In this first of a series of MVision Insights, we commissioned research from the London Business School into the participation of women in the US venture capital business. Our aim is to stimulate a debate that will start to redress this imbalance and make it a fairer, more innovative and ultimately a more profitable industry.
I went to a conference on women in private equity and, as I listened to one speaker after another talk about their experiences within the industry, I was very surprised by what was being said.. The picture presented was quite bleak so we decided to have a closer look, and what we found confirmed everything I heard that day. For business to progress, it needs to be addressed. In the long-term, everyone in VC benefits from a more vibrant and diverse working culture, and a business that more accurately reflects the society in which it is based. Our intention is to stimulate a debate to make a more equitable and profitable future. We start by raising three questions: How and why can a sector so obsessively consumed with creating the future, be more open and forward-looking? Why is so much talent not utilized in an industry so driven by performance? How can an industry so focused on innovation hope to disrupt end-markets not have more representation?
Our research, which concentrates on the US, shows that women constitute 13% of partners in leading US VC firms, which is much lower than more mature businesses like investment banking. In the Pharma and biotech sector the figure is lower still, at 5%. A commercial red flag for an industry where women account for 80% of healthcare decisions. The percentage of female partners was higher in Accelerator funds (27%) and female representation at partner level in younger funds was visibly higher.
Gender inequality needs to be addressed to strengthen business sense, promote innovation and ultimately performance. McKinsey s Delivering through diversity report released earlier in 2018 surveyed 1000 companies and found those in the top quartile for gender equality to be 21% more likely to have above-average profitability. Studies also show that diverse companies are more innovative. A recent report from Harvard Business Review found that companies with above-average total diversity had 19% more revenue driven by innovation and 9% higher margins. Diversity enables companies to be in touch with more consumers and markets. It is proven to promote a healthier corporate culture, and it stands to reason that a broader proliferation of opinions from a wider range of backgrounds will stimulate deeper and more meaningful discussion. The problem starts with the lack of female entrepreneurs that get funding for the businesses they create.
Figures show that fewer than 5% of all VC-funded firms have women on their executive teams, and only 2.7% had a female CEO. Without a groundswell of experienced female entrepreneurs, there will be fewer mentors at every stage in the pyramid through angels, accelerators, VCs and advisors, and the problem will persist. In our view, the long-term solution lies in encouraging more women to found businesses and encouraging moreangels and VCs to back them. Only then will the pyramid begin to change organically as women rise in a critical mass. We want to encourage a massive increase in VC funding for businesses led by women and we think VCs should be much more pro-active in targeting this untapped pipeline of innovation. Our intention is to stimulate a debate that will change the mindset of the industry. We are open to all suggestions that will help the industry tap this massive pool of talent and innovation and reverse this grimly familiar pattern.
After more than 20 years experience in healthcare and investing, Rafae le Tordjman launched Jeito Life, an investment fund that focuses on financing medical innovation as well as promoting positive societal impact. Away from her role as CEO of Jeito, Rafae le has pioneered several initiatives to support women in the healthcare industry she is founder and chairwoman of W.I.T.H (Women Innovating Together in Healthcare) and launched the Jeito Foundation. Prior to Jeito, she was Managing partner at Sofinnova where she gained firsthand experience of the venture scene on both sides of the Atlantic. Tordjman spoke to MVision about the difficulties faced by women in the VC industry, and the structural impact that the lack of women has on the healthcare industry. The development of future healthcare solutions is a complex, long-term endeavour that involves people across a wide variety of disciplines working toward a common goal. Tordjman argues that the investment industry that backs this innovation is, to an extent, set up to fail. As we have seen, it is male dominated to an even greater degree than tech, with women accounting for just 5% of senior roles. This creates unique problems in biotech. Everything in the traditional VC model is based on individual success according to Tordjman. Every partner has his own deals and guards them jealously the mentality is that you are only as good as your last deal. A way of working that is based on individual competition, rather than collaboration for the good of the firm and the underlying companies, is counter-productive in a business relying on complex team work. I thought it obvious that an aggressive, shouty atmosphere wasn t conducive to getting the best performance..
The structural issue is compounded by the fact that while women account for 50% of healthcare consumers, they have a far greater say when it comes to family healthcare choices, accounting for more than 80% of healthcare decisions. Without women in senior decision-making positions within the industry important issues will be overlooked and innovation will be stifled, Tordjman commented. In a situation where men occupy almost all of the decision-making roles, it seems obvious that women on the way up will have to fight harder for fewer opportunities and it will be more difficult for female entrepreneurs to get funding. Throughout my career I have seen women put in double the amount of effort to get the same amount of success. In the end I couldn t accept that, and had to try and find a new way of doing things. Tordjman puts into stark words a problem that pervades much of the VC industry. Since leaving her previous employer, Tordjman has sought to prove that things can, and should, be done differently at every level. The Jeito Fund that she manages has a majority of women in senior roles, a much more collaborative culture and, unsurprisingly, an investment pipeline that is biased toward female entrepreneurs, They come to us because it s a different conversation, a different way of working.
As well as the Fund, there is the Jeito Foundation, which was founded to help mentor and coach women in medical innovation it is a not-for-profit organisation, investing in businesses that have great ideas but are not yet mature enough to meet the criteria of the Fund. Finally, nine years ago Tordjman created W.I.T.H, an association that brings together women working across the whole value chain of healthcare and innovation. The association aims to encourage a culture of creativity and risk-taking amongst its members to develop innovative solutions across the healthcare spectrum. By shunning the old world of VC and creating an eco- system in which the critical mass of decision makers are women, Tordjman has proved that there is a different way of working. In an industry in which they ve been virtually absent, this eco-system provides a rare forum in which women, from school upwards, can operate in a culture that is supportive and nurturing, and where they don t feel like perpetual outsiders having to smash down the door to be heard.
Founded in 2001, MVision Private Equity Advisers is widely recognized as one of the world s leading independent international alternative assets advisory firms, raising capital for Private Equity, Real Estate, Real Assets, Credit and Direct transactions in both the developed and emerging markets. We have a long-standing reputation for identifying and working with current and future market leaders around the world. Our goal, based on the belief that fund-raising is far more than a one-time event, is to assist our clients with the ongoing task of funding and growing their businesses effectively, and helping them to ensure optimal positioning, growth and performance. www.mvision.com Media contact: press@mvision.com Special thank you to London Business School, and to Lizzie Reid and Eric Chang who carried out the research between early April and late June 2018. The research looked at the composition of 31 top US-based venture capital funds. The data focuses on General Tech, Pharma/Biotech and Accelerator funds.