Here’s why we need more female fund managers
Women taking control of venture capital enables us to create a more inclusive and prosperous society that benefits us all.
Venture capital is a powerful vehicle for shaping the world as we know it. With over $2 trillion in assets under management (AUM), there’s plenty of money to go around. However, so much venture funding is ill-spent in repeatedly backing a homogenous subset of entrepreneurs to build underwhelming solutions. We need more diverse people involved who are positioned to drive capital where it’s most impactful.
Today, only 4.9% of VC partners are female, and of that percentage, women of color make up less than 1%. Looking at US-based VC firms, 5.6% are women-led, with 2.1% led by women of color.
We need more female fund managers.
As it turns out, female fund managers outperform male-led firms. From 2009-2018, 69.2% of the top-quartile-scoring U.S. venture capital funds included female decision-makers. Additionally, when U.S. firms increased their number of female partners, they saw 9.7% more profitable exits and a 1.5% increase in fund returns yearly. There’s a clear pattern when women take the reins in venture capital.
And women are more capital-efficient. Increasing the number of female fund managers not only results in greater returns, but multiplies that impact through funding additional female founders. Female investors are twice as likely to invest in female-founded startups and three times as likely to invest in female CEOs. This is critical for several reasons.
Currently, an abysmal 2% of venture funding goes to female founders—and that number has been in decline since 2019. More importantly, when funded, scrappy female startup teams generate 78 cents per dollar of funding and 10% more in cumulative returns over 5 years.
More women writing checks means more unicorns. Compared to 2020,the number of female-led startups reaching unicorn status quadrupled. Female founders at the Series A level experienced larger rounds in industries that consistently overlook women, including crypto, cybersecurity, and digital health.
And finally, women drive innovation. More female managers equals more services brought to market that reflect the needs and perspectives of women, representing 51% of the world’s population and 85% of consumer purchasing power. We need women at the top of the venture capital food chain to drive investments to overlooked areas of innovation.
The raw power and potential of women in venture capital could not be more clear. When women move money, funds outperform. When women invest in other women, they create a chain reaction of exponential impact on women and the world.
Read the full article in FastCompany