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Taking action by focusing on ‘the 2%’ of investments in female-founded and -led companies
As female venture capitalists, we are critical to both the foundation and the future of the U.S. economy. Today, we are taking immediate action to address the economic and social contraction currently resulting in a massive exodus of women from the workforce, leaving women’s employment rates at a 33-year low. One of the most powerful tactics is funding female founders, who typically hire 6x more women than male founders, according to Kauffman Fellows research.
We are members of the team that created and invested in a new fund, How Women Invest (HWI). We aim to advance our national interests by focusing on blowing out “the 2%” ceiling on female venture investment and profiting from the $5 trillion being left on the table by traditionally male-focused investors, according to Boston Consulting Group.
How Women Invest is a direct remedy for the disproportionate effects being felt by women in our challenging economy. Many are calling this unprecedented departure of women from the labor force a SHECession, and President Biden is calling it a national emergency, with more than 5.3 million net job losses for women since the pandemic began, taking back decades of progress. McKinsey’s Women in the Workplace report (co-authored with LeanIn.org) concludes that “more than one in four women are contemplating … downshifting their careers or leaving the workforce completely … and unwinding years of painstaking progress toward gender diversity.”
It’s not simply that the loss of women from the workforce and the stagnation of investment in female-founded companies sets back equality gains, it’s also the overwhelming evidence that gender inclusiveness delivers greater ROI and innovation, affecting corporate profitability and even America’s ability to compete on the world stage. Some argue that female heads of state were better than male counterparts at the pandemic response due to their inclusiveness and collaboration skills. And research shows that greater diversity yields higher returns. Startups with a female founder generated 78 cents of revenue for every $1 of funding, while male-founded startups generated 31 cents, according to a Boston Consulting Group study of 350 startups.
Investing in women is good business and vital to our economic recovery. The urgency is palpable.
Protect and advance our country’s economic and social interests
Financial experts agree that there are numerous benefits associated with investing in women and, even more specifically, women of color.
Data from Boston Consulting Group show that supporting and funding women entrepreneurs is a “sure-fire way to add $5 trillion to the global economy.”
Results from Morgan Stanley’s Beyond the VC Funding Gap survey found that investing in women would return $4.4 trillion to the economy and calls the lack of investment in women and multicultural entrepreneurs “the trillion-dollar blind spot,” highlighting it as a priority.
Morgan Stanley goes on to state, “Women and multicultural entrepreneurs are an emerging market in the U.S. in the same way that the internet was 20 years ago or cloud-computing a decade ago.”
“Only nine out of the 100 top VC partners worldwide are women,” according to Crunchbase, and women make up only 16 percent of VC deciders (investment partners) in the U.S., up from 11 percent in 2016.
What we’re doing about the SHECession (and you can, too)
We decided to take action and get to work on this national emergency immediately. We just closed on $10million for our How Women Invest Fund I in a record-breaking eight months.
As founding limited partners and fund advisers with How Women Invest, we helped plan, build and launch this new venture fund, led by general partners Julie Castro Abrams and Erika Cramer. We attribute our success to our ultimate differentiator: A vast network of 14,000 professional female leaders composed of board directors, C-suite and senior executives assembled through our sister organization, How Women Lead.
We call it “transferable trust” when one woman brings another woman into a community. These women pull more women forward, and that is how we quickly amassed over 211 LPs, who are 90 percent women, 70 percent first-time investors, and almost 50 percent women of color. This thesis resonated deeply with the community, which is to educate female investors as well as fund female-founded and -led companies to disrupt “the 2%.” We now have a waiting list for Fund II.
How Women Invest provides capital, mentoring and a network of influential women leaders to support female startup founders, especially women of color. We provide initial investments of $250,000 – $750,000, with large reserves for follow-on rounds. The fund is building a diverse portfolio of 10-12 companies that are tech-enabled, revenue-generating, and scalable in their central technology.
How Women Invest is the solution by bringing more accredited investors to the table, with the goal of educating 1,000 new investors this year, and a broader initiative for over 10,000 women to invest and make a substantial financial impact for themselves and future generations.
There is no lack of female founders
Women make up 42 percent of all entrepreneurs. The pace at which our Fund I closed, during a pandemic and all that is going on in the world, is a true sign of the demand and desire of accredited investors to invest in female-founded and -led businesses. We’re focused on disrupting the ecosystem from investors to fund managers and entrepreneurs with the goal of accelerating the purpose-driven products and services that female founders create.
Although HWI was not founded in response to the pandemic, Black Lives Matter, or the financial crisis, those events have accelerated the slow-moving topic of diversity. We are among the community of women working to make sure inclusivity is, without exception, a factor considered by fund managers in the future.
Having sat on both sides of the table as serial entrepreneurs and investors, we’re aware that not all investment dollars are created equal, and some have a cost burden to them. We want our investments to be more than just the money. We pride ourselves on being entrepreneur-centric.
This is How Women Invest.
Authors Heather Jerrehian and Nicole DeMeo sit on both sides of the table as entrepreneurs and venture capitalists. Reach them on LinkedIn / Twitter: Heather Jerrehian / @jerrehian and Nicole DeMeo / @techiecat
