And as a connector and consultant working in the gender-smart investing space, I hear from people wanting to launch new funds – or bring a gender lens to an existing fund – almost every week.
But corporate VCs, which represent as much as two-thirds of total global venture capital are falling behind. Of the more than 1,000 companies deploying corporate venture capital, only 12 to 15 have an articulated gender strategy.
This matters for women entrepreneurs and women-impact businesses, who miss out on accessing the significant pool of capital, expertise and support that corporate VCs represent.
But it also matters for the funds themselves, which miss out on the economic opportunity, innovation and insight that women and other underestimated entrepreneurs provide.
In some industries, the benefits of bringing a gender lens to their investment decisions are obvious.
For consumer goods companies like Unilever and P&G, for whom women drive the lion’s share of purchases, deliberately seeking out women founders can help identify vital market pain points and opportunities. In healthcare and tech, taking gender into account when evaluating potential investments can help to make sure that the products and businesses you’re investing in cater to every type of body. (Think the early iterations of health-tracking apps by companies like Apple and Nike that did not include features for tracking female-specific health needs, or the crash test dummies based on “average” male bodies that result in higher rates of death and injury for women involved in car accidents.)
Becoming gender-smart
But even in industries that are less obviously woman-focused, there is a benefit to paying attention to gender. Seemingly gender-neutral arenas like B2B, food and the environment can use a gender lens to identify innovations and market opportunities that might be missed using a legacy investment strategy.
In addition to accessing new innovations and perspectives, traditionally male-dominated fields like aerospace engineering and big energy can use a gender-smart investment strategy to help balance their internal teams and use their corporate investments to identify talented women-led and gender-balanced teams they might want to hire. We all know diverse teams perform better and venture capital is one of the places where increasing diversity can reap dividends.
Adopting a gender-smart investment strategy doesn’t mean you have to set an immediate goal of a 50-50 gender balance in your company’s investments. That won’t be realistic for every industry. Instead, the relevant benchmark should be for your investments to reflect the proportion of women working and innovating in the industry – and go higher. In some industries, that might mean shooting for women to comprise a full 50% (or beyond) of your investments. In others, it might mean moving from 10% to 20%, or from 2% to 10%.
You might be wondering why you need to make gender an explicit consideration to achieve all of this rather than just look for the best people and companies out there? Why not just proceed with business as usual, and trust that the talented women will rise to the top?
But it’s clear that business as usual isn’t working. Right now, only 3% of all VC funding goes to woman-led companies, and only 0.2% to companies led by women of colour. That’s a lot of undercapitalised women entrepreneurs. And that’s a lot of underleveraged ideas and innovation for smart investors to capitalise on.
So, what would adopting a gender strategy look like in practice?
It might mean earmarking a portion of your capital specifically for women entrepreneurs, like Microsoft’s M12 Venture Fund or SAP.io’s No Boundaries, or making gender a factor of consideration, like Salesforce’s Impact Fund or Intel’s Diversity Initiative. It might mean identifying the implicit biases in your fund management team – most people’s tendency to favour those who resemble them in terms of gender, race, family structure or where they went to school – and examining how those biases play out in your sourcing and negotiations.
It will mean looking harder and through different channels than the ones you are used to using for identifying for potential investments: looking explicitly in places where there are pools of women entrepreneurs, getting involved in accelerators that are gender-forward, or backing new initiatives. It will mean using gender as a lens through which to evaluate potential investments’ customer base, market opportunity and supply chains. And it will mean looking at who occupies decision-making roles in your own fund. A May report from Female Funders and Highline Beta found that while women occupy 47.4% of junior analyst roles at VC funds, they hold only 15.9% of leadership positions. Some savvy corporates are already picking up on the opportunity. When Unilever bought Sundial Brands in 2017, a family-run business focused on hair and beauty products for black women, they swiftly followed the acquisition by creating the New Voices Fund, a new venture fund committed to investing $100 million in women entrepreneurs of colour. It wasn’t just the right thing to do, it was the smart thing to do: a way to demonstrate commitment to the market while gaining access to innovation and talent at the time. In 2018, woman-focused dating app Bumble, a female-founded unicorn, leveraged its success to create Bumble Fund, which invests in early stage startups run by women.
And there is a lot more opportunity to be found. Corporate VC may not be right for every entrepreneur or business, but it is one huge part of the market that is currently missing the boat on gender-smart opportunity.
