Women Are Hacking Venture Capital — Do They See it Coming?

Trish Costello
Mar 1, 2016 · 7 min read

We’ve all heard about the state of women in the venture capital investing world. Research shows that eight percent of venture capitalists are women. Insiders know that it’s even worse. Once you remove the women EIRs and the advisory, retired and administrative partners, we’re left with perhaps one percent women as active VC investing general partners.

One. Percent. Women.

One percent representation, in the industry that decides how and where to deploy the funds that fuel entrepreneurial growth.

One percent, when women-led, venture-backed companies deliver higher returns on less capital, on average, than male-led teams.

One percent, in a nation where women are earning the majority of all undergraduate and graduate degrees.

One percent, in an economy where women buy 83 percent of consumer products and are responsible for 60 percent of business purchases.

This makes no sense. And it has to change. But it’s not happening anytime soon inside the traditional venture capital world.

Believe me, I tried.

I placed some of the most accomplished and successful women and men in venture capital as the co-founder, CEO and now CEO Emeritus of the Kauffman Fellows Program. Over 25 percent of our Fellows in the first ten years were women. I thought we were making a difference in the field. But although these women had slightly higher internal rates of return compared to their equally impressive male colleagues, they often didn’t receive the same level of recognition, promotion, respect and expanded opportunities. Even the world’s most brilliant women had difficulty breaking through the Mad Men culture. No wonder I was disheartened.

But today, I’m more optimistic than ever. That’s because revolutionary VC’s and forward-thinking institutional investors are beginning to grasp that while conventional venture capital will continue to be important, it’s not going to be the only game in town.

The change is a twist on one of the most fundamental and long-standing principles in the industry — the VC Golden Rule:

She who has the gold is changing the rules.

The venture world runs on OPM–other people’s money. And while few venture folks seem to have noticed, women have been building wealth for the past 30 years, quietly and consistently taking another one-half to one percent of the share of U.S. wealth each year. Women now control nearly half of all personal investable assets in the US, estimated at over $14 trillion. Women already control half of US estates over $5 million. Wealth managers project that at least $1 trillion of wealth will change hands annually for the next 20 years, and 70 percent will go to women — the largest intra-generational wealth transfer in history.

This new generation of wealthy women are educated, experienced, sophisticated and confident. Forty-seven percent say they are taking greater control of their assets and are open to taking more risks with their money. An eye-popping 90 percent, in a recent Morgan Stanley Wealth report, say they want to invest a portion of their wealth in women-led companies or in companies whose actions express their values.

BTW, she’s not amused by people who can’t — or won’t — recognize other talented women.

And it’s not just talk. There are ten times more women in angel groups today than ten years ago. Women are stepping into leadership roles in family offices, endowments and pension funds. And by the way, these women aren’t amused by those who can’t — or won’t –recognize other talented women.

Finance has been called the “industry women love to hate.” A recent study of ultra-high net worth women by the Luxury Institute reveals that only 3 percent believe their brokers, advisors and private bankers know how to communicate to them effectively. (Incidentally, only private jet services rank lower.) Unimpressed with the options, and with exceptional wealth and power, women are looking for new ways to focus their investable assets and rejecting models built by and for others.

You’d think the new equity investing platforms like Angel List would be finding favor, but instead they reflect the same old biases: Few have even 5% women investors as members. A ‘better, cheaper, faster’ approach to the traditional venture capital model isn’t good enough.

But change is coming.

First, exceptional and enterprising women VC’s are creating their own funds, realizing that it’s no longer necessary to be a standard-issue lone woman in a fund. They are raising significant institutional money and backing rapidly growing companies. As important, they’re doing it their way, creating cultures and practices that work for them.

We green-light companies for the marketplace.

Others, like me with Portfolia, are hacking the VC system, deconstructing the traditional concept of a venture fund and re-creating an investing process customized for women but inclusive to all. These aren’t mini “pink & shrink” funds, but a new, streamlined, scalable, collaborative global model of venture investing that has the power to shift who green-lights exceptional companies now and in the future.


Portfolia has now fully invested its first two funds: Portfolia Active Aging and Portfolia’s Rising Tide Fund, closing 14 investments within 10 months. Two Portfolia Funds are currently investing, Portfolia Enterprise and Portfolia Consumer, and two new funds will launch in September. Many of our investors, though highly sophisticated and globally influential, have never before invested in a fund or an entrepreneurial company. Many are C-suite executives or entrepreneurs, some have their own family offices, and a few sit on the boards of trusts and endowments.

Diversifying into 6–10 companies with one investment.

With Portfolia Funds, our investors start small and invest annually, building a diversified portfolio of high-potential entrepreneurial companies in specific industries or interests. The funds are transparent, collaborative, educational and empowering. Our investors can be as active as they like. Some just review a quarterly report. Others engage with companies during video presentations, participate in Ask Me Anything Sessions, volunteer for deal teams to study a company, or serve on success teams after the investment. It’s investing — personalized your way. Those who develop a passion for investing can train through a Portfolia Fellows Program to be Lead Investors in future funds, sourcing companies, conducting diligence, advising on fund investments, and sharing in the carried interest.

A Global Revolution of Women Investors — 100,000 investing by 2022.

Think this is pocket change? Think again. Portfolia will reach 1 million affluent women in five years with 100,000+ investing annually in our funds. Our fund leaders and advisors are best-in-class investors who can cherry-pick the best deals from around the country and the globe. There are plenty of highly successful cashed-out entrepreneurs, visionary corporate executives and experienced private investors, who would have been heavily recruited as venture capitalists, if only they had been men. We’re here to connect these women and unleash their potential.

Yes, you’ve probably heard that venture capital investing doesn’t scale. But that’s the old singular “Superman” model. This view, which is so much a part of the VC myth, doesn’t reflect how women usually work. More importantly, it doesn’t reflect how the most successful businesses work. Collaboration, emotional maturity, and in-check egos, researchers tell us, are reliable markers of success in business and investing. And that’s exactly what we’re finding in our investing communities.

There are plenty of successful cashed-out entrepreneurs, visionary corporate executives, and experienced private investors, who would have been recruited as VC’s … if only they were men.

One last lesson I learned early from my VC mentors: regardless of the power of the status quo, it’s only a matter of time when an under-served market speaks. The women’s market is shouting. She who has the gold is ready to change the rules. Here’s our invitation to you:

To the VC revolutionaries — men and women — who know there is room for other successful models of venture investing, who see a vast and empowered platform of women investors as good for your companies, your bottom-line, and even your legacy: lets disrupt and renew ourselves for the 21st Century.

To the women who have been successful investors and are looking for more, better, different, richer: join us, as we have companies to build and money to make.

To the 5 million affluent and sophisticated women in America: It’s your time! We are going to green-light the companies, teams and products we want to see in the marketplace. And when they succeed, we will win — together. This is how we shift the world.

www.portfolia.com

trish@portfolia.com

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(1) http://www.babson.edu/Academics/centers/blank-center/global-research/diana/Documents/diana-project-executive-summary-2014.pdf

(2) The Boston Consulting Group, “Leveling the Playing Field: Upgrading the Wealth Management Experience for Women” (July 2010), available at www.bcg.com/documents/file56704.pdf

(4) Harvard Business Review, September 2009 — The Female Economy

(5) CFAInstitute, 2015

(6) https://www.bmo.com/privatebank/pdf/Q1-2015-Wealth-Institute-Report-Financial-Concerns-of-Women.pdf

(7) Mary Quist-Newins, “Untapped Market: Women May Be Gaining Economic Power, but They Still Feel Financial Planners Are Not Recognizing Their Potential” (March 1, 2010), available at www.financialplanning.com/fp_issues/2010_3/untapped-market-2665922-1.html.

(8) U.S. Bureau of the Census, 1999

(9) 3 “A Profile of Older Americans: 2012,” Administration on Aging, U.S. Department of Health and Human Services

(10) http://www.morganstanley.com/articles/power-of-purse

(11) http://luxuryinstitute.com/blog/?p=3283

(12) http://www.investingdaily.com/10887/want-to-make-money-in-the-markets-invest-like-a-woman/

Trish Costello

Written by

Founder/CEO of Portfolia — An entrepreneurial investing platform designed for women. CEO Emeritus & founder, Kauffman Fellows. www.portfolia.com