5 Ways to Encourage More Women Into Careers in Venture Capital
It’s time to tear open the seemingly impenetrable ‘old boys’ network
It’s no secret that founders seek out investors who value diversity and recognize the success that comes from having diverse teams. However, the question of how to make this a reality remains unanswered.
What can we do to attract more women investors, and to change the types of startups, products, and services that are funded?
Given that venture capital is one of the most sought-after professions for top business school graduates today, it is imperative that we change the facts and figures. As far as numbers go, they aren’t pretty.
Adding to the lack of female representation in the industry, research also shows that only 8% of the investment professionals at the top 25 VC firms are women.
As a white male investor, I’d like to know what’s behind this discrepancy, and just how I can encourage and support more women to pursue careers in venture capital.
While much remains unsure, I’m certain of one thing: I have to step aside and pay attention to the women who are navigating the complex world of investing. So I resolved to do just that, beginning by providing a platform for those who have experienced these difficulties firsthand to voice their concerns.
Among other things, I came to the realization that the key to unlocking the door of change lies behind a few simple steps.
1. Open the pathway to people of different backgrounds and experiences
You might think that a career in venture capital has to be driven by a background in finance. But that’s not necessarily true.
As Sara Lindquist, an Associate at FUSE, an early-stage business software venture capital firm in Seattle, Washington, has found, non-traditional pathways can also lead to successful outcomes.
Without any prior finance expertise, she managed to break traditional barriers and enter the world of venture capital. Despite this, she had an advantage others did not have—a diverse background, essential for entering the venture capital world. As Lindquist says,
“The industry is not limited to people with finance backgrounds; everyone has a way they can contribute.”
While Lindquist didn’t major in finance, she did study business development—a critical element of the many issues venture capitalists face on a daily basis.
“In situations like mine, remember to shift your focus. Take time to reflect upon your own strengths. Ask yourself: how can you bring your distinctive set of experiences and unique perspective to different companies?”
After all, discovering your strengths is the key to opening up a world of possibilities. In Lindquist’s experience, this approach has brought her nothing but success in a variety of fields, including music and sports. A skilled individual, she brings a unique perspective and diverse skill set to the FUSE team.
So, while you might think finance is the most valuable and possibly the only pathway to becoming a venture capitalist, I urge you to reconsider and think about Lindquist’s story. In the end, it seems that experience in multiple aspects of the business ultimately yields the unique perspective companies are looking for in their candidates.
2. Promote the unique leadership that women bring to the table
According to a study published in the Harvard Business Review, VC firms with 10% more female investing partners make more successful investments at the portfolio company level, have 1.5% higher fund returns and see 9.7% more profitable exits.
Wanda Hunchak, the Executive Vice-President at Westcap Mgt Ltd, leading venture capital and private equity fund manager in Saskatoon, Saskatchewan is living proof. She joined the investment industry with a history of working within the chartered banking system, managing client service and retail investment teams, as well as writing commercial credit.
“Investments at the early stage are less fact and diligence based and more of an intuitive call about the entrepreneur’s skills,” explains Hunchak.
As Hunchak puts it, the key to making women feel at ease in the venture capital field is to provide them with access to capital, mentorship, and industry networks. With the help of their leadership positions, women can locate and develop underserved markets and areas that might otherwise go unnoticed, and capture lost profit.
3. Expand networks and seek out talents different than your own
In recent years, several institutional managers have launched diversity initiatives to invest in women and diverse managers. With more diversity and women in senior roles, there is a greater likelihood of champions who are willing to go up to bat for other women to move up the ladder.
Nisha Dua is a General Partner at BBG Ventures, a New York-based seed-stage venture capital fund that invests in women-led consumer tech startups. Before VC, her career has seen her in an array of roles as a mergers and acquisitions lawyer, going into management consulting, and creating #BUILTBYGIRLS, a platform that matches young women interested in tech with professionals in the tech industry. “We have to rebuild all of the frameworks,” Dua advises. “We have to eliminate the hidden biases and commit to expanding our networks, getting to know different people, and becoming warm connectors.”
As Lindquist adds, “We all have unique networks, personal relationships, market knowledge, and talents, which contribute to the fabric of a VC ecosystem.” Bringing diversity into the VC industry will change the fabric of networks and create opportunities for more women to enter investment careers.
4. Provide mentorship and sponsorship to women interested in pursuing VC
As an investor, Hunchak recognizes that there is a lot of work going on behind the scenes in support organizations, but despite all of that, female founders still don’t consider venture capital funding as much. While they often get loans or investments from their family and friends, Hunchak believes it’s important that women understand the fundraising prices, and how to build the relationships that will open those doors for them.
“When women don’t see other women making investment decisions, it’s difficult to consider VC funding — let alone being in the VC role.”
As seniority increases, women representation drops, so proactively creating opportunities for mentorship, sponsorship, and planning for career advancement of corporate venture professionals will prove to be incredibly beneficial in the long term.
5. Out with the old, in with the new
As a whole, VC must actively expand the ranks of women in leadership roles as well as retain their talent within firms that foster a culture shift.
For Lindquist, she’s had a warm welcome coming into the VC industry.
“The FUSE team has such high integrity, intelligence, and camaraderie. We’re one team — a family — and that has not only contributed to my positive personal experience thus far, but it will make a big difference in how we execute,” she explains.
But that isn’t always the case, as Nisha has observed. “In institutional firms, it can be hard to shift a paradigm from inside an existing institution. Starting our own was easier than trying to drive change within an existing firm.”
Investors who are ingrained in the VC space need to tear open the seemingly impenetrable “old boys’ network.” By acknowledging this necessity for change, we are expanding our pool of potential collaborators and improving financial performance.
Venture capital may be a closed network, and success is often dependent on the contacts you have, but we can take the steps required to expand our networks and break out of our existing circles. Encouraging more women to get their foot in the door is one thing, but we also need to provide the resources required to retain their talents and see them step into leadership positions.
We all know the value of seeing women in venture capital roles, so let’s push for a cultural shift and support, mentor, and build those necessary relationships to get them there.
Neal Dempsey is the Managing General Partner of Bay Partners, one of the longest-running venture capital firms in Silicon Valley with over $2.5 Billion in successful returns. Forbes has named Neal as one of the top 100 venture capitalists in the world. Neal also provides angel investment for entrepreneurs “in unexpected places” around the globe.
