The State of Women in Venture (Part 3)

Earlier this week, we gathered four inspiring women founders and investors to share their views on the state of women in venture and where they see the industry headed.

The speakers included women who have dedicated their careers to supporting female founders and funders: All Raise CEO Pam Kostka; Women 2.o founder Kate Brodock; and Women Who Tech founder Allyson Kapin (Brodock and Kapin recently launched a new Rolling Fund together to invest in women-led startups). Fintech executive and angel investor Sima Gandhi also joined the conversation, sharing her experiences cracking the “boys’ clubs” of fintech and venture capital.

While sharing stark assessments of the lack of progress toward diversifying in the venture industry, the panelists also offered a hopeful message to entrepreneurs and investors in the audience about their power to change things.

Change the ecosystem

As I wrote in Part 1 and Part 2 of this series, the venture industry has a long way to go before achieving anything close to gender parity. And, the picture is far bleaker for women of color. Given all the talk over the past decade, the panelists agreed, we’ve seen painstakingly little progress.

No one solution will fix the problem, the women said. Rather, change is needed across the board.

Kostka: “98% of the wealth that happened for the ten largest IPOs in the last decade went to white men. If we’re going to break that cycle, we need to seed a new flywheel across the board, as advisors, as board members, as founders, and as funders.”

Kapin: “One of the big reasons why 2.7% of funding has only gone to women-led startups is that traditionally VC has been a boys’ club closed to people who don’t look like or operate like them. To address this, we need to focus on building an ecosystem that supports women investors.”

Start upstream

While everyone in the ecosystem plays a role, traditional VC funds have a particular responsibility to bring about change, through their investments and the way they hire — and, importantly, retain — diverse talent.

Kostka noted the percentage of women decision-makers at VC firms grew from 9% to 12% since All Raise started five years ago. The organization hopes to help grow that number to 18% by 2028, she said.

Kostka: “It’s not just hiring a woman or a woman of color. You really need to think about creating a culture of inclusivity in the organization. You need to be intentional about how you’re hiring people into your firms and how you’re keeping them at the table. As you’re looking at your investments, you need to be intentional about widening your network and making efforts to reach out to female founders and people of color who are entrepreneurial and making sure that you’re getting to know them and making the investments in them.”

Brodock: “85% of the venture industry looks the same right now. A serious mind shift needs to happen with the group of people who still own the firms and have most of the GP positions.” Such a shift will require VC firms to do the “hard, often emotional work” of examining their practices and adjusting them to match their rhetoric, Brodock said.

Such a shift will require VC firms to do the “hard, often emotional work” of examining their practices and adjusting them to match their rhetoric, Brodock said.

Founders’ role

Founders, too, carry responsibility, something the panelists agreed is not discussed enough.

Men and women who start companies and seek venture funding have more power than they may realize to bring about the change they want.

Kostka: “It’s critically important that founders have a voice, and make decisions based on who they’re doing business with, including their investors. The investment pipeline is the lifeblood of venture. If you make a change to that investment pipeline, we will see change at the upper end of venture as well as the emerging side.”

Gandhi: “Culture starts with the CEO. If you’re a founder and want to build the best company you can, then you want a woman on your cap table and your board and in your executive leadership roles. That’s not lip service; it’s a fact. The data is starting to show that story as well.”

The women pointed to “opportunistic forces” that help founders make the case for diversity in the partners they choose, including a growing acceptance that diverse teams perform better than homogenous ones and a broad public dialogue about societal equity.

The next Alphabet

There was a recognition among the panelists that the economic downturn creates an even stronger case for diversifying the ranks of founders and funders.

Kapin: “We need more allies stepping up and being LPs and investing in emerging funds like ours. It needs to change right now if we are truly going to change the face of VC and fund the next big startups that are going to be emerging out of this pandemic.”*

Kostka: “With focus, we can change how this next generation of companies are founded and funded. The next Google, Facebook, and Alphabet are all waiting to be born right now. We want to grab them while they’re early and make sure that they're built with diversity and inclusivity at their core.”

In some ways, the environment is getting more challenging for women founders and investors, as opportunities to meet and pitch investors move online, and investors rely even more on their referral networks, which skew heavily white and male. An All Raise study found women founders face significantly less runway than their male counterparts.

At the same time, venture funds still have plenty of capital to deploy, especially in emerging opportunities.

There’s also an unprecedented number of resources for women to tap into, from NfX’s FAST Seed program, which funds startups within nine days of submission; to funds like the W Fund that invest in women; to AngelList’s new Rolling Funds, which provide new levels of flexibility for investors to learn about and join deals; to scout programs and online communities such as All Raise that work to give women the know-how and network to get started.

Demystifying investing

Gandhi shared her experience breaking into angel investing, which she said initially carried a high amount of mystique. She recalled asking an investor friend how she gets into deals.

Gandhi: “I said, ‘This is a really dumb question, but how do you become an angel investor?’ It felt like a clique or something you had to be picked to be part of. Her answer really stumped me: ‘Well, I just tell an investor that I want to invest.’ It really struck me then that being an angel investor is also about just raising your hand and putting money or time against a company that you believe in.”

While everyone’s path may look different, the panelists agreed these are the crucial first steps toward landing a deal:

• First, understand what value you can bring to startups based on your professional experience and any knowledge you have about a specific industry that interests you.
• Second, let people know you want to invest by approaching investors and founders. If you don’t have money to invest, offer “sweat equity” until you do.
• Third, work your network. Persistence pays off.

Just as investors and founders must change their mindset to bring about meaningful change, women also need to adjust their mentality to succeed, Gandhi said.

“This is all very accessible to you,” she told the women in the audience. “You are wanted. You are desired.”

Watch the full recording here.