The Outsized Impact Opportunity of Investing in Women
By Renske Lynde, 1st Course Capital
This is part two of a six-part series, Breakthrough Strategies with Emerging Managers, in partnership with Confluence Philanthropy to lift up the voices of emerging fund managers, sharing their perspectives and experiences, as they shine a light into the challenges and the opportunities in this unique ecosystem.
On this 112th anniversary of International Women's Day there is much to celebrate about how the role of women in many countries has dramatically improved since the founding of the Day in 1911. However, we would be remiss if we did not also acknowledge that much remains to be done to achieve anything close to equality across the genders or equity within them. In this piece, we will discuss two intertwining challenges that carry significant implications for equality, equity, and economic empowerment. They are the fact that women remain highly underrepresented in venture capital as an industry, as well as the fact that women receive significantly less financing than their male counterparts as they build companies.
Despite numerous research studies indicating that investing in diverse and women-led teams leads to better financial outcomes (to the tune of delivering twice as much revenue per dollar invested according to one BCG study), women still only received 2.3% of all venture capital funding in 2020. While this is clearly an alarming statistic, the implications are far greater. The inability to secure funding can lead to an overlooked opportunity to create massive social and environmental impact in addition to maintaining an unhealthy status quo in terms of wealth building and economic empowerment. It has long been known that VC decision makers rely heavily on “pattern recognition” to identify the next set of startups in which they will invest. The dangers of this approach have also been well documented, but substantive change in this direction can only come when the decision makers at VC firms better represent the world in which they invest. In other words, women will likely only get more funding when there are more female investors bringing their viewpoints and understanding of markets to bear. For the astute investor, this represents a clear financial opportunity to support diverse and female-led venture funds.
Consider the case of infant formula. 80% of the $7B market in the US has been controlled by two major players for decades. The industry has been known to be toxic with documented cases of the presence of heavy metals, lead and other contaminants. Many US mothers have been forced to choose suboptimal options to feed their infants and then also made to carry enormous guilt and shame about their choices when they are unable to breastfeed for a myriad of reasons. Caregivers of means were historically able to access a black market for infant formula from the European Union , which has much stricter regulatory standards for formula. In 2018, a startup called Bobbie was founded to challenge the incumbents by delivering a healthier, cleaner, transparently sourced alternative. A women-founded, women-led company is now not only changing the landscape of options for US caregivers, but also leading a cultural conversation about the many dynamics at play in our country around maternal health and wellbeing. In February of this year, they launched a campaign to raise awareness on the radical disparities in maternal health outcomes for women of color. Alarmingly, Black women are 3 to 4 times more likely to die from pregnancy-related causes and the US has the worst maternal death rate of any industrialized country across race.
While there is clearly no single-point solution to redress racial health disparities, we absolutely need to bring energy, attention, and capital to support female led founders and funders who are focused on creating better and more balanced outcomes.
Breakthrough Strategies with Emerging Managers is a partnership between Confluence Philanthropy and ImpactAssets.
LEGAL AND PROGRAM DISCLAIMER: LEGAL AND PROGRAM DISCLAIMER: This is not a solicitation to buy or sell securities, nor a private placement offering. Nor is this an endorsement of any of the featured impact fund managers. It is intended for informational, educational and discussion purposes only.