Recommendation 10

HM Government Accepted

HM Treasury agrees with the Committee on the importance of promoting greater diversity in UK venture capital allocation. The British Business Bank is committed to improving diversity in venture capital allocations and is already making an impact through several of its programmes. The British Business Bank’s Enterprise Capital Funds (ECF) programme is designed to lower the barriers to entry for fund managers looking to invest in the venture capital market, thereby backing fund managers with a variety of backgrounds with a broad skills base. The Bank assess prospective fund managers’ approaches to diversity as an integrated part of its due diligence process. Through this programme, the Bank has allocated funding to fund managers that specifically target and fund a diverse network of founders. Particular highlights of this approach have been the Bank’s cornerstone investments into Ada Ventures’ Fund II and into Zinc’s 2 Fund. Ada is aiming to build the most diverse pipeline in venture capital, to increase funding for underrepresented founders. The portfolio of Ada Ventures’ Funds I was amongst the most diverse in Europe, with approximately 55% female founders and 30% ethnic minority founders. Zinc’s new fund will back 500 diverse entrepreneurs to create brand-new ventures from scratch and invest in 100 of the ventures they create. In Zinc’s most recent venture builder programme, more than 50% of founders were women and 15% Black, with the cohort having a Founders average age of 38. In Summer 2018, the British Business Bank launched its Finance Hub, a website that offers independent and impartial information for businesses. The Hub includes a comprehensive range of support and guidance for various groups, including female entrepreneurship, financial support for diverse and inclusive hiring, business finance jargon and much more. The British Business Bank undertakes research on diversity and inclusion. In 2023, the Bank published ‘Finding What Works: Pathways to Improve Diversity in Venture Capital Investment’, which sets out effective actions that fund managers can take to reach more founders from underserved backgrounds. The Bank will now be able to track these specific actions against actions taken by signatories of the Investing in Women Code, to develop the evidence base and ensure fund managers have the tools they need to target founder underserved communities. The British Business Bank will continue to track its own performance, work with others to ensure that it performs and publishes valuable research on diversity in access to finance. Outside of the British Business Bank, DSIT have committed £12 million of funding through the Digital Growth Grant to provide a two-year programme of specialised support for aspiring and existing tech entrepreneurs, including specific activity to improve outcomes for underrepresented entrepreneurs. Activities were launched in April 2023 and are being delivered by Barclays Eagle Labs in collaboration with industry partners such as Foundervine and AccelerateHER. Activities to support underrepresented entrepreneurs include the Black Venture Growth Programme and the Female Founder Programme– dedicated programmes that focus on growth and removing barriers to fundraising through targeted support and connectivity to investors.