Gender equity is a major challenge for venture capital, despite the potential of increased returns and innovation. According to research, a higher female representation in venture capital leads to greater fund returns as well as more profitable exits.
Only 15% of European companies have women as investment decision-makers. The industry’s preference to hire people who are similar to them and its reliance on male-dominated networks perpetuates male dominance. This is compounded by harassment, societal stereotypes and the reliance on male-dominated networks.
CapitalT is a great example of a proactive approach in tackling these issues. CapitalT, led by Janneke Niesen and Eva de Mol uses a tool named VCVolt instead of relying on gut feeling to evaluate early-stage founding teams. Their fund has a diverse group of founders with 52% of them being women and 48% of them being people of color. Despite gender-based barriers, Niessen and de Mol’s resilience and innovative strategy highlight the potential of a more inclusive and successful VC eco-system.
Why Gender Equity is Important in Venture Capital
Women are still vastly underrepresented in venture capital despite the potential for higher returns and innovation. According to Sifted, only 15% have women as decision-makers in Europe. According to research by Paul Gompers & Silpa Kovvali, having more women in VC results in higher fund return as well as more profitable exits. A more gender-balanced VC ecosphere benefits not only investors, but also society. But it’s still difficult to achieve.
This is due a complex web challenges. The industry’s tendency to ” homophily “–people preferring those who are similar to themselves- creates a cycle of male dominance. Women are also excluded from the VC world, which is dominated by men.
The situation is further aggravated by reports of sexual harassment, creating a hostile atmosphere that discourages women to enter or stay in VC. The “bro culture” is a hostile environment for women. It is rife in sexual harassment, aggressive behaviour, and a lack work-life balance support.
Stereotypes in society portray leadership and VC domains as masculine, causing women to be less likely to see themselves as qualified or as effective. The industry operates under the illusion that it is a meritocracy and ignores the reality of gender discrimination.
These factors present significant obstacles for women in VC. Unconscious bias is deeply ingrained, and it will take a long time to remove these barriers.
Innovative Venture Capitalists are driven by dynamic leadership
CapitalT portfolio companies include several of the following:
CapitalT is a VC firm that invests in climate tech, future of work tools and pre-seed.
CapitalT is a Dutch VC led by a dynamic team: Niessen, cofounder and general partners, and de Mol PhD, cofounder, general partners, and academic researchers. Niessen, a serial entrepreneur and angel investor who is also a board member and diversity advocate, brings a wealth experience. De Mol’s study revealed a link between a growth-mindset fostered by coping with failure with greater resilience when you succeed. This is what informs the VCs’ unique approach.
CapitalT’s tool goes beyond traditional financial indicators, market metrics, and team size to evaluate teams at the pre-seed or seed stage who have not yet established a track record. VCVolt evaluates a company not only on its hard skills, knowledge and experience, but also on its human capital. This includes soft skill such as entrepreneurial passion, shared values and vision, and mindset.
Assessment of startup teams can provide insights beyond gut feelings and validate a startup’s team-building decisions. Corinne Vigreux is a founder and investor. She said, “I believe that 80% of the success of an entrepreneurial venture is due to the team and 20% to the idea.” “Eva and Janneke focus on the quality of teams and have developed a method to assess their effectiveness. I was also very happy to invest into a VC which was started and ran by two smart women.”
CapitalT Fund I closed the first round of funding in February 2020 with EUR12.5 million. It closed at EUR50million in August 2021. The fund focuses on pre-seed climate tech and future of work tool startups. The firm invests in amazing founders, regardless of gender, race and ethnicity. Portfolio company founders include
- 52% of women
- 48% of people are color.
- 80% of women, people of colour, or LGBT+
The lack of diversity is likely due to the fact that most VC pipelines are dominated by warm introductions. CapitalT deals are largely cold inbound.
CapitalT is too young for exits. However, based on feedback received from institutional investors, CapitalT’s portfolio companies have outperformed similar-stage investments when it comes to revenue, internal return rate, and the number of investment rounds.
CapitalT’s founder-centric approach is a key differentiator, according to founders. The team is genuinely concerned about the well-being of founders and they are always willing to help. Marta Krupinska is the CEO and cofounder of CUR8 and she said that Janneke and Eva were the most supportive VCs she had ever worked with. “They put the founders’ needs first, give feedback quickly, treat people respectfully, and always provide candid and constructive feedback.”
How to overcome gender bias as a general partner of a venture capital firm
When raising their first fund Niessen and demol encountered stereotypical and sexist obstacles. Many questioned their ambition and urged them to “start small.” Niessen expressed her surprise at the “openly racist” bias against female entrepreneurs and VCs. Dismissive remarks included:
- “You are too ambitious, start smaller.”
- “You need a man in your team” (without mentioning his required skills).
- “We’ve already Invested in a Woman” (tokenism).
- “I am a real man, and real men like to count and women do not.”
- “You must commit to working for a certain number hours” (a sexist inference about childcare).
Niessen pointed out that these attitudes were a result of the belief that investing in female fund managers would not be successful. It seemed that men have a “privilege of failure” that women don’t. This negativity, however, only fueled Niessen’s and De Mol’s determination.
They refined their approach through trial and error. They learned to ask direct, simple questions before meeting with potential investors: “Is this asset class that you like?” They learned to ask direct questions: “Do you like this asset class?” and “How much time do you need to decide?” They learned to avoid meetings that are centered around feedback on the pitch deck.
Niessen and Demol sought advice from women who were raising money. One key takeaway is to avoid setting a low investment minimum, as this would require time in order to raise money from many investors.
The fundraising journey of first-time fund managers from diverse backgrounds often follows a common path. They begin with high-net-worth individuals–including founders–then family offices. Once they have raised EUR20-25million and gained traction with their investment, they can approach government agencies who support innovation and SMEs via VC investment.
With the lessons learned from raising CapitalT Fund I it should be easier to raise EUR75 million Fund II, with the same focus as Fund I on early-stage climate technology and the future of tools.
How do you handle gender bias?