“There’s a strong chance the next Bill Gates isn’t going to look anything like the last one,” wrote Melinda Gates in a recent post taking venture capitalists to task for not putting diversity at the top of their agenda. “So I’m interested in finding solutions that will help ensure we recognize her when we see her.”
So am I. So I say: it’s time to own your gender-lens investing.
Over the past eight years, and specifically for Project Sage, my research with Wharton Social Impact Initiative about venture capital and private equity, I’ve spoken to many fund managers about gender-lens investing. One of the most surprising things in our conversations has been how many of them invest with a gender lens without consciously doing it.
There are many who invest intentionally with a gender lens but choose not to talk about it — whether that’s to industry peers, in marketing materials, or to prospective investees.
I’ve spent some time wondering why this is. Here are some of the reasons I’ve heard for not talking about gender — and why I think talking about gender matters.
Why some fund managers don’t talk about gender
Backlash when fundraising. When this happens it can sometimes be easier to avoid mentioning gender, get the money and then invest it with a (stealthier) gender lens once there has been a successful raise.
Perception you’re ‘less commercially-minded.’ There’s a (false) perception in some circles that any funds focusing on women-led or co-founded businesses are interested in pursuing an equality agenda rather than finding the most commercially viable ventures.
Entrepreneurs in the pipeline don’t like it. This is another perception issue. I’ve spoken to a few funds who’ve had entrepreneurs worry that it will be perceived they’ll raise capital because they’re women, and not because they’re great businesses. Particularly if they’re going to go after more capital to scale later on. There’s a concern that “if I took your capital and it was thought it wasn’t because I was the best, flat-out, others won’t come in.”
Gender is secondary to their other interests. To some investors, gender might be secondary to what they really care about, for example education or energy, but they know women and girls will be affected by solving for those other challenges. So they only talk about their priority focus and not the fact that they aim for positive effects on women and girls.
Why some fund managers do talk about gender
Investing in women is commercially smart. These investors have seen the commercial benefits of investing with a gender lens and they want everyone to know about it. They want to show that they can back women, have social impact and make money.
A clear purpose helps them attract capital. Investors who care about backing women or the women’s market — and our numbers are growing — may want to invest their money in funds with a clear gender agenda.
Invest consciously to grow the next base of women as investors/VCs. Some investors perceive that much mainstream VC has been a boys’ club, rife with hidden bias and wielding a disproportionate amount of power. By backing women who grow successful businesses, they’ll create a new generation of investors and change the ratio that way.
Normalizing investing in women
What needs to change? As the financial system gets more methodical about uncovering and expelling bias, there’ll be less of a stigma around talking about gender, although ironically — hopefully — it won’t be an issue by then. There’s also a fear of doing your best but getting it wrong and being held up by the wider community as a case study for why not to invest in women.
Some gender lens investors and fund managers believe that as long as more capital is flowing towards women and girls, it doesn’t matter whether it’s spoken about or not. I disagree, for similar reasons that role models are important. The only way we’ll accelerate the movement of capital in this direction at scale is by building an evidence base and normalizing the notion that investing in women is smart, for various reasons, at all levels of the financial system.
It’s almost certain that we’ve missed a number of funds in Project Sage that are doing great gender lens investing work because they’re not being explicit about it. We’ve also found that, even when people are talking about gender, they have different lenses, and use different language for the same criteria.
As an investor who cares about achieving positive gender-related outcomes, it’s hard to know whether I’m better off investing in a fund that’s explicitly talking about gender, or one that’s just delivering great outcomes. This is why I’m hoping we’ll be able to look at impact data in more detail around fund investments and investment processes, whether gender is mentioned or not.