Why venture capital firms need more women partners and entrepreneurs

Globe and Mail | | Sep 12, 2019

lauren robinson - Why venture capital firms need more women partners and entrepreneursLauren Robinson is general partner at Highline BETA and executive director at Female Funders

For decades the research has been clear: businesses benefit from gender diversity. Women are starting businesses at a faster rate than ever before, and leadership teams that include women provide better financial returns for investors.

Investing in women is good for business. But for women founders looking to launch and scale successful businesses, access to capital remains a major barrier.

There is consistent data showing that deal flow is often sourced from pre-existing networks. This explains why women entrepreneurs have a higher likelihood of closing an investment when a female investor is involved: venture firms are twice as likely to invest in women-led startups if they have at least one female partner on their team, and women angel investors place greater importance on the gender of the founders they are considering investing in. Women entrepreneurs are more likely to access capital when there are women making investment decisions. This is critical when funding for female founders is stalled at 2.2 per cent of the total invested in the United States. We can do better.

Why venture capital needs more women

Entrepreneurs, emerging technology and innovation are driving our future. It’s time to reconsider the role of private capital and its influence on the innovation funding. Among venture capitalists and angel investors, the numbers remain embarrassingly skewed. Across North America, only 13.5 per cent of partner roles at VC firms are held by women. Without women and more diverse perspectives at the table, funds miss out on deal flow and expertise, and female founders struggle to access capital. VC firms, angel investors, policy-makers and corporations all have a role to play in ensuring this change does not take another decade.

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Specifically, corporate venture capital (CVC) groups are becoming increasingly involved in early-stage funding. According to CB Insights, global CVC deals have tripled in the past five years and CVC participation in seed-stage and series A rounds is rapidly rising. Corporations are also increasingly investing in independent venture capital funds as limited partner (LP) investors.

In a report released in May by Female Funders and Highline Beta, we found that there is little gender diversity among the top CVC decision makers. Using firm websites and data sources such as LinkedIn and Crunchbase, we gathered the title and gender of nearly 4,500 team members of more than 300 venture capital firms across North America. While women hold nearly half (47.4 per cent) of junior-level analyst roles in CVC, the representation of women drops off as seniority increases. At the top, only 15.9 per cent of CVC leaders are women.

See:  Meet The Female Entrepreneur Who Raised Over $3 Million From Crowdfunding, Not VCs

Looking to today’s high-performing women executives is the key to changing numbers at the top: 82.6 per cent of women who hold executive or partner roles in CVC groups today come from within the company itself or a direct competitor. By providing female executives with opportunities to develop the skills and knowledge needed to evaluate and invest in startups, corporations can open doors for more women to pursue leadership roles in CVC.

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