Introduction
The future of technology is shaped by a small group of venture capitalists. The world’s 10 leading venture capital firms have invested over $150 billion in technology startups, deciding which new platforms and technologies will shape our lives tomorrow.
A Lack of Diversity in Venture Capital
There is a startling lack of diversity within the venture capital sector. This means that a small group of men — mostly white men — make decisions that affect all of us. Unsurprisingly, they often ignore the broader societal and human rights implications of these investment decisions.
- 81% of all venture capital funds worldwide are clustered in just a handful of countries: the U.S., Europe, and China.
- If you use Facebook or Twitter, Google, travel in an Uber, or stay in an Airbnb, then you’ve experienced firsthand the impact of venture capital funding.
- Venture capital firms play a critical gatekeeper role, deciding which new technologies and technology companies will receive funding.
The Responsibility to Respect Human Rights
All businesses — including venture capital — have a responsibility to respect human rights. To ensure that their investments are not undermining our human rights, it is therefore critical for venture capital firms to conduct due diligence processes before making investments.
- Amnesty International recently surveyed the world’s largest venture capital firms and startup accelerators.
- Of the world’s 10 largest venture capital firms, not a single one had an adequate human rights due diligence process that met the standards set forth in the UN Guiding Principles on Business and Human Rights.
- Unfortunately, this is true of the broader venture capital sector as well.
The Consequences of Inadequate Due Diligence
Despite gains, gender diversity remains a challenge in tech, with women holding just 26% of technical roles. However, companies are making efforts to address this imbalance.
The consequences of inadequate due diligence are severe:
- Human rights abuses: Venture capital firms may be investing in companies that commit human rights abuses.
- Financial risks: Inadequate due diligence can lead to financial losses for venture capital firms and their investors.
- Reputational damage: Venture capital firms that fail to conduct adequate due diligence may suffer reputational damage.
What Can Be Done?
Venture capital firms need to institute human rights due diligence processes that meet the standards set forth in the UN Guiding Principles on Business and Human Rights. They should:
- Provide support to their portfolio companies to ensure they comply with human rights standards.
- Publicly commit to hiring more diverse teams, especially in investment-related positions.
- Publicly commit to funding more diverse startup founders as part of their flagship funds.
Conclusion
Venture capital firms have a responsibility to ensure that their investments are not causing harm. They must take steps to address the lack of diversity within the sector and conduct adequate due diligence on their portfolio companies. The future of technology depends on it.
Recommended Reading
- "The Future of Work: Robots, AI, and Automation": A comprehensive guide to the impact of automation on the workforce.
- "Diversity and Inclusion in Tech: Challenges and Solutions": An exploration of the challenges facing tech companies in achieving diversity and inclusion.
- "The Role of Venture Capital in Shaping the Future of Technology": An examination of the influence that venture capital firms have on the development of new technologies.
About the Author
Michael Kleinman is the director of Amnesty International’s Silicon Valley Initiative. He has written extensively on issues related to technology, human rights, and social responsibility.