Diversity VC acquires Extend Ventures to make inclusive investing measurable

When Diversity VC launched in 2017, it began with a report looking at the underrepresentation of women in venture capital.

As it turned out, this was information that hadn’t really been investigated properly before, and the answer to the question of why there was so much disparity was buried in data that didn’t yet exist. 

Its first major study — led by David Houghton, now CEO of Social Mobility Ventures — laid the foundation for what became the organisation’s core mission: making venture capital fairer through evidence.

Eight years on, data remains a central tenet of Diversity VC, and now it has acquired Extend Ventures to embed it even further.

The entire team is made up of data analysts, which is perfect for the nonprofit because, as CEO Meghan Stevenson Krausz tells me she’s always saying: “if you’re not measuring it, you can’t change it.”

The merger brings together two sides of the same structural problem. Extend Ventures has historically focused on the founder experience: who gets funded, who doesn’t and the systemic reasons why. Diversity VC, meanwhile, has concentrated on the investor side, building the industry-recognised Diversity VC ‘Standard’, a framework that helps funds benchmark and improve their internal diversity and inclusion practices.

“From their side, they’ve always been focused on the founder side, and we’ve always been more focused on the investor side,” Stevenson Krausz says. “As we focus on the investor side, we’ve also seen the importance of reaching LPs. Now the new joint entity can actually touch every part of the investment cycle — from LP to VC to founder — in the research we do and the interventions we design.”

Extend Venture’s data-science team will now become Diversity VC’s data engine, working jointly under the Diversity VC name. The non-profit has also received a “significant donation” from Phoenix Court Works and Next Economy Trust to fund the ongoing work of the data team.

Stevenson Krausz argues that venture capital already understands the power of diversification. But the industry has long ignored the most important variable it claims to evaluate.

“We have the data to prove why diversity matters,” she says.  “And especially within the investment space the idea of diversification is such an integral part of most investment funds theses that it almost doesn’t even bear repeating.

“However, if you were to ask a VC, ‘what’s the most important thing that you’re looking at when you’re evaluating a startup?’ I guarantee you at least 90% of the time, if not higher, they’ll tell you the founder. And yet when we talk about diversification in a portfolio, they’re ignoring this huge and important piece which is the founder.”

The numbers back up the need for diverse founding teams. 

In the US, ethnically diverse founding teams receive just 20% of VC capital yet deliver 30% higher returns at exit. 

Female founders raise a fraction of the capital male-only teams do, despite outperforming them: BCG’s 2018 analysis found that for every dollar invested in a startup with at least one female founder the return was 78 cents — more than 2.5x the 31 cents returned by all-male teams. 

In the UK, the Investing in Women Code report shows that the equity market could grow by 13% if unmet demand from female and ethnic-minority-led businesses were funded. 

The Social Mobility Ventures report released last week shows founders who attended state schools are 30% more likely to reach Series A and beyond than privately educated founders, but they make up just 25% of pre-seed startups.

The list could go on, but put simply: the market continues to underfund the founders who make the most money.

“On any given day when you look at the stock market, anywhere between five and nine of the largest companies in market cap received venture capital dollars in their early days,” Stevenson Krausz says. “So the companies that are being backed today by VCs are literally creating the future economy that we will live in. And that's why it matters who is being invested in.”

The idea that investment should be inclusive shouldn’t require the numbers to back it up, but it currently still does. But the Standard, now used globally, intentionally avoids pushing firms to collect sensitive founder data until they’ve reached level three of the five-stage framework.

“It’s because we want them to do the work behind why they are capturing what data,” Stevenson Krausz says. “Once you start collecting certain data points, particularly from founders, there’s an expectation: what are you doing with this? How are you using it to improve? And if you’re collecting it and not doing anything, it can actually erode trust in the ecosystem.”

Extend Ventures’ arrival strengthens that logic. With a dedicated data team, the merged entity can not only standardise what firms measure but also assess whether any of these interventions actually work. The challenge, though, is that it will take time — the average return cycle for a fund is 14 years.

This push isn’t only about investors and founders. It’s also about the workforce they hope to attract.

Gen Z and the next generation entering the workforce, Stevenson Krausz notes, cares deeply about being able to show up as their full selves at work. Cultures that enable that see the benefits: stronger output, higher retention, more commitment.

“I think all of us here are doing what we’re doing because we love it,” she says. “And because of that, we can give so much more. That pays dividends in retention and productivity — which shouldn’t be the main reason to do it, but in a sector focused on returns, it is a very good reason to invest in inclusive cultures.”

One of the priorities for the combined organisation is accelerating the Diversity Data Alliance — an initiative to create a shared, always-updated platform where funders, founders and LPs can access a living dataset rather than relying on annual snapshots to see directly the impact of inclusive investing.

A stronger, more connected dataset could also help finally quantify something Diversity VC has been arguing for years: that inclusive practices have a measurable impact on who gets funded and how those companies perform.