The advice gap: Why VCs don’t practice what they preach

Walk into any pitch meeting, attend any LP conference, or read any VC blog, and you’ll be handed the same well-worn gospel: build diverse teams, move fast, be transparent, hire for culture, flatten hierarchies, and always be learning. This is the catechism of the modern venture capitalist, wisdom dispensed freely, with conviction, to the founders who come hat-in-hand seeking capital.

But look at how venture capital firms actually run themselves, and something curious emerges. The gap between the advice VCs give and the organisations they operate is not a rounding error. It is structural, persistent, and, frankly, a little embarrassing for an industry that prides itself on pattern recognition.

The team building contradiction

Nothing is more sacred in VC doctrine than the team. “We invest in people, not ideas.” “Team is everything at the early stage.” Every investor says some variation of this. The data backs it up too, diverse founding teams with more than one gender or ethnicity have been shown to generate returns up to 30 per cent higher in multiples on invested capital compared to homogenous ones. Ethnically diverse founders also enjoy an average exit multiple roughly 30 per cent higher than solely white founding teams.

VCs know this. They cite it often. But here is where the cognitive dissonance begins.

Black investors make up just four per cent of venture capitalists in the United States, with only three per cent holding key decision-making roles. Black women comprise a mere one per cent of the US venture community, this in a country where Black Americans represent about 14 per cent of the population.

Only three per cent of VC partners in the US are Hispanic or Latinx, and just 14 per cent of partners are women.

And it isn’t just a US phenomenon. In the UK, 78 per cent of senior VC roles are held by men. In 2023, startups with all-women founding teams raised just three per cent of European investment dollars.

In 2024, all-female founder teams received less than 1 per cent of capital in Europe.

So while VCs tell founders that diverse teams build better companies, and the research agrees, the firms making those calls are themselves overwhelmingly homogeneous. There is a striking contradiction here: venture capital thrives on new ideas, yet many VC teams lack the very diversity they know drives innovation.

There’s even a term for it now: the “mirrortocracy.” This pattern tends to fund entrepreneurs who resemble the investors themselves, which often means white men from prestigious universities. This similarity bias restricts the variety of innovations entering the market, as ideas outside the familiar comfort zone of investors get overlooked or undervalued.

Harvard Business School professor Paul Gompers, one of the world’s leading researchers on VC dynamics, has studied this extensively. His research found that VC firms which increased the proportion of female partner hires by 10 per cent saw, on average, a 1.5 per cent increase in fund returns annually and 9.7 per cent more profitable exits. The financial incentive to diversify internally is unambiguous. And yet, little has changed.

‘Move fast’: Unless you’re the one moving

Another staple of VC advice is operational agility. Founders are told to ship fast, iterate quickly, and ruthlessly cut what isn’t working. The VC mindset, as Harvard Business Review described it, is characterised by “the individual over the group, disagreement over consensus, exceptions over dogma, and agility over bureaucracy.”

Inspiring stuff. Now consider what’s actually happening inside large VC firms.

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Reasons for the wave of senior partner departures from large firms include a perception that decision-making at many large firms is slow, and that funds are focused on increasing the pools of money they manage rather than working with promising founders. One investor quoted by the outlet described a cohort of top VCs who are “now deciding that they don’t want to be asset managers… they don’t want to deal with the bureaucracy or corporate structures.”

This isn’t a fringe view. What began as a trickle of departures from heavyweight VC funds about a year ago accelerated into a stream throughout 2024 and into 2025, with senior partners quitting what were long considered lifetime positions. The irony is rich: the same firms whose partners lecture founders about avoiding bureaucracy have become so bureaucratic that their own talent is fleeing.

At large VC firms, decision-making power is concentrated at the top. Junior investors often spend years sourcing deals and supporting due diligence without ever leading an investment, with real influence over which startups get funded remaining with senior partners. That is not the flat, empowered, move-fast culture they preach to founders.

The transparency problem

VCs consistently advise founders to be transparent with their boards, investors, and even the public. Radical candour, open-book management, honest retrospectives, these are standard talking points in any VC-founder conversation.

Yet the VC industry has long been defined by its opacity. VC firms are notoriously secretive. Research examining court rulings that forced some large public limited partners to disclose return information found that, in response, the most successful VC firms dropped those public LPs and replaced them with private and foreign LPs not subject to disclosure requirements.

Historically, many firms have held their cards close to their vests, and lots of VC websites remain sparse. The advice they give to founders, be open, share your numbers, build trust through transparency, is advice many are unwilling to apply to their own operations or fund performance.

California has had to step in legislatively. In 2023, California enacted Senate Bill 54 to promote transparency in venture capital funding by requiring firms with a California nexus to report demographic data on the founding teams of their portfolio companies. In other words, the state had to mandate the kind of accountability that VCs freely recommend to their portfolio companies.

‘Hire for culture’: But what culture, exactly?

Culture fit is a phrase VCs adore deploying in founder conversations. Build a strong culture early. Hire people who embody your values. Get the team chemistry right. All valid advice.

But the culture within many VC partnerships is one that outsiders rarely get to scrutinise. VC firms went on a premature hiring spree during the boom years and found themselves bloated with too many investors, in some cases resulting in underqualified investors guiding founders. The very excess and poor hiring discipline that VCs warn founders against played out at the firms themselves.

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Harvard Business School’s Gompers recommends that firms looking to build diversity must first become aware of their own biases. “Most people aren’t bad people, but we have these internal biases to think that people who look like us are smart and capable,” he says. Creating a diverse company has to start from day one. “Some firms say, ‘I’m worried about survival, I’ll worry about diversity later.’ But it’s really hard to start from a frat boy startup culture and move to one that is open and inclusive.”

That observation, made about startups, applies with equal force to the VC firms themselves.

Why does this gap persist?

Several structural forces entrench the inconsistency.

Accountability asymmetry. Founders are accountable to their VCs on a quarterly basis, burn rates, headcount, KPIs, board approvals. VC firms are accountable to their LPs on a much looser cadence, and the internal workings of a partnership are almost never scrutinised with the same rigour that founders face. Almost all VC firms do not have diverse or inclusive teams internally, so their ability to directly help their portfolio companies with these challenges is undermined.

The LP concentration problem. The top 30 funds secured 75 per cent of the year’s total VC fundraising in 2024, with just nine funds raising 46 per cent. Andreessen Horowitz alone captured roughly 10 per cent of the entire year’s capital. When capital concentrates so heavily in a small number of incumbents, the competitive pressure to reform internal practices is minimal. Established firms don’t need to change to attract LP capital.

Pattern matching rewarded, not penalised. Warm introductions to VCs are the most likely route to getting funded, and some VCs specifically state they only take meetings through warm introductions. This self-reinforcing network means the same demographics cycle through, and nobody at the top of the system has a strong incentive to interrupt it.

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What should change

The good news is that this gap is increasingly acknowledged, and some firms are beginning to act.

Project Include has argued that VC firms should take the lead in tech diversity and inclusion, holding their portfolio companies accountable by adding comprehensive diversity metrics to their quarterly reporting, and implementing the same recommendations in their own firms. Taking the lead to make their teams diverse and inclusive would give them the credibility and experience to be better advisers to tech startups.

The NVCA-Deloitte Human Capital Survey has called for transparent baseline measurement across the industry. “Transparency is a powerful force for change, and we now have a clear benchmark by which we can measure progress,” the NVCA’s Bobby Franklin noted.

The market may also correct some of this naturally. Newer “next gen” VC firms that eliminate bureaucratic layers often report higher portfolio company satisfaction with responsiveness compared to traditional fund relationships. As founders become more sophisticated about the kind of investor they want on their cap table, the demand for VCs who actually practise what they preach will grow.

The bottom line

There is nothing inherently wrong with venture capitalists giving founders advice about team building, culture, speed, and transparency. Much of that advice is genuinely good. The problem is the credibility gap that opens up when the advice-giver doesn’t take their own medicine.

Founders are expected to operate under intense scrutiny and perform against explicit metrics. They face board pressure, investor expectations, and public accountability. VC firms, structurally insulated from similar scrutiny, have had the luxury of preaching without practising.

That luxury is eroding. Between LP pressure, regulatory mandates, departing senior talent, and founders who are increasingly savvy about evaluating their investors, the pressure to close the advice gap is building.

The best founders now do reference checks on their VCs. Perhaps it’s time for the industry to start doing the same on itself.

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