Challenges Persist: Lack of Inclusion and Unclear Parental Leave Policies Continue to Impact Retention of Women in Canadian VC

Limited partners (LPs), investors in venture capital funds, have increasingly pushed for greater diversity in the traditionally male-dominated Canadian venture capital (VC) industry.

This pressure has spurred efforts to recruit and promote more diverse candidates within VC firms. Research indicates that these initiatives are starting to yield positive outcomes, contributing to a more inclusive and representative landscape in the Canadian VC sector. This shift reflects a broader industry acknowledgment of the value of diversity in fostering innovation and better decision-making.

Roxanne Leduc, a board member of Canadian Women in VC (CWVC) and the founder and CEO of the diversity, equity, and inclusion (DEI) consultancy Cap Inclusive, highlights a potential gap in the efforts within the Canadian venture capital (VC) industry. She suggests that while there has been attention on hiring more diverse candidates, there is a need for increased focus on fostering inclusion. This observation indicates that efforts to retain women and visible minorities in Canadian VC firms may benefit from a more comprehensive approach that goes beyond initial recruitment.

Roxanne Leduc emphasizes that, amid challenging conditions in the venture capital (VC) market, the focus on creating an inclusive environment where individuals can thrive without facing exclusion, biases, discrimination, or harassment has been deprioritized. She suggests that during tough market conditions, if inclusion is not mandatory, it may not be a priority for VC funds. Leduc underscores the importance of reemphasizing inclusion and equity, going beyond just diversity efforts, especially during economic downturns.

Canadian Women in VC (CWVC) is a grassroots organization committed to supporting self-identifying women in the Canadian venture capital (VC) industry. The organization’s fifth annual survey on compensation in Canada’s VC industry, released in November 2023, provides insights based on 190 responses from both women and men. The report sheds light on the strides made by VC funds in fostering diversity and equity within the industry, highlighting remaining challenges such as inclusion and parental leave.

In early 2023, Roxanne Leduc launched Cap Inclusive, a consultancy aimed at assisting Canadian venture capital firms in developing more sustainable and inclusive funds. The firm specializes in conducting diversity, equity, and inclusion (DEI) audits and research to address the gender gap in the industry. Cap Inclusive published a series of white papers in the previous year, providing recommendations on recruiting and retaining women in VC and investing in women founders. These recommendations were based on insights gathered from interviews with over 75 women in the industry.

Canadian venture capital firms, while making progress in recruiting and promoting more women and visible minorities, are facing challenges in retaining them. Research from Cap Inclusive and a 2022 report by the Canadian Venture Capital and Private Equity Association (CVCA) and Diversio indicate that inclusion is a critical factor. The CVCA and Diversio survey revealed that women partners are six times more likely than men to report harassment or feel undervalued, and women in the VC industry are 3.5 times more likely than men to feel no one has invested in their career growth.

Despite efforts to improve diversity, many venture capital firms still lack diversity at decision-making levels. A 2023 BDC Capital report and other research indicate that women often feel a lack of support and struggle to advance within VC firms. The Canadian Women in VC (CWVC) survey highlights a contrast between diverse junior ranks and less diverse senior positions. Gender and market factors, particularly the challenge of funds raising money, contribute to the slow pace of promotion in the VC industry.

The Canadian Women in VC (CWVC) survey shows that 8% of respondents are unlikely to stay at their current job in the next one to two years, with 64% indicating they would consider leaving for better growth opportunities. While women in entry-level investment roles have seen salary improvements compared to previous years, the representation of Black, Indigenous, and People of Colour (BIPOC) investors remains stagnant, with lower compensation than non-BIPOC investors at the same levels. The findings highlight ongoing challenges in diversity and career advancement within the venture capital industry.

The CWVC survey indicates that a majority of respondents are unsure about their parental leave policies, reflecting a lack of clarity in the industry. The absence of well-defined and communicated parental leave policies can impact women’s decisions, especially considering that many enter the industry around the age of 30. The need for more transparent and supportive parental leave policies is evident to address the concerns and uncertainties faced by employees in the venture capital sector.

Cap Inclusive emphasizes the importance of VC firms implementing clear standards and policies for parental leave from the beginning, preventing women from negotiating them individually. Encouraging mentorship, hosting inclusive events, integrating family obligations into shared calendars, and utilizing a buddy system are recommended practices. LPs can play a crucial role in shaping expectations around diversity, equity, and inclusion. Despite offering a parental leave template for VC firms, the uptake has been disappointing, highlighting the need for more concerted efforts to establish supportive policies in the industry.