Breaking Barriers: Building a More Inclusive Venture Capital Ecosystem
April 29, 2024
As part of our work for the WIN-VC Canada Network, New Power Labs’ Research Lead, Tom Vargas, and Research Associate Bamboo Ren spoke with Allison Gibson from Spring and Sylvain Carle from CI/VIC about how we can foster a more inclusive venture capital ecosystem for diverse, underfunded entrepreneurs – especially women and gender diverse entrepreneurs.
Unconscious biases are barriers that limit capital flows to diverse entrepreneurs.
New Power Labs’ Research Associate, Bamboo Ren, shared two prominent insights that emerged from our research on barriers to flowing venture capital to women and non-binary entrepreneurs:
Explicit and implicit biases can seep into investment decisions at multiple points throughout the investment process. Various unfounded biases restrict access to capital for women and non-binary entrepreneurs. Solving biases only at the due diligence stage, for example, will not magically unlock capital.
The traditional toolkit to evaluate businesses may unfairly judge underfunded founders because they're different from what investors usually see, both because women-owned and non-binary-owned businesses may look or may be perceived differently than those owned by men and because these founders are judged more harshly. Investors need to rethink the way they approach these businesses if they don’t want to lose out on these opportunities.
In our conversation, Allison Gibson and Sylvain Carle shared their experiences from both investors’ and entrepreneurs’ points of view, highlighting three ideas:
1. Venture capital is supposed to be the space for investors to take risks. Yet, due to the effects of biases and a lack of data and tools, venture capital investors tend to perceive diverse entrepreneurs as more risky and less attractive than others.
Allison highlighted that most of the time, the onus is on entrepreneurs to assimilate and appear more familiar (ie, less risky) to investors. This perpetuates the imbalance in power dynamics between entrepreneurs and investors and creates more barriers for diverse entrepreneurs to access funding and resources.
2. Investors can overcome biases by actively reaching out to diverse founders, collecting and analyzing data, setting targets, and implementing incentives.
As an investor, Sylvain discovers investment opportunities that others would overlook by actively putting himself in the environment of diverse entrepreneurs. He noted that although there are growing spaces for investors and entrepreneurs to meet, investment amounts are not following suit. To expedite progress, we need funders to pressure their peers to invest in diverse-led businesses.
Data and incentives play a part in expediting progress by uncovering blindspots and nudging investors in the right direction. Data and benchmarks can help venture capitalists measure progress and set targets – and setting incentives and accountability ensures that targets are met.
3. Entrepreneurs and investors can all benefit from being part of networks that promote peer learning, knowledge sharing, and shared mission.
Sylvain emphasized the importance of knowledge sharing and peer support among entrepreneurs. By connecting with those on similar journeys, entrepreneurs can bring more transparency into the due diligence process, which helps them navigate the challenges encountered. Building on this, Allison highlighted the need for networks to be designed and created based on human connections. This can be done by creating communities for entrepreneurs to bond over their entrepreneurship journey and also other aspects of their identity and experiences.
Investors could also advance their journey of investing in diverse founders by joining networks of like-minded funders. Sylvain observed that the pressure to embed equity, diversity, and inclusion in the investment process can be more effective coming from peers. Being part of a network that shares knowledge and insights can also help de-mystify the equity, diversity, and inclusion journey for investors, encouraging them to take concrete steps toward their goals.
About the WIN-VC Canada network
The Women and Nonbinary Impact Network for Venture Capital (WIN-VC Canada for short), is a national collaborative of organizations working to provide services, programming, events, and dedicated resources to women and non-binary entrepreneurs and gender lens investors across Canada who are working towards becoming investment ready and increasing the pool of investors driven to invest in these ventures.
New Power Labs is the research partner of WIN-VC Canada. Our role is to aggregate and lead research that provides resources to gender lens investors and supports WIN-VC partners in creating programs and services for women and non-binary entrepreneurs.
WIN-VC acknowledges the support of Innovation, Science and Economic Development (ISED) Canada.
