Investing in Female-led Startups: Best practices for investors
This is the second article in a series from Noga Tal addressing the inclusion of women in the startup industry. From accelerators to entrepreneurs, from investors to government policy and programs, we're exploring the current state of women's inclusion in our industry and providing some tips and best practices for further advancements.
The first post in this series addressed the ways in which women are underrepresented in the investment community – not only as investors, but more importantly, as entrepreneurs receiving funding. The industry is primed for venture capital firms and angel investors to fund female-led companies. A small few have chosen to focus solely on female entrepreneurship, but most are still struggling to find ways to incorporate women into their existing investment strategy and portfolio. To that end, here are some easily attainable tweaks you can make to your existing model to encourage greater investment in the success of female entrepreneurs.
1. Track your data
To make an improvement, you need to know where you currently lie. Begin to track how many women-led startups you have invested in and how many make it through your pipeline each year.
2. Set a target
How quickly do you want to improve your numbers? Address both your pipeline and portfolio and choose targets you feel you can reach comfortably. Gradually increase this over time as you perfect your action plan.
3. Publish your diversity stats
Though this is a hard barrier to cross, public accountability incites a strong driving force. Broadcast that diversity is important to you and chances are your funnel will experience organic growth with minimal effort.
4. Expand your funnel
Research shows that women tend to pitch less to VCs, so reach out to female-led companies or organizations who help women in tech and ask for referrals. Even better, connect with investors who focus on women-led companies to collaborate and tap into their pipelines.
5. Make sure your own investment firm is diverse
A study covered by Fortune found that when a VC firm had at least one female partner, founders of businesses they invested in had higher chances of exiting their companies successfully regardless of gender. For female founders, the odds leaped from 15 percent to 40 percent. It’s still unclear whether female VCs are better at picking female run companies, or are better at helping female founders achieve success, but either way, including women in your investment firm is an opportunity to expand your portfolio and increase your ROI.
If you’re struggling to find existing companies that are both diverse and a good fit for your portfolio, be proactive and help female-led businesses reach the levels you need. Locate programs that support female entrepreneurship in your ecosystem; get involved and offer to mentor a few promising female founders who have crossed your path.
7. Invite more women into your professional network
Even if you decide not to fund them, providing impressive female founders with access to your professional network will go a long way in helping them build their businesses. Research shows that while men have access to strong, predominantly male networks, women are working with weaker networks. This means female entrepreneurs have less access than their male counterparts to sponsorship from industry influencers, thought leaders, and those in positions of power.
Join other tech companies around the globe who have already committed to recruit, retain and advance diverse tech talent.
Women-led startups present a tremendous opportunity for investors that has remained untapped for the large part. Hopefully you’ve been able to identify at least one or two suggestions here that you can implement in your own firm that will not only empower more women but will also bolster your bottom line.