To create equal opportunities for women, we need to change not only who gets hired or funded, but who makes those decisions. As men dominate the world of venture capital, male-owned firms are four times more likely to report receiving venture capital funding than those owned by women, according to this 2020 report by the Women Entrepreneurship Knowledge Hub.
But progress is finally being made to move the needle for diversity and inclusion in VC and with it, greater focus for supporting women-led firms. If we’re serious about growing our economy, we need to get serious about tearing down the barriers for women’s participation.
We tackled the push for inclusion in the venture capital space on the latest Disruptors podcast, in recognition of International Women’s Day.
As we heard, there are reasons to be optimistic for a more equitable financing future in Canada. Here are a few:
1. Transparency and tracking are key to measurable progress
If women are to receive a larger share of the funding pool, more women VC partners are needed to write those cheques.
A recently published report called, “State of Diversity and Inclusion 2021” by the Canadian Venture Capital and Private Equity Association acts as a benchmark of diversity, equity and inclusion across the industry, in hopes of measuring lasting change. As many as 73 Canadian Venture Capital firms agreed to participate in the survey, signalling a step in the right direction for tracking and accountability.
“[What] surprised me about that effort was actually how willing VC firms were to engage and how different the conversation is now than it was three or five years ago,” said Laura McGee, Diversio’s founder and CEO who partnered with the CVCA for the report. Diversio uses artificial intelligence to analyze and improve diversity and inclusion in the workplace.
Having more women in leadership positions at VC firms is a better investment, too. According to a 2018 report by the Boston Consulting Group, businesses founded by women ultimately deliver higher revenue—more than twice as much per dollar invested—than those founded by men.
So why the disparity? Often women are building companies in industries that male investors may not truly understand, according to Michelle McBane, Managing Partner at StandUp Ventures. Women represented 19.4% of venture capital partners in 2021, compared to 11% in 2019. But there is still considerable room for improvement to get that figure closer to the 50% mark.
2. Peer support and mentorship matter
Put simply, success breeds success. As more women-led companies scale and grow, a trickle-down effect happens where they become role models for other aspiring women entrepreneurs, and share secrets and best practices for raising capital.
“The founders in our portfolio who’ve gone on to raise some substantial rounds of financing are now coming back and spending time with the younger generation of founders—the first time founders—and sharing their stories,” said McBane.
But men have a role to play in mentoring as well. “I think an equal lever is we need straight white men at venture capital firms to personally mentor and sponsor up-and-coming aspirational entrepreneurs,” said McGee, who recently went through the fundraising process herself and raised over $8 million.
3. There are more funding opportunities in place for women founders
With women struggling to receiving more financing than men, more than 83% of women-owned SMEs use personal sources of financing to start their businesses.
Luckily, as awareness on this issue grows, new funds and sources of capital that specifically invest in women-founded firms have surged both in Canada and the U.S.
Seed stage funds like StandUp have invested in 16 women-led, or co-led companies to date, and recently raised their second fund of $30 million. Since its inception in 2017, Canada has seen more women-focused investment groups come to fruition, including BDC’s Women in Technology Venture Fund, The51, Sandpiper Ventures, and angel investor group Backbone Angels.
“I think what we’ve proven is that community does matter and role models do matter,” said McBane.
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