To Help Boost Female-led Startups, More Women Join Investor Ranks
Houston—Men have long leveraged their networks to succeed in business, and the tech industry has been no exception. Women, finding themselves outside of the club, are now creating their own networks to do the same.
Katelyn O’Shaughnessy already had a solid track record, selling TripScope, a travel startup she co-founded in 2013, to Travefy two years ago. But when looking for funding for her second company, Doctours, she says, “I kept hearing, ‘I love your idea, but I’m not sure about you being CEO.’ ” The investors O’Shaughnessy was pitching didn’t believe she fit the profile of what they considered a tech founder, she says.
Laura Wagner, co-founder and chief vision officer of electronic payments startup Digitzs, who is also based in Los Angeles, says she faced similar skepticism from the venture community—even with some heavy-hitters on the startup’s board of directors, including chairman David Jacques, PayPal’s first CFO.
The women spoke earlier this month at a reception marking the launch of the Artemis Fund, a venture capital firm in Houston that will use a $20 million fund to invest in 30 women-led startups. Around 100 mostly women attendees, including many entrepreneurs, nodded in agreement as O’Shaughnessy and Wagner spoke.
“There is a wealth of female leadership in Houston,” says Stephanie Campbell, an Artemis co-founder and managing director of the Houston Angel Network. “We would like to see that represented within the angel investor community.”
With only 2 percent of women founders receiving venture investment, Artemis and other female-focused funds have decided that one way to try to get more women funded is to make more women investors. Currently, only 9 percent of those in decision-making seats at venture firms are women.
For Artemis co-founder Diana Murakhovskaya, the time to launch this fund makes sense, not only for business reasons, but also because of the increasing awareness in society and business of the need for more women’s voices. “I just think there’s definitely been a cultural shift happening,” says Murakhovskaya, who also runs Monarq Incubator, an accelerator for women-led startups. “There is a broader shift to really hear a bigger demographic of voices.”
Last week, tennis star Serena Williams unveiled her firm, Serena Ventures, to invest in startups that, among other criteria, “embrace diverse leadership.” Williams, who has been investing since 2014, has backed women-led companies such as Billie, Lola, Mayvenn, and others.
The day after Artemis’ event in Houston, Trish Costello and a group of associates hosted about 40 women at Dallas Startup Week in hopes they’d join the First Step Fund. It’s a new fund organized by Portfolia, an investment platform made up of female funders that Costello leads as CEO.
Costello founded Portfolia six years ago, after 17 years at the Ewing Marion Kauffman Foundation, where she founded its well-known Fellows program. “We’re deconstructing how venture capital works,” she says, noting that the modern VC industry was developed at a time when women couldn’t even take out loans on their own. “If we could organize it today, what would it look like?”
Portfolia operates like a micro-VC and has six funds; examples include “femtech” and active aging. Women can choose a fund to join with a minimum $10,000 check to invest. While more experienced women investors run the funds, the other investors are encouraged to actively participate in pitches and investment discussions.
To accommodate the fact that the women are scattered around the country, many of these meetings are done via video call. This more hands-on approach gives the novices the ability to ask questions, observe more veteran investors, and become more confident in their role as investors. In essence, investment decisions are made not by a small group in a board room in Silicon Valley or Boston, but by a diverse group of women from around the country, with the different perspectives that that brings.
Artemis, too, has a lower than average buy-in check for its investors, though Murakhovskaya declined to disclose an amount.
Giving more women the ability to influence which startups get money helps get more women funding, research has suggested. Venture firms with women partners will invest in startups with a woman on the executive team at a rate that is almost three times that of those with only male partners (34 percent versus 13 percent), and they are nearly four times as likely to invest in companies with women CEOs (58 percent versus 15 percent), according to the Diana Project by Babson College.
“Innovations that we need, those technologies will not get venture capital,” says Barbara Clarke, a Boston-based angel who is the lead investor in Portfolia’s Rising Tide and Enterprise funds. “Women will use their financial firepower to shift the world and [investing] is the way to do it.”
The lack of women in venture capital or receiving funding is not proportionate to the role they play in the U.S. economy. In more than 40 percent of US households, women today are the primary breadwinners—a four-fold increase from 1960, according to a 2015 report from the BMO Wealth Institute. Women also own 30 percent of all private businesses in the United States, employing more than 7.8 million Americans, and control 51 percent, or $14 trillion of US personal wealth. The report projects they will control $22 trillion of wealth by 2020.
Many women have found success in the startup world, of course. Recently, two female-founded companies, Rent the Runway and Glossier, had their companies valued at more than $1 billion as part of major funding rounds—making them members of the “unicorn” club.
But in media reports, Jennifer Hyman, Rent the Runway’s co-founder has recounted the difficulty she had faced in being taken seriously by a male-dominated investment community. That will only change when more women are investors, she said in a CNBC article. In the meantime, Hyman, through the Rent the Runway Foundation, has also founded Project Entrepreneur, an accelerator program for women founders.
Juliana Garaizar is the director of the Texas Medical Center’s TMC Venture Fund and formerly led the Houston Angel Network. As a Kauffman Fellow from 2013 to 2015, she examined the gender gap in VC and explored new investing models that could be more inclusive. (She’s also a lead investor in Portfolia’s consumer fund and a senior advisor on the Rising Tide fund.)
“We need to take matters into our own hands,” she says.