By Lauren Robinson, General Partner, Highline Beta
If the pandemic has taught us anything, it’s that resiliency requires innovation. More than ever, entrepreneurs, emerging technology and innovation are powering our reimagined future. But the secret to building a better tomorrow isn’t just about having the skills to navigate an ever-changing landscape. It’s about which individuals are leading the way.
From the very beginning, Highline Beta has been deeply committed to making a difference through Female Funders and the many other diversity and inclusion initiatives that we have created, supported and invested in. We’ve shared our commitment to equal (50%) representation of female founders in our venture studio companies, we’ve created and are constantly evolving a workplace culture that supports diverse and female employees, and we’re committed to supporting the companies we work with to build diverse leadership teams. But the path to building a more fair and equitable future will need to be a collaborative effort.
It’s no secret that gender diversity creates better businesses. We know the research shows that gender diverse leadership teams drive more innovation, more productivity, and provide better financial returns for investors. Yet women are still largely underrepresented in innovation leadership roles and at investment tables.
Companies with at least one female founder have been shown to outperform those with strictly male founders by 63%, yet only 2.8% of capital raised in 2019 went to women. As we found in our Women in Venture Report with Female Funders, women make up just 15.2 % of partners at venture capital firms in North America. More importantly, 85% of capital was controlled by venture firms run by all male partners.
Over the past few years, we’ve seen positive change coming from more transparent data, however COVID-19 has only amplified these gaps. While venture capital funding for women-led startups has been growing in the past few years – VC funding for women-founded or led startups in the U.S. dropped 31% in the first three quarters of 2020 – double the drop for startups founded or led exclusively by men. Women entrepreneurs were the hardest hit by the pandemic in Canada – representing the majority owners of SMEs and a higher concentration of business owners in the service sector. Add to that the challenge of growing a business while carrying the bulk of family caregiving, and it’s no wonder economists are calling the current economic moment a “she-cession.” Between February 2020 and January 2021, 5 million women dropped out of the labour force altogether.
This “she-cession” will only worsen as women remain missing from the world of investment. Women now own and control a greater portion of wealth than ever before. In 2020, women controlled US$72 trillion – 32% of all wealth globally – up from US$51 trillion in 2015.
With more “socially conscious” investment priorities and increased wealth access, women could be uniquely positioned to shift the innovation landscape and bridge these gendered divides. But they aren’t investing at the same rate as men. According to a survey by BlackRock, of all the assets women control, they keep 71% in cash, compared to 60% for men. Just 26% of women in the US invest in the stock market and in Canada, where more women are investing, they still invest 40% less money than men. The result is that women are losing out on access to investment opportunities that could narrow the wealth gap and increase their influence on our future and economy. According to one analysis, the cost of not investing for women reaches up to $1 million over a lifetime.
How can we harness the full force of our innovation talent to solve new challenges and build a better economic future with 51% of the population left behind?
The answer is we can’t. If we want to make sure we don’t miss out, we need more women making investment decisions, sitting on boards of early stage technology companies and leading innovation at large corporations. Our future depends on it.
The case for bringing more women into investing is clear. Diverse investors drive new innovation and approaches to solving diverse challenges. They’re more likely to invest in diverse founders and impactful problems – which is good for bottom lines.
We all stand to gain from bringing more women into investing – but this can’t just be a problem for women to solve. Too often diversity and inclusion initiatives are thrown onto the already full plates of women leaders – who are creating education opportunities and funds to help other women rise. But increasing gender diversity in investing and innovation isn’t a women’s issue: it’s a strategic business and economic recovery plan.
The pandemic has highlighted many gaps in our society – and brought communities together to solve complex challenges. The progress we’ve seen as a result of this collaboration is astounding. Business models have transformed overnight; sectors have joined forces to power new solutions for unprecedented problems; and in a time of doubt, industries have adapted, survived and thrived. We need to take the same approach to diversity. If we truly want to elevate the women in our ecosystem, we’re going to need to do it together.