SUPPORTING DIVERSE AND EMERGING MANAGERS
HarbourVest has historically provided capital support to diverse and emerging funds and managers – opportunities that provide great potential yet fly under the fundraising radar and seldom receive the capital to match their promise.The funds and firms in these market segments can provide compelling returns, and their distinct attributes require investors to have a dedicated sourcing focus, specialized analytical skills, and a proven manager selection process. We source more than 150 opportunities each year focused within this market.⁶
HarbourVest defines diversity as 25% or greater of a senior-level team identifying as female, belonging to an under-represented minority, or both. Within this portfolio, diverse GPs to which we have committed capital have generally outperformed non-diverse GPs during this time. Our data also shows that as the trend of diversity has continued across private markets, the outperformance delta for these GPs has grown over time.
PERFORMANCE OF US BUYOUT AND VENTURE MANAGERS⁶
Data as of 6/30/2019. IRR represents cashflows in investments in US Buyout and Venture fund managers with vintage years within the 3 year time periods across the HarbourVest portfolio. Diversity defined as 25% or greater of senior-level team identifying as female, belonging to an under-represented minority or both.
This information is presented on a gross basis. These returns do not reflect the management fees, carried interest, and other expenses borne by investors in the HarbourVest managed funds / accounts, which will reduce returns. See last page for ‘Additional Important Information’, including important disclosures related to Gross Performance Returns, and Fees and Expenses. Past performance is not a reliable indicator of future results.
Additionally, HarbourVest dedicates a portion of its buyout-only portfolio for commitments to smaller and more emerging GPs, and we have also seen outperformance for diverse GPs within this segment of our portfolio. Since 2009, our teams have committed approximately $2.3 billion to opportunities less than $1 billion in fund size, of which 41% has gone specifically to diverse GPs. As the chart below shows, diverse GPs at the smaller end of our portfolio have shown the ability to outperform, from both an internal rate of return (IRR) and multiple on invested capital (MOIC) perspective.
DIVERSE vs NON-DIVERSE FUNDS (<$1B) PERFORMANCE⁶
6 HarbourVest data as of December 31, 2019. Includes all partnership investments with a focus on US-based funds generally targeting less than $750 million that pursue venture, growth, buyouts, recapitalizations, turnarounds, special situations, and other private market transactions since January 1, 2009. Includes performance generated by HarbourVest’s Emerging/Diverse team at a prior firm. Three of the four senior decision-makers from the prior firm now make up our Emerging/Diverse team.
While these funds continue to perform well, the need to support them remains strong. In 2019, venture capital investment in US-based, female-led teams totaled $3.3 billion, representing only 28% of the total capital invested across the entire US venture universe.⁷
HarbourVest is doing its part. Among our commitments to diverse-led funds in 2019, we invested with several GPs who have female-led funds, including Vista Equity Partners, which focuses on high-growth enterprise software, data, and technology-enabled businesses, and Blossom Capital, which backs European early-stage consumer and enterprise start-ups across multiple sectors. Below, René Yang Stewart and Rachel Arnold from Vista, and Ophelia Brown from Blossom offer their insights on their respective industry journeys.
7 PitchBook, “Women in Venture Capital”, February 2020
As of December 31, 2019. Female-led GPs are defined as those where at least one investment partner or senior team member is female. The companies listed above are intended for illustrative purposes only and represent a sample of all the female-led GP relationships in 2019. For the complete list of GP relationships please see the additional disclosures section on this page. While each may be an actual relationship in a HarbourVest portfolio, there is no guarantee they will be in a future portfolio.
Enterprise software, data, and technology-enabled
René Yang Stewart, Senior Managing Director (left) and
Rachel Arnold, Managing Director
“We’ve been fortunate to work for a founder and a firm that understands the value of diversity and is built on a foundation of meritocracy. This has been crucial not only to our own professional development and career opportunities as investors, but to advance and accelerate the growth and innovation within the hundreds of enterprise software companies in which we invest.”
European early-stage consumer, enterprise start-ups
Ophelia Brown Founder
“We all started somewhere. I spent my first three years on the trading floor of a well-known investment bank buying 20 coffees for my team at 5 a.m. It was 2008; I knew this was the first step on the ladder and where I wanted to reach. I was happy to be patient and play the long game. My simple advice to young female investors: Dare to be bold. When I set out to build Blossom, everyone in my life thought I was crazy – even my loved ones. That only spurred me more. In the venture capital world, the very best ideas all sound impossible at first.”
Annie Lamont, Co-Founder and Managing Partner
HarbourVest has had an investment relationship with Oak HC/FT, a mostly female-led firm focused on health care and financial technology, since 2014. One of Oak’s portfolio companies, Unite Us, is making a big impact in the field of community health care.
Founded in 2013, Unite Us builds coordinated care networks of health and human service providers to address all determinants of health. Originally created to serve veterans, Unite Us recognizes that medical care alone does not equate to wellness – people don’t live in hospitals, they live in communities. The company’s intuitive platform supports meaningful collaboration, community-wide care coordination, and secure, bi-directional information sharing, creating value for network partners with a focus on increasing access to services and improving health outcomes.
“Even though we’re early in our journey, we’ve already proven that by connecting and maintaining networks of clinical and social service providers– and tracking individual outcomes delivered in communities – we can help improve overall health and quality of life and reduce costs dramatically.”
Unite Us co-founders Taylor Justice (left) and Dan Brillman
Paying it Forward
by AAAIM-ing High
The Association of Asian-American Investment Managers (AAAIM), a non-profit group dedicated to the advancement of Asian Americans and Pacific Islanders in the field of investment management, was born in a California conference room in 2006. HarbourVest Managing Director Sanjiv Shah was in the room that day, and now serves as the co-chair of the board for AAAIM. In the following interview, Sanj talks about AAAIM’s mission, what makes it unique, and what the future may hold.