Experienced CEO and founder of How Women Lead, venture capitalist and sought-after speaker on female entrepreneurship.
Historically, venture capital has been dominated by men in Silicon Valley, who may have fueled massive innovation but who also fueled questionable cultures and some business practices that most of us wouldn’t want to replicate. Despite the public stories of harassment, discrimination and biased decision-making, some courageous women have broken in and learned the trade. By my count, today we have more than 425 women-run venture firms with the ability to dramatically shift the innovations, leaders, jobs and corporate cultures of the future, by investing in and supporting companies and ideas that support women around the world. Yet, because many of these firms can’t find investors in their ventures, they can’t scale funding fast enough to sustain a reasonable operation.
In my experience, most women-run venture firms start with a $10 million fund. The industry standard 2% management fee yields only $200,000 to run all operations. As such, most general partners running these firms can’t take a salary. So, while we technically have this foundation of women-led venture firms predisposed to invest in women-run startups, most of these firms don’t have the size to thrive long-term.
At the same time, women control a third of all wealth in the United States, nearly $10 trillion and that’s projected to increase to $30 trillion by 2030. For the first time, tens of thousands of U.S. women have access to and control over enormous amounts of wealth that are not under the control of their male family members. And a large percentage of these women have at least 30 years of executive work experience. Now, we need to connect the dots.
Malcolm Gladwell, author of The Tipping Point, explains that “the tipping point is that magic moment when an idea, trend, or social behavior crosses a threshold, tips, and spreads like wildfire.” I believe we are now at the tipping point where women have access to and control of sizable amounts of capital, and the foundational infrastructure exists to deploy that capital into companies focused on women’s concerns across health, technology, aging, sustainability and equality. Today is the beginning of an enormous opportunity for women to make strategic investment plays that accelerate wealth and influence positive change.
How To Bring 10,000 More Women Into Venture Capital
1. Invite and introduce women to venture capital.
Before we move, we should first know where we want to go. I propose we set an ambitious yet attainable goal of bringing 10,000 more women into venture capital.
According to Pitchbook/NVCA’s 2021 report, a mere 19% of investment partners at venture firms are women. Given the fact that there are more than 13.6 million accredited investor households in the U.S., we can assume that there are hundreds of thousands of women accredited investors who don’t know they qualify and who simply need an introduction first to venture capital as a sound impact strategy and second to the VC firms that can invest their money to create the impact they’d like to see in the world. If we invite a minimum of 10,000 qualified women to invest in venture capital for the first time, the percentage of women venture investors could more than double to 36%.
The impact of 10,000 women entering venture capital could be dramatic and system-changing—it could bring approximately $1 billion into the venture capital ecosystem and $1 billion invested in vetted pre-seed, seed and series A-stage startups and could help at least 1,000 companies scale and bring their market-changing, world-improving ideas to fruition.
2. Remove barriers to investing.
We should also recognize that we have a responsibility to uplift women by leveraging our networks to open doors of opportunity that lead to this new table. This includes engaging other accredited investors and providing women with the tools and resources they need to make sound investment decisions.
According to research commissioned by my organization, accredited investors, both male and female, face several obstacles to investment:
• Women don’t feel “invited in,” and the environment feels very uncomfortable or even hostile for women.
• Venture firms use language that is intimidating, making women question whether they need extensive expertise.
• The high investment requirement by traditional venture funds excludes most accredited investors.
• Most women do not have time to do due diligence.
These barriers are not insurmountable. To start, we can raise the number of accredited investors that are allowed to invest in micro funds (from 100 to 250 for funds less than $10 million), therefore allowing more investors to join a fund. This would lower the investment requirement, thereby bringing more women to the table.
We can also demystify venture investing and make it more welcoming by building firms where women see women like themselves leading. And our firms can be designed to be more accessible for first-time investors, especially busy executive women. With this goal in mind, firms can:
• Limit the number of steps in the investment process.
• Offer a low minimum so it’s easier for new investors to say yes.
• Reduce the use of industry jargon when explaining the investment process.
• Create opportunities for women to invest according to their values.
All of this can create an on-ramp for first-time investors to build confidence and begin to play bigger in venture capital.
3. Invest in women founders for a greater return.
Investing in women-founded and women-run companies results in higher returns. According to BCG, women-led startups generate 10% more cumulative revenue over a five-year period than other startups.
The critical problems of the world require investments in women-run businesses. Women identify, approach and solve issues from their unique perspective, and there’s an opportunity to meet the needs of half the world’s population, which have largely gone unaddressed. We need fresh viewpoints to make the positive changes that the world needs, but these insights can only happen if the companies leading the charge get the funding they require to scale and bring big ideas to market.
The tipping point is now. Will you be a spark that helps the wildfire spread?
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