics from their own firm and portfolios? If yes, what are the measures of D&I that you are including in your decision making?

NC: As part of our new NVCF II mandate, Northleaf will inform management teams of each entity in which NVCF II invests of our expectations with respect to gender balance and diversity. We will also encourage management to set specific goals that are published internally and to which management holds itself accountable regarding overall hiring rates of women and other underrepresented groups.

As part of Northleaf’s investment and monitoring processes across our Canadian venture capital portfolio, we track and measure gender balance and diversity at each entity in which we invest.

TC: We intend to track progress made on diversity statistics on an annual basis, both at the GP level but also among their underlying portfolio companies.

We are well aware that a great number of GPs, if not the majority, are not there yet in terms of diversity numbers (although we track these numbers too). However, we are very sensitive to GPs who are willing to progress in that direction and make a commitment to integrate more inclusive practices, such as implementing D&I policies, having office hours for diverse founders, getting involved in ecosystem initiatives, among others.


“There are a number of concrete steps that GPs can take today to start driving change.”


How would you suggest GPs begin to start moving in the correct direction with D&I—some good business practices that aren’t formalized but provide good value to investors?

NC: There are a number of concrete steps that GPs can take today to start driving change. First of all, when hiring, particularly for senior leadership roles, firms should ensure that at least 50 per cent of the candidate pool is female, and/or from other diverse groups. This helps ensure that a truly diverse slate of candidates is considered. A second important consideration is training. Courses on unconscious bias, as well as ones that focus on respect in the workplace, are often beneficial not only in terms of surfacing and eliminating bias, but also in strengthening a firm’s culture. And lastly, firms that already do this well should strive to lead by example for their portfolio companies, thus ensuring that the positive impact of their actions is felt even more broadly.

TC: First of all, I think GPs should have a top-down approach to D&I, meaning that the impetus should come from the firm’s partnership, even if it was originally championed by somebody who is not a partner. It should be the firm’s priority and not a single individual’s battle horse.

Once a firm is willing to engage, I would start with small steps, like initiating conversations with the CVCA or with LPs who identify as diversity champions (like us!) and who can share industry best practices and provide a sounding board.

One simple yet meaningful way to move in the right direction is recruitment. Committing to having a more inclusive process doesn’t require reinventing the wheel. For example, there are plenty of online tools (some of which are free) which ensure that job descriptions have gender-neutral language or anonymize applications. For those working with head hunters, I would suggest specifying that diversity is one of the firm’s priorities.

Anything on D&I from an LPs perspective that you’d like to comment on (anything perhaps I haven’t asked)?

NC: As a part of our new NVCF II mandate, we have begun to promote gender balance and diversity as part of our ongoing commitment to the development of the Canadian venture capital ecosystem more generally. We believe that LPs need to lead by example. If we are requiring or requesting that D&I be a priority for our GPs, then we have to prioritize it as well. As an example of this, Lauren Harris from our firm has joined the CVCA’s Diversity and Inclusion Committee to further advance the initiative in the ecosystem.

TC: As investors, especially in venture capital, chasing innovation wherever it is, is one of the most crucial aspects of our job. Yet we don’t fully realize how much of a powerful innovation driver D&I is. As an LP, I feel that GPs are leaving investment opportunities on the table and are missing out on qualified applicants when they focus on a particular type of candidate or entrepreneur. At Teralys, we truly believe innovation and talent can be found across any social or ethnic background, physical ability, age or gender.

Also, Sarah Pisonero who is an investment professional at Teralys, volunteers her time and energy to promote diversity and inclusion at the industry level through her involvement with the CVCA’s Diversity and Inclusion Committee.


At the CVCA, we are making every effort to ensure our members have all the insight they need when it comes to empowering greater industry diversity and inclusion. To help members appreciate the full spectrum of topics on diversity and inclusion in our community, CVCA’s D&I Committee has curated a Diversity Resource Library for you to explore. We encourage you to contact us if you have resources you’d like to submit to our library or if you have any questions.


If you would like to submit an idea for content, contribute to an article, or are interested in submitting an op-ed, contact the CVCA’s editorial department here.