Maria Pacella is managing partner of Vancouver-based Pender Ventures, the private technology-company investing arm of PenderFund Capital Management.
The most striking, yet unsurprising, aspect of the pandemic has been its disproportionate impact on women. More women have been diagnosed with COVID-19 than men, and more women have died as a result, according to the Public Health Agency of Canada. Economically speaking, a higher proportion of women lost their jobs in the early stages of the pandemic. Gender and economic inequality already existed, but last year’s serial crises made things worse.
In the tech industry where I work, inequality is nothing new. It’s no secret that women, compared with men, are underpaid, underrepresented as a proportion of the population and, as founders, significantly underfunded by investors. Still, a recent report that female venture capital (VC) funding is at a three-year low (despite an increase in women-led VC funds) struck me as particularly troubling, given its implications for the rest of the economy.
The inequities within the tech sector are unfortunate on their own – as we enter 2021 with a critical need for solutions to pressing global problems, we must ask ourselves: What happens when the industry with the greatest potential for innovation doesn’t reflect the world it’s innovating for?
To regular Canadians, the VC world may seem obscure. But as a tech investor, I know the impact we have on lives can be found everywhere – from smartphone apps to travel websites to telemedicine tools. That being said, the significance of investors – the people who get to fund these product ideas – goes far beyond the cheques they write.
Investors give oxygen to new, untested business ideas. We support entrepreneurs in achieving their mission. We help them set the goalposts for hiring, developing culture, the type of company they build and how they – to use a Silicon Valley-ism – change the world. It sounds romantic and aspirational, and sometimes it is – that is, until we admit that the best ideas frequently do not get a shot because of a person’s gender. How and why is this the case? It’s simple. When you look at the data on who makes the majority of startup funding decisions, the picture isn’t pretty – but it’s pretty clear.
A 2019 report from Highline Beta and Female Funders indicated that just 13.5 per cent of partners at Canadian venture funds are women, with only 8.9 per cent being managing partners. They estimate that in 2018, only 10 per cent of all VC dollars invested in Canada went to women-led funds. Why does this matter? To quote a recent Women in VC report titled The Untapped Potential of Women-Led Funds, “The VC industry overwhelmingly invests in founders, teams and products that look like them.” In Canada, this has meant that women, who make up 51 per cent of the population, reportedly raised just 4 per cent of venture capital funding available. In the United States, according to Business Insider, since the New York Stock Exchange was founded in 1817, hundreds of companies have gone public each year – yet about only 20 of those have been founded and led to an IPO by women. This is what happens when investors overlook millions of people.
What else happens? We leave huge market opportunities on the table. Plenty of research indicates that women-led businesses (and diverse teams) perform the best. So if the majority of VCs are neglecting this community, we are forgoing innovation and economic growth at a massive scale at a time when we need both more than ever. As a society, we’re also missing the chance to ensure the people who get to shape the world we live in accurately reflect the people and communities who will inhabit that world.
The VC industry is falling short. Fortunately, this means we have an enormous opportunity to not only change the investment landscape, but to also drive overall economic equality. $150-billion of incremental value could be added to the economy by advancing women’s economic equality in Canada, according to Export Development Canada and McKinsey. Through the reallocation of our favourite underutilized resource – capital – investors can truly make a difference. And not a moment too soon.
There are many groups in the Canadian venture community already striving to create this change. BDC’s Women in Technology (WIT) Venture Fund is one of the world’s largest funds dedicated to investing in women-led companies. Through in-depth research, Female Funders has driven significant awareness of the funding discrepancies between women and men. Calgary’s The51 and the Atlantic Women’s Venture Fund recently launched an initiative to support and fund women’s ventures across Canada. In addition, the Canadian Venture Capital & Private Equity Association (CVCA) has published a valuable library of diversity and inclusion resources for 270 member organizations that employ 1,800 individuals.
At my own firm, we’re proud of the fact that 40 per cent of Pender Ventures and 40 per cent of our portfolio company founders are women. We know that creating lasting change doesn’t happen overnight – but we also know that the actions we take at this critical juncture today are sure to generate the same outcome that we’d expect from backing a promising early-stage startup: an exponential return on investment.
At the end of the day, investing is about empowering individuals. As we start 2021, investors must remember what’s at stake – making sure we’re not leaving anybody out.
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