The case for female fund managers

Building an Impact VC fund

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It's my life purpose to bring feminist principles to capitalism to build gender equity+equality. I call it feminism 2.0. It's not just about an impact case, but a solid financial case to back new emerging managers and especially, small funds and female fund managers. Data after data is coming out, gender-diverse and all-female fund management teams perform better.

Why the world needs female fund managers?

  1. PitchBook data shows that 69% of venture firms in the top-quartile (2009- 2018) had women in decision-making roles.

  2. According to IFC, gender- diverse fund teams deliver an incremental 10%-20% return compared to a non- gender diverse teams.

  3. Gender-diverse leadership generates better financial performance, stronger innovation, and higher levels of startup success. [Harvard Business Review]

Problem Thesis

The problem I want to address in this article is missing diversity at the capital allocator level. Excluding China, 15 percent of senior investment professionals are women, female representation in emerging markets falls to 8 percent. [IFC].

There are many biases and barriers for a first-time female fund manager to build her first fund. If we don't bring diversity at the capital allocator level, we can't bring diversity at the founder level.

Solution

We need to work with the new breed of fund managers who are operators, women, or people of color who are not equally represented in the venture capital, impact investing, or investing world in general. Today, there are over tens of thousands of venture capital investment partners, of which around 15% are women.

I want to break the barrier and challenge the status quo by bringing in more diversity in the industry, as diversity can help us achieve inclusion, equality, and equity at all levels.

“It is absolutely essential that we increase investments in women fund managers in order to benefit from their increased access to women entrepreneurs, women impact businesses, and insights about women’s markets, and to realize the dividends of diverse decision making on teams,” - Suzanne Biegel (gender-lens advocate)

The next phase of Gender Lens Investing (GLI)

Most of the existing efforts in GLI are around directly investing in women founders. With female fund managers, there can be a much more scalable and significant trickle-down impact on GLI.

If we don't bring diversity at the capital allocator level, we can't bring diversity at the founder level.

Kauffman's data clearly shows the validation to this assumption, which says women fund managers invest in up to 2x more in female founders.

Seema Chaturvedi has said it beautifully in her ET post - Why the world needs more female fund managers

"transformative power of asset allocation, when made available to women, can truly and more definitively accelerate the drive towards gender parity.”

Curated resources for further curiosity

  1. [Article] Why the world needs more female fund managers

  2. [Article] Female-managed US funds outperform all-male rivals

  3. [Article] Female fund managers make the case for gender alpha in emerging-markets

  4. [Podcast] Common Traits Shared by Top GPs, Why Underrepresented Fund Managers Will Produce Superior Returns

  5. [Case Study] Institutional Investors Must Help Close the Race and Gender Gaps in Venture Capital by Harvard Business Review

  6. [Report] PitchBook-All Raise Report on Venture Financing in Female-Founded Startups Shows Progress, Yet Continued Gender Inequity

  7. [Report] Moving towards gender balance in private equity and venture capital IFC World Bank

I am continuously looking for first-time fund managers looking to create their first-time impact funds with an edge or a differentiated value proposition in emerging economies. If you are building one, please do write to me. I would love to learn more from you and would be happy to help in any way.

With Love,

Sagar

"first followers" is founded by Sagar Tandon, a founding member at Moonshot Ventures. You can reach him at sagar@firstfollowers.co.

Occasionally, he blogs about the responsible investing, tech for good, venture capital, investment thesis, conscious capitalism, collaborative consumption, community, and humane lifestyle.

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