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How Institutional Investors can contribute to breaking gender stereotypes

WE Сommunity team every week will share with you the latest international news on gender equality progress.
Today we will talk about another example of how gender stereotypes and biases are holding back women led start-ups and what can be done to change the situation.

We see 40% growth in the number of start-ups founded by women over the last decade in the USA. Numerous research findings show that companies with gender diversity within the leadership team have better financial performance and higher startup success rates compared to male led ones.

It seems like most of the venture capital investors are missing out on this opportunity as barely 6% all female led start-ups and 22% of at least one female founder start-ups are backed up by venture capital. That not particularly rational tendency is explained by Hardware Business Review (HBR) in their article Institutional Investors Must Help Close the Race and Gender Gaps in Venture Capital. The main reasons they identify are:

  1. Gender and racial stereotyping
  2. Unconscious bias
  3. Systemic economic barriers
  4. Silicon Valley’s preference for serial entrepreneurs

There is something that can be done about it by those people who constitute the lifeblood of venture capital - Institutional investors - as they are the main source of capital for venture business. HBR is suggesting that institutional investors should “hold venture capital funds accountable for addressing race and gender gaps in their investment portfolios” and should introduce several practices to be used while making investment decision:

  • Oblige VC fund to report numbers of companies with gender diverse leadership teams they invest in
  • Track number of women in “senior decision-making investment roles” in VC funds
  • Develop “guidelines to invest in high-performing emerging VC funds that are 100% committed to gender and racial diversity”

WE Community team is looking forward to seeing these guidelines to be adopted by Institutional investors all over the world.

For the full article, please follow the link to HBR website.

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