A Picture of Both Opportunity and Urgency
A review of The Untapped Potential of Women-led Funds
A fresh report by Women in VC, The Untapped Potential of Women-led Funds, is hot off the press, making it the newest reinforcement to a growing movement of increasing diversity in venture capital. The report, published today, paints a poignant, data-driven picture of the current state of gender equality and diversity in venture funding and urges that we are now at a critical juncture for enacting change in this space.
The report’s motivating question is one that also keeps me up at night — How come the funding stats for female founders have not been improved by the influx of diversity and gender equity initiatives that now proliferate the venture capital world?
The answer? We do not have enough female fund managers.
Untapped Potential’s central argument is simple and resonates deeply with the perspective I’ve focused my own digital work and personal investment portfolio on: innovation drives wealth and prosperity, and making sure there are enough females with check-writing ability in venture is critical to closing the wealth gap and reaching a whole diversity of currently underrepresented markets. In the words of the authors, “The VC industry overwhelmingly invests in founders, teams, and products that look like them. That leaves huge market opportunities on the table, with millions of people who would be willing to spend money on the things they need remaining largely overlooked.”
Simply put, putting money into the hands of women presents massive payoffs for both equity and economics.
The report also communicates a sobering warning: failing to take action now risks “losing all the progress that women-led venture firms have achieved over the last five years.” At the current rate of progress, female fund managers would achieve equal status to their male counterparts in an estimated 200 years. If that jaw-dropping figure alone is not enough to incite urgency in action, I’m not sure what is.
The report calls upon the venture community to approach this challenge on a deep and committed level, which will require “confronting challenges attached to unconscious beliefs, attitudes, and stereotypes” as a first step. I was glad to read this in such clear language, as this is aligned with the work I have written on at length: how important the steps of acknowledgment, acceptance, and growth are in affecting sustainable and lasting change in the venture capital industry (see: Untangling Implicit Bias in Venture).
Beyond outlining the current debates and engaging critically in the conversation, the report’s authors provide actionable steps and a clear vision for a path forward. Some powerful takeaways from these include systemic approaches to changing the landscape through recruiting sources, increasing awareness and transparency, and connecting to the network and resources built by the Women in VC movement.
Of all the telling figures and facts presented in this report, the ones that strike me the most are these:
Although only 5.6% of all US based VC firms are women-led, there is more diversity in women-led funds and women partners than anywhere else in the industry.
33% of all founding female partners are non-white, vs 21% of all VC partners in the US.
38% of all women-owned firms are founded by a woman of color. Yet this represents only 2.1% of all VC firms in the US.
These numbers speak to the fact that investment in females has a greater propensity to propagate greater ethnic diversity as well. This is important because the VC world is not only overwhelmingly male, it is also overwhelmingly white. It is therefore currently catering only to the specific needs of a fraction of this country’s diverse population. Talk about an overlooked opportunity!
I feel hope and I also feel a great sense of urgency. We have moved to a stage beyond doubt, where the data tells a story of overlooked opportunity that is so compelling and clear it is difficult to imagine it being ignored any longer. The data consistently tells us that there are measurable, positive performance and economic outcomes from hiring and investing in diverse teams, yet for some reason, we are still discussing a lack of diversity. Again and again. Why? Because without those controlling the industry taking actionable steps to change it, this will always be an uphill battle for underrepresented groups.
This needs to be a collaborative effort, so together, let’s capitalize on this opportunity because I don’t have 200 years to wait.
Written and researched in collaboration with Gabi Skoff.
