Tessa Wanders’ career has spanned roles as founder, angel investor and venture capital (VC) investor. Wanders has launched two successful start-ups, was part of the FJ Labs founding team and is currently an investment manager at VNV Global. Her career achievements are impressive by anyone’s standards, but particularly as she is, more often than not, the only woman in the room.
Wanders has always refused to acknowledge herself as a ‘token woman’, even if that has been the case on some occasions. If fact, she is optimistic about gender diversity in tech investing and has seen some positive changes over her decade-long career. “People have become much more aware of their biases and women have also become more supportive of one another too,” she says.
The single women
There is still much more to be done, however. Deloitte’s 2021 VC Human Capital report found that although female employees comprised 16% of investment partners in 2020 (up from 14% in 2018 and 11% in 2016), among the companies that did report having female investment partners, 75% reported that they only had a single female investment partner.
This comes despite the business case for diversity in technology investing being stronger than ever. Studies show that diverse companies perform better, hire better talent, have more engaged employees and retain workers better than companies that do not have a focus on diversity and inclusion.
Deloitte’s report found that companies that increased their proportion of female partner hires by 10% had, on average, an increase of 1.5% in overall fund returns each year. So why are women still under-represented in VC investing and as founders of their own companies?
Deloitte reported that, in the investment management sector, Goldman Sachs analysis of investment returns found that all-female and mixed-gender portfolio management teams at US large-cap equity funds outperformed all-male teams, even after adjusting for risk.
Professor Luisa Alemany, academic director of London Business School's Institute of Entrepreneurship and Private Capital, works closely with the Newton Venture Program, which aims to increase diversity among investors by recruiting 50% of its fellows from under-represented groups. The goal is that greater diversity in the VC industry is likely to lead to a more diverse group of founders receiving venture funding, she says.
Although US venture capital investments have quadrupled over the past ten years, there has not been a similar increase in the proportion of VC funding going to start-ups with women or racial and ethnic minority founders. In 2019, 2.8% of funding went to women-led start-ups, but that figure fell to 2.3% in 2020, according to Crunchbase, against a backdrop of global VC funding rising 4% from 2019, to $300bn.
Women still find it harder to get funding, according to Alemany. “Studies have found that unconscious biases mean that women often find themselves in a position of defending their start-up proposals when seeking funding while their male counterparts are questioned about growth potential,” she says.
The growth of the 'femtech' market
The femtech market is expected to grow at a compound annual growth rate of more than 13% during the forecast period of 2020–26, according to researchandmarkets.com. Alemany says women often focus on areas that are considered to be 'female sectors', such as fashion and baby care, “but if a woman proposes a machine learning or fintech start-up they are penalised”, she adds. Alemany says women also tend not to be as ambitious in scale when launching a company, choosing instead to focus on building smaller companies.
But some steady progress is being made, according to Julia Hawkins at London-based VC firm LocalGlobe. “Some of our most ambitious founders are women,” she says. LocalGlobe’s health portfolio comprises Panakeia, a deep-tech company focusing on cancer diagnostics and treatment; Vira Health, a company dedicated to providing better menopause care; and fertility company Fertility. “These three companies have some of the most ambitious founders in our portfolio, so I don't actually think that is true anymore,” she says of the idea that women limit themselves.
As an investor, Hawkins says she has seen much change during her decade-long career. At LocalGlobe, she is one of three female partners in a team of nine, and says the firm is actively looking to diversify at every opportunity. What both Hawkins and Alemany agree on is the importance of role models to normalise the presence of women leaders as both tech investors and founders.
Role models like Wanders and Hawkins do seem to be having a positive effect. Deloitte found that the representation of women in junior-level investment positions has increased, building a pipeline from which companies often fill more senior-level positions. Women comprised 33% of junior-level investment positions in 2020, compared with 28% in 2018 and 25% in 2016. Female employees accounted for 24% of investment professionals who originate deals, 21% of those who represent the company on the boards of portfolio companies, 21% of company investment committee members, and 18% of management company owners.
More and more funds are realising just how critical it is to nurture female talent, both in their investment teams and within their portfolios, according to Jane Reddin, talent director at London-based AlbionVC. Founders in the tech sector need both IQ and EQ (emotional intelligence) to lead their teams effectively, she says. “These qualities are also required by investors if they are to give start-ups support and effective advice,” adds Reddin. “This can give female leaders an advantage, as they often have higher emotional understanding and empathy, which makes them better investors and advisers to entrepreneurs.”
There are many reasons why more women entering the technology investment field would be positive for the sector. They would bring a different perspective to a male-dominated field and help create a broader array of companies for a new generation. Perhaps more than that, however, the business case for better female representation is very solid.