To Allocate Capital To Women, VCs Need to Talk to More of Them

My good friend Waverly Deutsch runs the Polsky Center of Entrepreneurship at Chicago Booth.  I really like her a lot because she is so frank.  When we are going through the early paces of the New Venture Challenge, or one of the other entrepreneurial challenges that Chicago Booth has, Waverly doesn’t mince words.

I think that is one of the things that I really liked about Booth.  Professors were direct.  Not so at other schools.

I don’t always agree with Waverly on some points but that’s okay with both of us.  In those disagreements you find common ground and you often find solutions if you manage them well.

I was talking to her the other day and it caused me to search for some of her publications.  I thought this was apropos given all that is going on in Entrepreneurship.  West Loop Ventures has five portfolio companies, and two are led by women.  We had a female attorney draw up our PPM.  One portfolio company where I serve on the board, Holberg Financial has half its engineering team made up of women.  Holberg has made diversity core to its company values from the beginning.  I’d suggest people become customers of Holberg if they want to support that ethos.

I don’t buy the measurement argument that the population is 50% women, so women should get 50% of all VC funding. That’s a stupid way to measure. What we need to measure is actual opportunity which is harder. Of women led companies, how many got to pitch to a VC and of that how many got funded? Did they get funded at the same rate, valuation, and money raised the same as everyone else or was it different? Those seem to be meaningful stats to me.

For me, it’s about opportunity not outcomes. Women shouldn’t feel intimidated, and VC’s should be welcoming. In my angel portfolio, I have several women led companies and they are failing at the same rate as men led. One, Simple Mills, is doing very well and if you haven’t tried their products yet you are missing out.

As soon as you try to equalize outcomes, you are on the slippery slope.

Waverly says VCs need to interview and talk to more women led companies in order to fund them. Here is a seven minute video of her talking about it.

Here is a blurb from the Chicago Booth magazine that is a companion to the video.

Women make up half the US’s population and account for more than a third of all privately owned businesses, but 90 percent of all venture capital goes to all-male-led teams of entrepreneurs. One explanation could be that venture capital is a male-dominated industry: about 83 percent of investment professionals are men. Another cause could be that both male and female investors view women entrepreneurs differently from men—asking them different questions, describing them differently to investment partners. Chicago Booth’s Waverly Deutsch suggests that to help correct the imbalance, venture-capital firms should institute their own version of the NFL’s Rooney Rule, which mandates that teams must interview at least one minority candidate for head-coaching vacancies. By interviewing more female entrepreneurs—and putting women on their investment teams to help coach them—VCs can help close the investment gender gap and improve their returns at the same time.