First-Ever Study of AAPI Representation Among VC Investors Finds Persistent Underrepresentation

Despite a perception of inclusion, new data from DECODE, UC Berkeley’s SCET, and AAAIM show that AAPIs face an imbalanced reality. 

In the fields of investments and venture capital, the narrative often revolves around a world full of innovation and opportunity. However, beneath the surface lies a glaring reality that challenges these notions of potential. In a first-of-its-kind study, research from DECODE, UC Berkeley’s Sutardja Center for Entrepreneurship & Technology (SCET), and AAAIM now sheds light on a concerning issue: the significant lack of representation of Asian American and Pacific Islander (AAPI) in funding opportunities and career advancement within the VC investment community. 

This might come as a surprise to some people. There are a handful of highly-visible success stories at the top, and the Forbes Midas list continually ranks several AAPI investors among the top 10. Furthermore, AAPIs indeed comprise an important workforce throughout the tech industry and venture capital. Compounding the surprise-factor is that the combined term “AAPI” is incredibly broad. AAPI includes people with origins among more than 50 distinct ethnic groups, hundreds of languages, and maps to wide geographic regions including the Far East, Southeast Asia, the Indian subcontinent, and the Pacific Islands. The cultures, histories, and lived experiences of AAPIs is vast beyond comprehension. These factors all reinforce the  prevailing assumption that there’s no shortage of representation of AAPIs in technology and entrepreneurship. 

However, our recent research quantifies for the first time that – despite these perceptions of success and inclusion – AAPIs face a pervasive bias within the VC community. There have been a number of studies that looked at the systemic imbalance faced by women and other diverse communities but, until now, there’s been limited research related to the AAPI community in VC. Our research also quantifies that AAPI-owned VCs continue to face proportionally low AUM numbers and unique challenges in fundraising.

Here are some of the most surprising revelations from our research. 

1. Only 3.3% of VC funds are AAPI owned. This low, single-digit percentage of representation is extremely lower than the common perception. Of these 3.3% AAPI-managed VC funds, it represents only 2.9% of total AUM. This mismatch makes even less sense when you look at the performance of AAPI-owned funds, which have a higher proportion of being top-performing funds: 52.6% of all AAPI-owned funds have been ranked in the top quartile for fund performance. 
2. AAPIs are often left out of DEI initiatives by LPs. Among the top 100 limited partners (LPs) that allocate to venture, we found an alarming fact: 19% explicitly exclude AAPIs from these critical DEI initiatives. Clearly, the incorrect perception that AAPI professionals are doing well in VC is resulting in AAPIs being excluded. We found that only 9% specifically include AAPIs in DEI initiatives and goals. Furthermore, we found that 72% of diversity initiatives do not clearly state the inclusion of AAPIs in programming, even though other minority groups and women are mentioned as part of programming. This omission of AAPI could be interpreted that AAPIs are not included in much of this additional 72%.
3. The path to promotion and becoming an investing partner takes 41% longer for AAPIs. Before rising to become an investment partner, AAPI professionals worked in junior roles for an average of 3 years, 10 months. Non-AAPI professionals were able to be promoted in 2 years, 9 months. This slower trajectory is even more notable when combined with our research finding that AAPIs are more likely to have additional work experience before joining a VC (coming from prior roles as operators, in finance, or in consulting). 
4. More AAPIs with junior VC experience end up starting their own funds. Rather than waiting to be recognized inside their current firms, it appears that a difficult path to promotion could be leading more AAPIs with junior VC experience to start their own funds.  Proportionally more AAPI partners with junior VC experience started their own fund (16.6%) compared to their non-AAPI (13.7%) counterparts.

There’s a lot at stake due to the underrepresentation of AAPIs. 

• Policies and practices are adopted that limit opportunities specifically for AAPIs. We found examples of unconscious exclusion of AAPIs from leadership programs. These kinds of patterns can put senior-level investment roles out of reach, despite AAPIs’ qualifications. Our interviews also revealed recurring themes where many fund managers said they face additional hurdles like stereotyping and unconscious bias from LPs. 
• There is less mentorship for AAPIs. Another practice we repeatedly heard is that AAPIs are afforded fewer structured mentorship opportunities. These programs are in-place because they’re shown to accelerate advancement to leadership roles. With limited AAPI participation, many advancement opportunities are being denied. 
• AAPI investors are poised to recognize innovations that non-AAPI investors may overlook. With AAPIs representing an incredibly diverse range of ethnicities and cultures, AAPI investors are well-positioned to recognize a wider range of entrepreneurial ideas. 
• Despite proven track records of successful investments, the lack of AAPIs in investment partner roles means that future returns are capped. Previous AAAIM research quantified the excellent performance of AAPI-owned VC funds. In fact, 52.6% of these AAPI-owned funds delivered top-quartile performance, compared to 24.1% for non-AAPI funds of the same vintage year and strategy. 

For many AAPI individuals working in VC and investing, these research findings validate the gut feelings they’ve held for some time. One interviewee in the research commented on the experience of seeking a promotion through path: “The ‘Bamboo Ceiling’ effect has caused AAPI managers to lack leadership opportunities. People tend to promote others who look like themselves, so it is harder to stand out and be promoted since most people in the space are white.” Another interviewee underscored a belief that unfortunately continues to persist: “Asians are tagged as quiet, hardworking, and behind the scenes.” A third interviewee shared the insight that, “There are diversity pushes but capital is given to old managers, and not new managers who fall under the diversity initiative.”

As a result of quantifying these feelings for the first time, we see a number of actions that must be taken to improve DEI outcomes for AAPIs.

1. We must raise awareness about how underrepresentation is experienced differently by AAPIs in the industry, and ensure that data about AAPIs is captured in DEI reporting. By backing up anecdotes and gut-feelings with hard data and showing the realities facing AAPIs in VC, we can challenge existing narratives and catalyze change. New levels of awareness will also lead to better policy-making. 
2. We need better coalition-building across AAPI groups, and with other diverse communities. We’d like to foster a greater sense of common mission on DEI and create a unified voice with other industry organizations. We believe by working together and pushing for a more inclusive approach, we’ll yield better representation among VCs.  
3. It’s critical to keep the spotlight on DEI efforts, for all communities. We are extremely disturbed and worried by current trends where DEI programs are being deemphasized and even eliminated. It would be the ultimate tragedy for these critical efforts — which are meant to increase visibility and participation among people of all backgrounds — to be discarded.  

It’s true that we’ve seen breakout success stories among the AAPI community such as Khosla Ventures, Venrock, and Intel Capital, and among a number of Silicon Valley’s earliest VCs such as Mayfield, Sierra, and Lightspeed also now include AAPI leaders. These accomplishments must be celebrated and recognized. However, the consistently low levels of AUM share for AAPI-owned VC firms and our myriad other findings indicate that our community is viewed largely as a part of the support-level investment workforce.

Diversity should not be just a buzzword, but an elevated practice that creates increased opportunities and a fresh look at how best to enhance the market. It’s critical to fostering progress and innovation, and this new research provides long-overdue clarity about the imbalances that AAPIs are facing. Homogenous leadership constrains the types of ideas that become supported with venture capital. In order for the big ideas of tomorrow to emerge and grow, the investors supporting those ideas must reflect the diversity of our communities, both in the United States and around the world. 

Read the full report

Overview of variety of data sources: 

• 46 publications reviewed that talked about diversity in VC
• 32 VC databases compiled 
• 60+ fund managers interviewed 
• 2,000+ fund manager profiles analyzed (primarily via LinkedIn) 
• 700+ funds analyzed 
• Incorporation of DEI into investment criteria among the top 100 LPs in the U.S.
• $500 billion in VC AUM represented in the study 
• Consolidated and consulted relevant data from a variety of organizations including: BLCK VC, NVCA, Harvard Business Review, Fairview Capital and Midas List, All Raise, EVCA