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Investing in Women: The New (And Overdue) Frontier of Venture Capitalism

BY Hailey Eisen | Photography by Kourosh Keshiri


The statistics are bleak. Only 7% of venture capital funding has been invested in female-led startups in the United States, and these figures remain low even as the industry grows and matures: between 2011 and 2013, only 3% of venture capital investment dollars went to companies with a woman CEO. It’s not for lack of trying: women are 33% more likely to found startups than men, however, according to a study out of MIT, pitches delivered by men were 60 to 70% more successful in generating funding than those delivered by women, even when the content was the same. In the highly male-dominated venture capital industry, fewer than 5% of decision-makers are female.

So where does this leave female entrepreneurs?

“For me, all of these negative stats added up to a really good opportunity,” says Susan Lyne, who left her post as CEO of AOL’s Brand Group in 2014 to found the AOL investment fund—BBG Ventures—which makes seed and series A investments in digital startups led by women.

“I said to myself: if 93% of venture dollars were going to 50% of the population—males—then there was a lot of opportunity in looking to invest in the best of the other 50%—females.”

Having spent a number of years running quarterly breakfast gatherings for female tech entrepreneurs in New York, Lyne had a good sense of the talent pool. The group grew from about 10 women in 2009 to more than 130 in 2015. “Millennial women don’t necessarily want to get a job with a large company and work their way up,” Lyne says, “They’d rather be the author of their own destiny, and they’re starting earlier than the previous generation did.”

Lyne, has had a wildly impressive career, in roles such as Editor in Chief of Premiere Magazine, to President and CEO of Martha Stewart Living Omnimedia, to CEO of luxury shopping heavyweight Gilt Group. She has always had her finger on the pulse of media and technology. “I began noticing a lot of women coming out of B-schools and tech programs with fantastic ideas for products and services that held a lot of potential.” What they needed was someone to invest in them. “

The BBG (Built By Girls) Fund was born out of AOL’s #builtbygirls initiative to encourage young women to view technology as their friend. The initiative began when AOL’s Cambio website for young girls partnered with the non-profit Girls Who Code to allow a group of girls to redesign and redevelop the site in a way they’d want to interact with it. The result was the relaunch of Cambio in the fall of 2014, a site that was not only for girls, but also #builtbygirls.


Related: Collaborating on Disruption: How Susanne Chishti is Connecting Investors to FinTech Startups 


The concept of consciously investing in women-led startups didn’t begin with AOL. In fact, it has been gaining momentum for the better part of the last decade. In 2005, New York-based Golden Seeds was founded with the goal of raising substantial capital for women entrepreneurs, while also empowering both women and men to become active venture investors. Since then, the firm has invested over $70 million in more than 65 women-led companies in a wide variety of industries. Others, such as Female Founders Fund (F Cubed), Astia, and Isabella Capital have a similar focus. As the momentum continues to build, we’re likely to see more of these types of funds emerging. As recently as June of this year, Intel Corporation announced the launch of the Intel Capital Diversity Fund set to invest $125 million over five years in tech startups led by women and unrepresented minorities.

Investing in women doesn’t mean shunning men. “Conclusive research shows that gender diverse management teams and boards produce better investment results,” says Loretta McCarthy, Golden Seed’s managing director. “As such, we are seeking a world that is more gender diverse, and we’re getting there by investing in companies with at least one female leader.”

The same sentiment is echoed by Lyne, who says male-dominated VC firms investing in male-led startups tends to be a self-perpetuating cycle—one that she is trying to break.

“If you ask any VC firm where their greatest source of deal-flow comes from, it’s usually from entrepreneurs they know and have worked with,” she says. “So, if you’ve previously funded only male-led businesses and they’re sending their friends to you, you’re not likely to see a whole lot of female-led companies.”

The other issue lies in the tendency for women to sell themselves short. “While I hate to generalize, women do tend to promise what they think they can deliver, while men paint a picture of a massive business—a huge idea that will come to rule the world.”

Because the venture capital world is all about hitting home runs, or finding the “unicorn”—a company with a valuation of at least $1 billion—entrepreneurs must be able to show potential investors that they’re capable of hitting it big. That’s the advice Lyne, and others like her, are giving to the female entrepreneurs they mentor.

But, while BBG is obviously looking for as great a return as possible—“What better way to encourage people to invest in women, than yielding a strong return”—Lyne says she’d be happy with lots of $100 million or $200 million successes. “They don’t all have to be home runs.”

BBG has seen more than 400 entrepreneurs and has made 13 investments to date, all of which Lyne says she’s genuinely excited about. On the list are Gracious Eloise (bringing handwriting to the digital world), Glamsquad (an on-demand, in-home beauty service), Rocksbox (a membership based jewellery shopping service), and Sunshine (a next gen weather network built entirely on mobile). “Most of the entrepreneurs we see have identified something in our work, play, or home lives that is a challenge—and they believe they have found a solution or a way to do it better.”

At 64, Lyne has been working in consumer-facing businesses for 40 years. “One thing I’ll say is I’ve never been disappointed when I bet on female consumers.” Considering women influence 80 to 85% of the purchase decisions and dominate every one of the fastest growing Internet platforms, “it just makes sense to invest in the entrepreneurs who know the end user best—because they are the end user.”

Looking to the broader impact of investing in women, Lyne says, “In many ways just by getting women funded, they’ll create cultures that are different than those that already exist. That better culture, better work structure, will ultimately get picked up by others.”

That’s what Vicki Saunders hopes. Her Toronto-based initiative, SheEO, is targeting those female entrepreneurs who have the potential to change the corporate landscape, but don’t necessarily require venture capital funding.

“Eight out of nine women build businesses that don’t require financing and can grow at a sustained pace,” she says, but many need some sort of support to ensure their success. Her focus is on what she calls “radical generosity”—the opportunity for successful women to support women who are just getting started. “Investing 96% of venture capital in men just doesn’t seem like a winning strategy for a better world. I want to try to transform how we see financing and support for female entrepreneurs.”

A serial entrepreneur, Saunders has co-founded and run four ventures in Europe, Toronto, and Silicon Valley. “Rather than looking for one in every 10 investments to succeed, I want to see everyone succeed, even if it as at a slower pace or playing by a different set of rules.”

A new SheEO initiative recently launched in August 2015 will give 1,000 women the opportunity to donate $1,000 each to be divided amongst 10 female-led ventures. The criteria for entry: the entrepreneur must have developed a new model, mindset, or solution for a better world. By offering debt financing (in the form of a 0% interest loan), networking opportunities, and other support, SheEO will aim to give these entrepreneurs everything they need to be successful. “We’re looking for our “tribe”—the people who want to contribute without expecting anything in return, and are willing to provide expertise and advice to support a more sustainable business model.”

No matter the model, it seems many are looking for the same outcome: an equal opportunity for female-led startups to attract funding and contribute to a changing business landscape. And hopefully in time, the stats will start to change in the favour of women.


A version of this appears in print in our Fall 2015 Women of Influence Magazine, Page 24-26.