Why Venture Capital Firms Need More Women Partners

I moderated a panel yesterday at the inaugural We Own It Summit in downtown Manhattan. The daylong event, hatched through many meetings of the minds at 24 organizations including Astia, the Kauffman Foundation, and Springboard Enterprises, was meant to drum up practical ideas on boosting women’s participation in high-growth entrepreneurship.

My panel was about venture capital. To set the scene, I cited data from the Center for Women’s Business Research that show that while about 41 percent of private companies in the U.S. are owned by women, only 3 percent to 5 percent of them get venture capital. Then the panelists, experienced entrepreneurs and equity investors Heidi Messer (World Evolved), Diane Mulcahy (Babson College), Divya Gugnani (Behind the Burner), and Anu Shukla (KM), candidly described their experiences on both sides of the funding table to an audience of about 45 women and a handful of men. One of the big (if obvious) takeaways: venture money is available but there are still plenty of gender-related obstacles. After that, the discussion began, with panelists and folks in the audience kicking around prescriptions for improving the odds.

Cindy Padnos, managing director of Illuminate Ventures, said increasing the number of women partners at VC firms was key, since those firms with at least one woman partner are 70 percent more likely to lead investments in a woman-run company than those VC firms with only male partners. (Padnos’s firm recently published a whitepaper aggregating new research on women entrepreneurs.)

Of course, it’s not just about adding women partners—the firm’s culture needs to change, too. Padnos told the audience this anecdote: “When I go out with these women-led companies and introduce them to women [venture capital] investors, I frequently hear a comment that shocked me—and when I thought about it, I realized they were right. They say, ‘I’m a new partner here. I’ve already done one woman-led deal. I can’t do another.’ Now substitute another male-led deal, Indian-led deal, Asian-led deal; anything else and you would think that person was absolutely out of their mind. But in reality when they’re in a partnership where they’re the only woman partner…and they are a junior partner in the firm and they’ve made one bet already on a woman, they’ve got to see it through successfully before they feel comfortable taking on another.”

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