The Trouble with Gender-Blind Investing

This op-ed was originally published on May 17, 2019 in Next Billion.

As an impact investor interested in gender equity, I was glad to see a recent Harvard Business Review article on gender equality and investing by Karen Firestone, President and CEO of Aureus Asset Management. In response to the article, I shared a call to action on LinkedIn that encouraged LPs (limited partners, such as high-net worth individuals, family offices, foundations and endowments) to invest in women-managed funds. also urged organizations to incubate these funds, and journalists to write about them.

Shortly thereafter, another impact investor responded to my call to action, saying that women shouldn’t just invest in women. Women should invest everywhere, he said.

That might sound like good advice. But in reality, it’s not that simple.

A Broad Base of Exclusion

I started Pique Ventures because I observed that women were being left out of key decision-making roles in impact investing. Pique Ventures invests in a diverse community of impact-focused entrepreneurs in British Columbia, Canada, and we’re growing to invest across Canada and the U.S. Pacific Northwest. One thing we’ve seen in our work is that it’s impossible to call for gender-blind investment without taking the broader context into account: The fact is, women are underrepresented as startup investors, as startup CEOs and amongst VC-backed businesses. The statistics back this up.

In her HBR article, Karen Firestone noted that women manage only between 1% and 3.5% of capital in the investment business (including investment management, mutual, hedge, private equity and venture capital funds). Those figures are drawn from a report by Bella Private Markets, released in January 2019. Firestone also noted that this low percentage of assets under management wasn’t due to poor performance: Bella Private Markets found that women-managed funds performed just as well as funds managed by their male counterparts. Earlier research on women in alternative investments by Meredith Jones, while at Rothstein Kass (now part of KPMG) found that women-managed hedge funds out-performed their counterparts with predominantly male leadership. However, the research also found that women managed smaller funds, and on average took longer to raise their funds.

The lack of women managing capital is only the tip of the iceberg. There is also a lack of diverse perspectives more broadly than just along gender lines – both in influencing investment and capital allocation decisions, and in defining and measuring success. This lack of diversity amongst investors means many problems go unsolved, or in some cases, more problems are created – for instance, because issues such as safety, sexual harassment and violence, poor working conditions, and job precariousness get overlooked. Only 2.2% of venture capital goes to women-led ventures, and around 13% of partners at U.S. venture capital firms are women.

A Glimpse of What Could Be

The proportion of women in leadership positions in venture capital has not improved in the past 5 years, but impact investing offers a glimpse of what could be. In 2013, using the ImpactAssets 50 as a representative sample, I found that women made up 34% of the leadership teams of impact investing organizations. And Tim Freundlich, CEO of ImpactAssets noted in a recent Forbes article that, “as of year-end 2018, 39% of companies funded by ImpactAssets were led by women founders or CEOs,” and that “asset managers in the impact investing space have significantly higher percentages of women.”

It is predicted that $30 trillion in wealth will change ownership in the next three to four decades, and women are anticipated to inherit a large proportion of this from their spouses and parents. But this wealth transfer won’t realize its potential for impact unless there is diversity among the asset managers and CEOs stewarding that capital. This diversity won’t happen by accident – and it won’t happen if the existing community of women investors fails to lead the way through their own investment decisions. There needs to be an intentional and conscious shift of capital stewardship into the hands of a diverse community of women to rebalance where the control and power of money lie.

Making the Case for Action

Fortunately, a number of investors and advocates are working to draw attention to these gender disparities – and to direct capital to help change them. For example, Carta is a technology company that helps private companies, public companies and investors manage their cap tables, valuations, investments and equity plans. #ANGELS is an investment collective founded by six women who are current and former executives at Twitter. The two organizations issued a report titled #TheGapTable in September of last year, analyzing data on the cap tables ( the documents that record who has ownership in a startup) of more than 6,000 companies with a combined total of nearly $45 billion in equity value. Starting with founders and employees, they found that women make up 33% of the combined founder and employee workforce of startups – but they hold just 9% of the equity value, with the other 91% belonging to men. They also found that women face barriers accessing equity and building capital in their own startups. They are being excluded from the opportunity to invest in – and to be on the cap table of – most startup companies.

Carta and #ANGELS intend to extend their research to include angel investors (just 22% of U.S. angel investors and 16.7% of Canadian angel group members are women). They also plan to include board members, advisors and other entities, and VCs (in the US only 11% of check-writing VCs are women, and in Canada, only 15.2% of partners in VC firms are women). Their work shines an important light on these gender imbalances – and brings us back full circle to the representation of women in managing capital. Family offices and foundations should respond by helping get more women on the cap tables of companies by investing in emerging funds managed by women – a goal they can achieve while still benefiting from strong investment returns.

Addressing these disparities will take time and concerted effort from stakeholders throughout the industry. But in the meantime, Pique Ventures is working to challenge these industry statistics in our own work. In our first impact venture fund, 32 out of 41 investors are women, representing 75% of the fund’s capital. We invested with our impact lens in seven women-founded early-stage technology ventures, and six continue to have female CEOs. We aim to continue to serve a diverse community of investors, including women, and we will continue to focus on impact-oriented, women-led technology ventures as we build our second impact venture fund.

Our work has shown us that it’s not enough to simply say that women should invest everywhere. In fact, we’d turn that formulation around: Everyone should invest in women, and women should be given the opportunity to participate in all aspects of the economy – in the workforce, as CEOs, on boards, as investors and as capital managers. Our economy and society need diversity to thrive: It’s up to all of us to deliver it, and it’s up to women investors to take the lead.

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