How can the deep-tech, venture capital industry, contribute to this goal?
When we get to the point where we are comfortable talking about founders, researchers, and entrepreneurs in their own right rather than adding ‘male’ or ‘female’ in front to define the founder or entrepreneur, we [and to clarify, ‘we’ refers to the venture capital sector] will be truly embracing equity.
But how achievable is this when only 20% of start-ups have one or more female founders, globally?
In this article, we examine what the sector can be doing to shift the gender balance, and, importantly, why we need to be doing it.
Often used interchangeably, it is worth clarifying the difference between equity and equality in relation to deep-tech investment. Equality is where each person or group is provided with the same resources and opportunities i.e., males and females are provided with the same tools and pathways so they can turn their IP into technology that creates meaningful global impact. Equity takes this concept one step further to recognise that everyone is different, and often females will need to jump through more hoops and leap over more hurdles to reach a level playing field.
Beyond the important moral and ethical arguments for increasing gender diversity in venture capital funding, because approximately 50% of our population is female,we would question how we address the significant societal issues which challenge the world we live in if we don’t expand the participation of underrepresented groups.
Take the future of health, for example. Infertility is a very common problem facing couples around the world, yet female health and the factors contributing to infertility in women are under-researched, which means we simply don’t know enough about their bodies. Endometriosis is one of those areas where a diagnosis can take up to 10 years or longer.
The economic benefits have been measured; McKinsey’s ‘Diversity Matters’ research showed that reaching gender parity in business could add US$12 trillion to the global economy if the gender gap is narrowed by 2025.
Additionally, research by Boston Consulting Group and MassChallenge found that, when women business owners pitch their ideas to investors for early-stage - pre-seed or seed capital, they receive significantly less, but female-founded businesses actually perform better and ultimately deliver higher revenue – more than twice as much dollar invested than those founded by men.
So, embracing equity not only broadens the lens of potential investments, and increases the solutions to significant issues facing all of humanity, but these companies could also turn out to be better investments.
Because venture capital companies are the ones making the decision of whether or not to invest, it’s our responsibility to help drive meaningful change. The Pacific Channel team fully acknowledge we don’t have all the answers, or that we’re getting everything right, but here are a few suggestions on w-foundedhat we can be doing to shift the dial:
- Because typically only the best of the best women-founded/led companies get funding due to the Venture Capital sector's more stringent and ‘unconsciously’ bias selection process, the data is skewed towards success. Investing in more females to build capability and applying a more selective lens to male companies would rebalance this equation.
- Adopt a different mindset and be aware of the structural biases which are built into investment decisions.
- Understand and recognise the benefits of female-founded/led companies and the diversity of thought.
- Connect female researchers and founders to relevant resources that can help grow their businesses.
- Create clear pathways that showcase the journey from concept to commercialisation i.e. answer the question, “What happens tomorrow if I develop this today?”
- Include women in investment decisions and increase the number of male mentors who understand the complex journey to commercialisation.
New Zealand is a great place for R&D, we have some of the most clever people in the world coming up with solutions to some of our hardest problems. Because our funding ecosystem is also very collaborative, we have the opportunity to lead by example and drive change globally.
As one of New Zealand’s leading deep-tech venture capital companies, our objective is to be part of the solution to the significant problems that deep-tech is trying to solve.
To achieve this, embracing equity is not just a nice to do, it’s a must-do.