What Happened When This Angel Investor Committed to Investing Only in Companies With a Female Founder Upon making the announcement, he was immediately deluged with responses ranging from relief to gratefulness to unbelievable outrage.
By Jonathan Sposato •
Opinions expressed by Entrepreneur contributors are their own.
Women make up one half of the earth's population. And yet, if you survey the landscape of founders of the most notable tech companies in recent years -- Mark Zuckerberg, Brian Chesky, Jack Dorsey, Travis Kalanick -- they are all white males. These leaders of Facebook, Twitter, Airbnb and Snapchat give the appearance that founding massively valuable companies is primarily the sport of men. Is it just a coincidence that none of them are women? Are we to believe that women simply don't create great things? Or, should we instead address the reality that we live in an unbalanced world where the path for female entrepreneurs is much much harder?"
It is 2018 and only 32 female CEOs lead a Fortune 500 company. In 2017, startups led by women only received 2.2 percent of the tens of millions of venture dollars for new companies, according to PitchBook. As recently as 2015, only 16.6 percent of Microsoft's tech-related jobs and only 23 percent of its leadership positions were held by women. That same year, Dadaviz.com published a report that showed Seattle, where I'm based, ranked dead last for the percentage of female tech company founders (8 percent) and female employees working for local tech firms (26 percent). And we consider ourselves a progressive city, leading the way for technology innovation in the West!
Having founded a few companies of my own and as a member of the tech investment community, I often hear pitches from a broad mix of technology entrepreneurs. A few years ago, I became alarmed at the trend I both heard and saw. Not only is it harder for women to get funded, at times it can be hard to even get in the room with investors. I heard disheartening stories of how some young female entrepreneurs don fake wedding rings to proactively head off awkward passes from male investors. Women founders have to deal with substantially more process friction than men.
Related: More Women Are Entering Franchising -- and It's Changing the Industry
After reflecting, I announced in May of 2015 at an Angel Investment Conference that moving forward, I would only invest in companies with at least one female founder. It wasn't a contrived or even particularly pre-planned announcement; it just felt like the right thing to do. I believed then and continue to believe that not only do women need more seats at the table, but companies with female leadership really do perform better.
The research backs me up. According to Credit Suisse, female CEOs have a 19 percent higher return on equity and a 10 percent higher dividend payout. Shares of companies where women make up at least 33 percent of senior management have much higher annualized stock returns than those with fewer women, according to a report from the Peterson Institute For International Economics. Simply adding three women to your board of directors will increase your company's return on equity by 46 percent on average, according to a Catalyst report. Quantopian found that the 80 women CEOs it followed during a 12-year study (2002-2014) were observed to produce equity returns for their shareholders of 226 percent better than the S&P 500! The facts are clear: When more women are present, you get better business results.
Related: 4 Things Women Entrepreneurs Need to Know Before Approaching Angel Investors and VCs
From where I sit, there's no pipeline problem of unqualified women. There's no shortage of viable investment ideas coming from women. When we improve gender equity in leadership roles, the benefits can be spectacular. As a direct result of gender-balanced teams that deeply understood their customer's desires, several of my companies grew to achieve massive scale (up to 60 million unique users a month).
Upon making my announcement, I was immediately deluged with responses ranging from relief to gratefulness to unbelievable outrage. It was an eye-opening experience that solidified my commitment to achieving gender equity in the workplace and I began to implement more policies and create more awareness for this issue within the companies I ran and invested. Since 2015, 100 percent of the companies I fund have female founders.
Related: Being a Female Entrepreneur Can Be Incredibly Lonely. This Founder Is Changing That.
I spent a lot of time thinking about the issues facing women in tech. Why do barriers exist, and why are theirs different? How can I, as a man in this world, help break down these barriers? Achieving meaningful change for women will require CEOs and business leaders to commit to taking action. I outlined the ideas that I and others have found to be successful, and wrote a book full of actionable steps leaders can take to enact real progress. Increasing the visibility of successful women at your company begets more success. This is not about one grand unifying and clever idea, but the totality of many smaller simpler notions that require sustained attention.
My goal is to provide managers, CEOs and board members with a guide to build a sustainable robust female workforce because having a more diverse workforce creates better and more sustainable companies. I believe we all have a responsibility to do more. Now is the time. Every small step we take in the same direction -- together -- can make a big difference.
