Can we wait 200 years to achieve gender equity?
4 min read · March 31, 2023
New Power Labs
TL;DR - The data we have show that women and gender minorities remain underfunded and underrepresented across the capital spectrum. There are specific tools that can help us make progress.
According to a Pitchbook report, 12.3% of venture capital funding in Canada in 2020 went to startups with at least one female founder - despite the fact that companies with diverse leadership teams are more likely to be successful.
In the US, 2021 was one of the best years for women founders, with a combined $8 billion invested in all-female teams, or 2.4% of total venture capital deployed.
Again, this was the best year on record.
For comparison, the percentage shot up to 17.2% with a male co-founder present, a trend that has remained consistent for at least a decade. And these funding disparities are even more significant for women of colour, who face additional barriers due to systemic racism and discrimination.
Similar gaps exist in traditional bank financing: women entrepreneurs in Canada are more likely to report difficulty in accessing bank loans, with 42% receiving the full amount they requested compared with 57% of male-owned businesses.
On the decision-making side, the Responsible Investment Association (RIA) found that women make up only 28% of senior roles in the Canadian responsible investment industry, which includes impact investing. Representation of women working in flowing venture capital decreases with seniority, with 51.9% representation at the analyst level and 15.2% at the partner level. There is also a gender disparity evident here in annual turnover rates: 42% in 2020 for female fund managers, compared with 27% for men, according to US-based data. In Canada, firms with one or more women partners raise funds that are on average 66% the size of those raised by firms with all-male partners.
According to a recent report, at the current rate we won’t achieve equal gender representation across fund managers for another 200 years. Do we have 200 years to wait?
What’s at stake if we don’t address the gender gap? A report by McKinsey & Company found that advancing gender equality could add $12 trillion to global GDP by 2025, and according to BDC data some $88.2B additional revenue would be added to the Canadian economy if women entrepreneurs earned as much as their male counterparts.
Over-mentored and underfunded
While resources specific to underrepresented communities are increasingly available, there is still a support gap in capital flows. Three ideas to move us forward:
Representation matters. Invest in diverse founders, fund managers and leaders. Increase representation by supporting and promoting underrepresented individuals, including women, and implement inclusive retention strategies. Embrace the 50-30 Challenge with your board of directors.
If you’re an investor, dedicate time to overcoming your biases; diversify your networks and seek opportunities to learn from women entrepreneurs. Attend events focused on supporting women-led businesses, seek mentorship from women entrepreneurs, and bring learnings back to your own due diligence processes.
Integrate the impact of gender across investment decisions. Investing in women-led companies is one part of gender lens investing, which includes:
Investing in companies that promote gender diversity and inclusion in their workforce, leadership, and governance structures.
Investing in products and services that benefit women and girls
Investing in women-led companies
Engaging with companies to encourage them to improve their gender-related policies and practices, and to increase their transparency and accountability on gender-related issues.
In case you missed it, this week we spoke with three expert practitioners working to advance gender equity across capital flows. Revisit the big ideas from the discussions.
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