“When women and multicultural entrepreneurs succeed economically and participate professionally to their fullest abilities, we all benefit” with Edith Dorsen and Tyler Gallagher

If significant pools of capital are finally pried open, we’ll unleash a currently underutilized talent pool to address real world problems in new and more creative ways with diverse perspectives at the table. When women and multicultural entrepreneurs succeed economically and participate professionally to their fullest abilities, we all benefit — children, families, communities and the economy — in […]

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If significant pools of capital are finally pried open, we’ll unleash a currently underutilized talent pool to address real world problems in new and more creative ways with diverse perspectives at the table. When women and multicultural entrepreneurs succeed economically and participate professionally to their fullest abilities, we all benefit — children, families, communities and the economy — in untold ways. Diversity has a multiplier effect.

As part of my series about “the five things we need to do to close the VC gender gap” I had the pleasure of interviewing Edith Dorsen, a Founder of Women’s Venture Capital Fund and the Managing Partner of its successor, WomensVCFund ll. At a time where there was scant interest in women entrepreneurs, Edith recognized the capital gap confronting female founders and co-founded the Women’s Venture Capital Fund — driven by the belief that leadership diversity is a major competitive advantage. It was the first VC fund in the country to focus on Series A stage startups in which senior leadership included both women and men.

Thank you so much for joining us, let’s jump right in. According to this article in Fortune, only 2.2% of VC dollars went to women in 2018. Can you share with our readers what you or your firm is doing to help close the VC gender gap?

Several years ago, the Women’s Venture Capital Fund team and our investors recognized the gender gap in venture capital access — before there was much attention to the issue or understanding of its magnitude. Our inaugural fund (Women’s Venture Capital Fund) and now its successor (WomensVCFund ll) remain uniquely focused on providing what is known as early stage capital to companies where the senior leadership includes both women and men. We’re happy to report that our funds have reviewed more than 2000 entrepreneurial companies led by women of which a large and growing number are Series A ready — which we define as companies that have developed their core technology or product and are demonstrating bona fide revenue traction.

Beyond providing venture capital, we think of ourselves as “mentor capitalists.” Depending on the specific needs of a portfolio company as determined by stage of development and background of senior team, WomensVCFund ll assists the women and men who run our portfolio companies in several ways — from helping to identify and recruit members of the company’s management team and board of directors to introducing new individual and institutional investors. We serve as a strategic sounding board and instill financial discipline where necessary. And, as needed, we coach individuals on the senior management team.

Can you recommend 5 things that need to be done on a broader societal level to close the VC gender gap, and explain?

Angel stage capital — as distinct from institutional venture capital — has shown real improvement for women founders. While there remain demonstrable differences from metro to metro, an estimated 20–25% of angel capital is now flowing to women-run startups. Perhaps not surprisingly, more and more women are becoming individual investors in startup businesses — in no small measure related to the conscious outreach of angel networks and seed funds to include women investor members.

The lesson for institutional venture funds is to engage more female investment partners. As the light has shown glaringly on the capital gap in the last few years, the long-established venture capital firms have hired more women in recent years. That’s the good news. At closer look, however, the overwhelming number of these hires are in marketing, finance and administrative support roles.

As we now well know, the challenge of unconscious bias is real — for all of us! And it’s a fact that female founders are often first-time entrepreneurs versus the serial entrepreneurs preferred by Silicon Valley funders. Without that prior experience, some women are less aggressive in their pitch. Their products and services are frequently focused on female consumers, children and families. Therefore, it’s imperative that venture capital funds ensure screening and decision-making include highly qualified women investors.

From an external, or as you say societal level, there’s a clear role for the institutions to play. In traditional venture capital, institutions today provide upwards of 90% of the capital underlying the VC industry. And the size and nature of institutions vary widely, encompassing family offices, college endowments, foundations and very large pension funds.

Of course, many of these institutions endorse diversity and inclusion either because of their foundational mission or, as I would hope, an increasing number recognize that diverse leadership builds stronger companies that perform significantly better — both financially and organizationally. However, notwithstanding their large and in some cases vast resources, very few institutions have invested in venture capital funds focused on diverse and multicultural founders.

Most institutions are in fact still standing on the sidelines. Why is that the case? In short, institutions generally prefer to work with a limited number of outside fund managers which understandably requires less oversight on their part. Unfortunately, virtually none of the newer funds committed to diversity and inclusion are big enough to absorb the $10–50M institutions generally like to deploy to a single fund and still comply with the 10% maximum threshold institutions set for an individual fund.

To open venture capital access to the most promising women and other high potential entrepreneurs historically overlooked and undervalued, institutions and specifically family offices, college endowments and foundations should recognize recently emerged fund managers now with good track records and develop realistic, new guidelines for the deployment of capital.

In addition, the foundations, endowments and family offices that have provided large pools of capital to major venture capital firms over successive funds are in a uniquely privileged position to question and survey their investment activity. Institutions who truly care about the VC gender gap have a major role to play here. They need to exercise their market clout to help ensure that early stage companies led by high potential entrepreneurs — whatever their gender or cultural background — are provided access to funding and the resources to thrive.

Who’s a female entrepreneur/ VC you respect and why?

That’s a sensitive question indeed. Kinda like asking a mom of a good-sized family who her favorite child is! In fact, I admire all the female entrepreneurs Women’s Venture Capital Fund and, more recently, WomensVCFund ll has funded. Without exception, they are smart, hardworking and passionate — as are many entrepreneurs.

Beyond that, we look for entrepreneurs who can recruit, build and retain a senior team around them. No successful company is built by a CEO alone and many entrepreneurs are not able to do this well. In addition, we look for strong and determined entrepreneurs who also demonstrate the requisite humility to regularly test their assumptions and projections against customer feedback and market traction.

Karla Friede and her Nvoicepay team have demonstrated this in spades; they recognized a huge opportunity in B2B payments and executed beautifully. After Joanna McFarland and her cofounders at HopSkipDrive launched the business to help busy families transport children from home to school to activity, they learned there is an even bigger opportunity to cater to more students by focusing on schools and children in foster care that are not well served by the traditional yellow school bus. And Amy Nelson, the visionary founder of The Riveter, a company dedicated to providing coworking spaces, community, and programming to enable professional women to progress in their careers and thrive in their work. (You can see Amy and The Riveter recently featured here on the TODAY Show.)

What do you think is the purpose and real impact of VC funds who focalize their work in women and minorities?

When we started the Women’s Venture Capital Fund several years ago, we did so under the belief that women entrepreneurs were a solid investment. What they lacked was capital. At the time, Women’s Venture Capital Fund shunned any label of mission or social impact investing because we believed there was an opportunity to earn equal, if not greater, financial returns for investors through companies founded or led by women. We predicted that the market would reach an inflection point in the number of venture-worthy women entrepreneurs…. and that inflection point has arrived.

If significant pools of capital are finally pried open, we’ll unleash a currently underutilized talent pool to address real world problems in new and more creative ways with diverse perspectives at the table. When women and multicultural entrepreneurs succeed economically and participate professionally to their fullest abilities, we all benefit — children, families, communities and the economy — in untold ways. Diversity has a multiplier effect.

We’re at a potential tipping point. If only we create a new capital paradigm and shift funding of high potential women and multicultural entrepreneurs from the exception to the norm. As women entrepreneurs and diverse leadership teams generate big returns for investors, they will prove to be the biggest impact investment of our time.

Can you share with us an anecdote about the real impact you’ve had in this field?

Several years ago, my Harvard Business School classmate Monica Dodi and I came across a shocking statistic — less than 5% of venture capital went to leadership teams that included any women.

Galvanized by that data which no one else at the time seemed to be paying attention to, we organized a roundtable at our Harvard Business School reunion to discuss this limited capital access. Despite pouring rain in Cambridge that morning and late-night class parties, by 8:30 am, all 15 of the invitees showed up along with 15 uninvited yet enthusiastic women!

During a spirited discussion, the group kept returning to a pivotal question: Was there a big enough pipeline of venture-worthy women entrepreneurs to merit a venture fund committed to female entrepreneurs? After extensive research, the answer was a resounding YES.

Backed by Harvard Business School classmates (both men and women) and two institutional investors, we closed the Women’s Venture Capital Fund about five years ago to invest in venture-worthy women entrepreneurs in revenue generating and capital-efficient companies. Management teams were required to include both women and men.

Building upon that initial success, WomensVCFund ll was launched in late 2017, the inflection point in venture worthy women entrepreneurs has arrived, and there is now much greater awareness and appreciation of the venture capital gender gap.

Some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US whom you would love to have a private breakfast or lunch with, and why? He or she might see this, especially if we tag them. 🙂

Yes; Michelle Obama! Her simultaneous grit and grace under pressure have been an inspiration professionally and personally at my and the funds’ most challenging times. While I’d relish the opportunity to speak with her one-on-one, I would even more love to share the conversation with our hardworking women entrepreneurs and the investors who recognized early the venture capital gender gap and committed capital to make Women’s Venture Capital Fund a reality.

I am hereby inviting Michelle to a fireside chat at our Annual Meeting in early 2020! Where do I send the invite?

Thank you so much for these great insights!

About The Author:

Tyler Gallagher is the CEO and Founder of Regal Assets, a “Bitcoin IRA” company. Regal Assets is an international alternative assets firm with offices in the United States, Canada, London and Dubai focused on helping private and institutional wealth procure alternative assets for their investment portfolios. Regal Assets is an Inc. 500 company and has been featured in many publications such as Forbes, Bloomberg, Market Watch and Reuters. With offices in multiple countries, Regal Assets is uniquely positioned as an international leader in the alternative assets industry and was awarded the first ever crypto-commodities license by the DMCC in late 2017. Regal Assets is currently the only firm in the world that holds a license to legally buy and sell cryptos within the Middle East and works closely with the DMCC to help evolve and grow the understanding and application of blockchain technology. In addition to his role with Regal Assets, Tyler is a regular contributor to Forbes, Arianna Huffington’s Thrive Global and Authority Magazine. Tyler has also been featured in many news publications and has been a guest expert on “The News with Ed Shultz”. Tyler is a proud member of the Forbes Finance Council a private invite only-group of hand-selected industry leaders.

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