The Gender Divide Inside and Outside of VC Firms — and How We Change It

The gender divide is prevalent throughout professional industries across the globe. In venture capital firms, however, the ratio of male to female employees is one of the worst offenders of gender inequity. 2018 research from The New York Times and CB Insights shows that only nine out of the top 100 global VC partners are women while an NVCA/Deloitte University study found that women account for only 11 percent of VC deciders in the United States.

As a result, this lack of female representation in the VC workplace not only sidelines female financiers’ careers and pockets, it also hurts female founders. In Q2 of 2019, only 3 percent of all venture capital went to all-female founding teams, a statistic no doubt exacerbated by the lack of representation and the experiences of sexual harassment and bias women often face in their careers.

To curb these factors, VC firms first need to focus on supporting women and female-based initiatives so that more women can thrive in the VC industry.

Connect VC Firms with Partner Candidates

In the past few years, several women have decided to create their own VC funds, creating their own paths to becoming partners and leaders. However, it still doesn’t negate the fact that women are underrepresented and face gendered obstacles (bias, microaggressions) in large legacy firms and throughout the industry. Since these firms manage more money and have the greatest influence, they too should take action to diversify. 

“If we want to impact our industry, we can’t just throw a bunch of women and minorities into small funds,” says Aileen Lee, founder co-founder of Cowboy Ventures, one of the most successful all-female led funds in the Silicon Valley. For example, firms like SoftBank Capital and Lightspeed Venture Partners might now have a few female general partners helping to manage billions of dollars, but it won’t fix the systematic problems.

Another way VC Firms can get women involved is by helping to place them on their portfolio company boards. In a board room environment, a female member’s direct exposure and influence will build the confidence and knowledge needed for breaking into the VC landscape (not to mention the connections it could provide). Plus, if VC’s care about successful exits, having a diverse board is becoming a requirement. The CEO of Goldman Sachs won’t take a company public without it. 

One answer is to tackle the issue from both sides. VC firms can start directly communicating with women about job openings, mentoring opportunities and career insights in monthly newsletter and employee emails. Firm founders also need to be held accountable by taking a public commitment to diversity and diversity reporting within its firm through The Founders for Change initiative. In an industry like venture capital where many (often men) are referred through male-dominated networks, it’s especially important that firms work both publicly and privately to try and open roles for women and underrepresented minorities.

Mentor Female Venture Capitalists

Of course, supporting more women in VC also means supporting smaller, female-run funds, to give female leaders more opportunities. Representation and the likelihood of backing female founders can help change the demographics of the industry overall. XFactor Ventures is one fund that has built an investment team of all VC-backed female founders and allowed them the opportunity to invest in other women-backed enterprises.

XFactor helps female CEOs between the Series A and Series B range who haven’t yet cashed out their companies, but who don’t have extra money to help fund their companies further. By providing them with cash flow, smaller VC firms can start providing female founders with the support they need, while building up their funds. Smaller funds can also help introduce outside investors (with access to larger sets of capital) to companies they otherwise would pass on or not even consider. Already, male investors have shown a huge interest in the companies that XFactor invested in. 

That being said, VC firms can also help educate limited partners on why it’s essential to back women-led funds. Together, they can reach the community at the grassroots levels. By building partnerships through their firm, it helps create cooperation and communication between the larger-scale general investment professionals, female-funded VC firms and entrepreneurs. It also gives them mentorship opportunities that focus on the specific needs of female funds without competing with someone at a large growth fund. Whether it’s through office hours for female founders or female-based VC gatherings, knowledge sharing and networking are part of the supportive mentorship process.

Women within VC firms, either female-led or not, can also act as resources for younger generations of VC women and female entrepreneurs, giving female associate-level employees insight into the process of venture capital from the position of a general partner.

“A lot of them don’t even know what being a general partner means,” says Eva Ho, a founding member of All Raise, a VC collective of over 30 female-led funds that are looking to mentor and help grow the number of female founders and women in venture capital.  Ho continues, “They can’t even envision that, and in the past, there have been so few iconic women general partners.”

Support Female-Founded VC Funds

Mentorship and community are key factors in helping both female VCs and female entrepreneurs succeed in an industry where men still hold the majority of power. 

With initiatives for VCs to start focusing on women-led brands and companies and offer more support to women within firms (inside or outside their own), the table is, albeit slowly, beginning to shift. Now, dozens of venture funds are seeking women-operated businesses. The Fundery, for instance, is indicative of this transition. The resource helps female investors who want to invest in female CEOs and diverse founding teams, even those within different industries, locations and stages. Likewise, many top-tier VCs are looking to diversify and add more women to leadership positions. 

Supporting female VC partners by hiring, mentoring, and working with them can change the game and open up more opportunities for not only females but investors as well.