The VC world is really small. While there are thousands of startups around at any point in time, there are only a few hundred active VC firms, which typically only have a handful of General Partners. People come in and out of the industry all the time, VC firms rise and fall, but for the most part, the core remains the same and many people are around for years (or decades). And it’s a pretty tight knit world: there’s all sort of ways for VCs to meet (panels, industry conferences), socialize (informal small group dinners) and work together (sitting on boards together, switching firms, occasionally personally investing in each other’s funds, etc.). As a result, the industry is characterized by a deep connective tissue, full of history, institutional memory, cliques and alliances. There’s this interesting “coopetition” dynamic where people sometimes compete, sometimes collaborate, but overall everyone tends to know each other well. As a result, information often travels easily and quickly, although not necessarily reliably. Facts can be checked, and reputations matter immensely. For entrepreneurs and VCs alike, there are some real benefits in handling difficult situations elegantly, fairly and transparently, as it’s all a long term game in a small echo chamber.
Not exactly a recipe for diversity.