As an investor, there are many factors that I consider when working with founders. Along with pitching a good idea, I’m also thinking of the biases that exist within venture capital to ensure I’m actively investing in diverse companies. Knowing that diverse teams perform better, we need to have seats at the table for a broad range of people to bring their fresh perspectives and innovative solutions.
With that, investors should also keep in mind that while founders are pitching them, they are also strongly considering an investor’s values to judge whether they want to enter into a business relationship with them.
Facing biases during pitches, such as being asked different questions than men during the process, has a huge effect on confidence and leads to potentially undervaluing a great company. Investors need to adopt a more gender-balanced approach to evaluate pitches.
While founders are pitching their ideas, they’re also critiquing the investors across the table. Diversity is about much more than just ticking the boxes of gender, race, and background; the best companies and business relationships are built on foundations where investors genuinely value and recognize the heightened success that comes with diverse teams.
It’s a fact that startups founded and cofounded by women are significantly better financial investments: for every dollar of funding, those startups generated 78 cents, while male-founded startups generated less than half that, at just 31 cents. Taking that comparison into account, there are areas of focus that women founders address that lead to increased revenue.
Investing in gender diversity opens up doors for huge opportunities. Considering women drive 70-80 percent of all consumer purchasing, more investment dollars going to female-founded companies will lead to products and services that meet universal demands.
There have been too many negative experiences for women raising capital based on outdated preconceptions and the lack of female funders. Closing the funding gap for female founders requires male and female VCs to adjust the lens of decision-makers and view unique strengths as opportunities.
Bottom line is that firms need to revisit their values and ensure they are taking action on their side of the table. Losing out on a company because they don’t see the benefit of building a relationship with you could mean missing out on the next big thing.
As much as founders are seeking capital, they are also looking for investors who understand, respect, and value their company. In the male-dominated world of venture capital, people gravitate and invest in founders that are familiar to or resemble them—mostly white men.
Diversity and women investing in women is crucial for the future. We need more women in senior partner ranks, and we need to embrace their views and strategies. More diverse funders and founders equate to stellar returns and better outcomes—a win-win all around.