International Women’s Day (IWD) is a good reminder of what’s been accomplished – and what hasn’t – in the 106 years since the first IWD event.
We see today as a moment to celebrate the incredible achievements of the founders in our portfolio, and to talk about why we think gender diversity is critical in our own team and in those we back.
Gender diversity is not only important for understanding a company’s consumers. It’s obviously ridiculous that just 4% of Fortune 500 CEOs are women, while women make the majority of household purchasing decisions. I’ve heard lots of female founders complain that male VCs say they have to go ask their wife about a company’s customer value proposition. But gender diversity is important for far more fundamental reasons. The broader the range of perspectives and life experiences on your team, the more nuanced and thoughtful decisions you can make.
That matters not only for product and marketing, but for communication, team-building, culture, negotiation, and a whole host of other areas where a diversity of perspectives matters. In an industry with a lot of press about the toxicity and ramifications of male-dominated culture, taking a different approach can be a huge competitive advantage. For example, I was impressed recently how Lindsay Holden, the CEO of Long Game, launched a substantial culture initiative involving their whole team to set up the company’s culture for success at about the same time that they launched their app. In my experience, companies don’t usually do this until they have a huge attrition problem after a few rounds of funding, and a proactive approach is well worth the investment when you consider that the going rate for engineers hired via acquisition is ~$500K-1M.
Another big advantage to diverse founding teams is that they have an easier time attracting a diverse group of employees. Adam Pisoni wrote about this earlier this year. I’ve found the same to be true for VC firms and portfolio companies. Numerous female founders say they would prefer to work with a firm that has women on its investment team. No matter how much a firm says they value women, a sea of white men in blue oxford shirts on a team page says otherwise. Why would a great founder want to take money from a firm that doesn’t choose to bring women into its own partnership?
The relative lack of women in the founder/VC ecosystem – 7% of VC partners and 10% of VC funding – is tough to change because this is a classic two-sided marketplace. It’s hard to attract and fund more female founders without more female VCs, and it’s harder for female VCs to break in when there are so few female founders. More and more, women-led VC firms like Female Founders Fund and the Helm Fund are emerging to invest exclusively in female founders in order to fill this gap.
In the interim, all VCs and founders need to proactively seek funding from, or seek to fund, teams that are gender diverse. Studies like First Round’s ten-year analysis, which shows that founding teams with at least one woman outperform those with only men by 63%, certainly help encourage that as profit-maximizing behavior.
Female founders in our portfolio have similarly outperformed the market, with a number raising big rounds this year despite underrepresentation of women-led firms in growth stage investments. Tala, headed by Shivani Siroya, just raised a $30M Series B, the largest by a female founder in “recent memory” according to Forbes. Science Exchange, led by Dr. Elzabeth Iorns and Dan Knox, followed closely behind with a $25M Series B. Outdoor Voices, helmed by Tyler Haney, raised a $13M Series B.
Today is a good day to celebrate these amazing founders, but it’s also an opportunity for our firm to look in the mirror along with our industry.
Half of our portfolio companies should have a female founder (more if you consider co-founding teams), and they don’t. That’s an error in portfolio construction that we need to fix.
If you have thoughts or ideas, please reach out.