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

New research about AAPIs in venture capital finds severe lack of representation among VC investors, and sheds new light on data such as assets under management (AUM), challenges in fundraising, timelines for paths to promotion, and exclusion of AAPIs from DEI programming and policies. The study was conducted by DECODE, UC Berkeley's SCET, and AAAIM.

SAN FRANCISCO, April 11, 2024 /PRNewswire-PRWeb/ -- A study was released today that quantifies, for the first time, the lack of representation of Asian American and Pacific Islander (AAPI) investors in the venture capital community. The research sheds new light on data such as assets under management (AUM), challenges in fundraising, timelines for paths to promotion, and exclusion of AAPIs from DEI programming and policies. The study was conducted jointly by DECODE, the UC Berkeley's Sutardja Center for Entrepreneurship & Technology (SCET), and the Association of Asian American Investment Managers (AAAIM).

"We expect that these findings will surprise some people. There are certainly a number of well-known success stories by AAPI VCs. The Forbes Midas list alone continually ranks several AAPI investors among the top 10 VC investors. However, when we looked at the VC investor landscape as a whole, the degree of underrepresentation was startling," said Jerel Lim, CEO of DECODE. "We hope this new data elevates awareness, sparks a data-driven conversation, and leads to change for AAPIs and all underrepresented groups."

"When we looked for credible data about AAPI representation among VCs, there was none. That was the impetus for this study: we wanted to quantify, for the first time, the AAPI VC investor landscape," said Shuo Chen, General Partner at IOVC and a faculty member with the UC Berkeley Sutardja Center for Entrepreneurship & Technology. "These research findings validate the gut feelings we've had, where perceptions about glowing AAPI successes don't align with people's true lived experiences. This new research provides important benchmarks for the industry and outlines some critical areas for improvement."

Key findings of the research include:

• Only 3.3% of VC funds are AAPI owned, despite superior performance. 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.
• AAPIs are often left out of DEI initiatives by LPs. Among the top 100 limited partners (LPs) that allocate to venture, an alarming fact was identified: 19% explicitly exclude AAPIs from their DEI initiatives. This is an example of an incorrect perception ? that AAPI professionals are doing well in VC ? and results in AAPIs being excluded from DEI programming. The research found that only 9% of DEI policies specifically include AAPIs in DEI initiatives and goals.
• 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 the 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).
• 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.
• Despite AAPIs' qualifications, the research uncovered multiple examples of explicit exclusion of AAPIs from leadership programs. This can result in senior-level investment roles being out of reach. Researchers also found multiple examples of fund managers who face additional hurdles like stereotyping and unconscious bias from LPs.
• Because of the perception of "over-representation," there is less focus on career growth for AAPIs. Programs designed for advancement into leadership roles often overlook the next generation of AAPIs. When AAPIs are excluded, advancement opportunities are being blocked.
• AAPI investors are poised to recognize innovations that non-AAPI investors may overlook. 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. With AAPIs representing this 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 fund growth is capped. Previous AAAIM research quantified the excellent performance of AAPI-owned VC funds: 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.

"Diversity is critical to fostering progress and innovation, and this new research provides long-overdue clarity about the imbalances that AAPIs are facing," said Jim Park, CEO of AAAIM. "Homogenous leadership means the ideas that are supported with venture capital are limited. In order for the big ideas of tomorrow to emerge and grow, the investors supporting those ideas must reflect the diversity of all communities."

As a result of this new research, AAAIM, DECODE, and SCET are calling for several key actions.

• Real data must help raise awareness about how underrepresentation is experienced by AAPIs in VC. Improvements can happen when anecdotes about people's experiences in VC are backed-up by data. New levels of awareness will also lead to better policy-making.
• A more united mission on DEI is needed, both among AAPIs and with other diverse communities. Coalition-building is imperative to drive better representation among VC investors.
• It's critical to keep the spotlight on DEI efforts, for all communities. Current trends where DEI programs are being deemphasized and even eliminated is an extremely disturbing trend. 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.

Data sources for the research included: 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, and EVCA.

To read the complete study, please visit the AAAIM website. The study can also be accessed at the DECODE website and the SCET website.

About AAAIM

The Association of Asian American Investment Managers is a national non-profit organization dedicated to increasing diversity and inclusion in the investment management industry and serving as a powerful voice for the Asian American and Pacific Islander (AAPI) community. Our goal is to elevate underrepresented groups through education, networking, and empowerment.

About DECODE

DECODE is the largest student-focused technology and entrepreneurship community in the San Francisco Bay Area. As a 501 (c)(3) non-profit organization with roots from UC Berkeley and Stanford, our mission is to decode the future and bridge academia with industry for student and alumni entrepreneurs.

About UC Berkeley Sutardja Center for Entrepreneurship & Technology

Since 2005, SCET has helped tens of thousands of students learn innovation and entrepreneurship skills and developed the foundation of Berkeley's entrepreneurship ecosystem, with SkyDeck, the Fung Institute, the Engineering Leadership Professional Program, Global Venture Lab, and an extensive network of Silicon Valley and global partners.

SCET is known for developing the Berkeley Method, an internationally recognized approach to teaching technology entrepreneurship to undergraduates, innovation to Ph.D. students, and technology firm leadership to professionals and executives. We help students develop their entrepreneurial mindset, leverage proven frameworks, and build their networks at Berkeley.

Media Contact

Kit Canlas, Association of Asian American Investment Managers, 1 615-717-5227, [email protected] 

SOURCE Association of Asian American Investment Managers