4 Savvy Strategies to Reduce Gender Disparity in Venture Capital

Providing the monetary, managerial and/or technical resources needed by small enterprises and start-ups, the venture capital industry provides an essential service in the technostructure. Venture capitalists (VCs), who include investment professionals and investment partners in venture capital firms as well as angel investors, are typically the impetus of unique startups. Yet women are significantly underrepresented among investment professionals and investment partners in venture capital firms, according to the National Venture Capital Association (NVCA) and Deloitte. To learn about why this is a problem, keep reading.

Currently, female entrepreneurs do not receive as much capital for their start-ups when compared with male entrepreneurs, and the underrepresentation of women in gatekeeper roles at venture capital firms has been identified as a possible cause, according to the Academy of Management Proceedings (AMP). Yet despite the fact that the venture capital industry in the U.S. does not adequately represent women, research conducted by AMP indicates that the average capital raised by female VCs for female entrepreneurs exceeds the average capital raised by male VCs for female entrepreneurs.

It is important to keep in mind that an industry with a workforce that is representative of the demographics that it serves is likely to provide a better service than an industry that fails to represent these demographics. The ongoing issue of female entrepreneurs receiving less venture capital than their male counterparts is also an example of how an industry that does not effectively represent the diverse demographics that it serves fails to optimize the opportunities available for both the industry itself and the people whom it serves. The AMP finding on the capital raised by female VCs for female entrepreneurs indicates that increasing the number of female VCs is likely to improve the service that the venture capital industry provides to female entrepreneurs. It could also solve a systemic problem in the venture capital industry that prevents the industry from benefiting from opportunities in the market. Consequently, developing strategies to reduce gender disparity among VCs is a positive step forward for the venture capital industry and the technostructure.

Strategies to Increase the Representation of Women in Venture Capital

There are a number of strategies that can be utilized to increase the number of women VCs by improving the access of women to resources, mentors, and networks. For a list of key strategies, read on.

• ​​Scholarship Program: To find a co-investing group of angel investors with an academic and/or professional background in venture capital and/or entrepreneurship to invest in a scholarship program. The scholarship program will encourage talented females toward fields of study, such as finance and business development that will give them the skills that they need for a career in venture capital.
• Partnerships: To build collaborative partnerships with universities and investment partners that will lead to the development of an academic and professional program for women in venture capital. This program will be geared to motivate female students in finance and business development fields toward choosing a career in venture capital. The components of the program will be based on the following agenda.

1. The program will increase awareness of the venture capital industry among female students.
2. The program will be developed through a collaborative effort between faculty members and investment partners to help female students develop a career strategy in venture capital, review resumes, and educate students on interview techniques within the venture capital industry.
3. The program will develop a network of investment partners who will be willing to provide internship opportunities to female students and graduates.

• Mentor Program: To leverage the existing female workforce of investment partners in the venture capital industry to mentor women within the industry and outside the industry through a mentor program. “Female investment partners are uniquely placed to provide women with guidance and inspiration in relation to the venture capital industry. Mentors can inspire women to become a part of the industry and teach them how to thrive within it by sharing information about the best practices, pipeline to deal flow, and opportunities.” commented Tyson Pratcher, a WMBE (Minority and Women Owned Business Enterprises) asset management seed-investor.
• Building an Online Community for Female VCs: To empower women within and outside the venture capital industry by the development of an online community that is geared to support female VCs. The community can support women by facilitating networking, collaboration, and career development in the venture capital industry. The mentor program can be implemented through the community as the community can be used to provide educational resources and connect women with mentors.

These strategies are geared to develop cohesive partnerships with angel investors, universities, and investment partners to incentivize women to choose careers in venture capital and empower female workers in venture capital. As discussed, the underrepresentation of women in venture capital is a systemic problem in the venture capital industry that prevents the industry from providing an effective service and reduces the prospects of the industry. “Based on the available research, it is clear that the venture capital industry is not structured to offer a balanced service to both male and female entrepreneurs because of the underrepresentation of women in gatekeeper roles,” said Juan Martinez CFO of Knight Foundation. In the long term, the outlined strategies, which focus on developing a robust structure that promotes the inclusion of women in the venture capital industry, are likely to lead to more female VCs and the deployment of a structure that addresses the systemic issue of gender disparity in venture capital.