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If there were more female investment professionals, would there be more innovation and economic growth? Lillian Li thinks so. Fed up with the boys’ club culture of her chosen profession, in 2016 she and a group of like-minded millennials working in venture capital co-founded London-based Diversity VC, a campaign group to push for change.

“We would go to VC networking events and see a very homogeneous group over and over again interacting in very similar ways. As the nature of venture capital is to invest in the future, we wanted to create an organisation that more closely reflects the society in which it invests,” says 29-year-old Ms Li, an investor at Eight Roads Ventures.

To establish the facts, Diversity VC analysed UK VC firms and found almost half employ no female investors and, overall, women make up just 13 per cent of decision makers.

The gender gap in UK investment teams is not exceptional, though gradually the top VC firms are admitting more women to their senior ranks. Across Europe, 9 per cent of partners in seed and early-stage VC funds are women, according to estimates by European

Women in Venture, a networking community. This figure is 8 per cent for the top 100 global venture firms, says business intelligence provider Crunchbase.

The image of investment houses as male bastions is bad for gender equality and the industry, which has been shamed by sexual misconduct allegations, typically concerning men in positions of power harassing female colleagues and entrepreneurs.

It may also be bad for the start-up economy. Women entrepreneurs, especially those targeting a female market, may feel disadvantaged when pitching to investment teams comprising solely or mostly men, and they may be right to do so. In one study, Boston Consulting Group found that start-ups founded or co-founded by women garner, on average, half as much funding as those started by men, yet dollar for dollar generate higher revenues than their male-founded counterparts.

Kathryn Minshew co-founded The Muse, a popular jobs and career website based in the US targeted at young professional women that quickly found a market among male millennials too.

She recalls how during the initial seed round male VCs would try to “turn meetings into dates” or make blatantly ill-informed remarks. “I was told by one investor that he didn’t think we’d be able to retain our users once they turned 30 and had babies.”

Colette Ballou, founder of Ballou PR, is an investor in VC funds and urges businesswomen who care about equality to buy into funds and push for change from the inside. Many VC firms grew fast without setting up robust HR functions, she says, and lack basics such as parental leave policies or channels of complaint for staff who experience sexual harassment.

To help venture firms minimise biases in their hiring processes, Diversity VC is developing a set of recommended practices, such as asking the same questions of every candidate.

Analysis by academics at Columbia University and Harvard Business School of pitches recorded at TechCrunch Disrupt New York, a funding competition, revealed that both male and female investors asked men how they would expand their businesses and women how they would prevent losses, reinforcing stereotypes of men as go-getting and women as risk- averse.

Entrenched expectations can be hard to change. But a trend for senior women to leave established venture firms to found new firms may offer an answer.

According to Crunchbase, 21 per cent of venture firms set up in the past three years have at least one female founder, almost three times the rate in the top VC firms. It also found that female-founded and co-founded firms employ a higher proportion of female investors overall, and invest at a greater rate in female entrepreneurs.

Jenny Ruth Hrafnsdottir, one of three female founders of Crowberry Capital, a Reykjavik- based venture firm operating in the Nordic region, is unsurprised. “There are some [investment opportunities] where gender doesn’t really matter, but where there are products made for women, it’s logical that we’ll invest a little differently and see opportunities that men might miss,” she says.

Theresia Gouw, co-founder, Aspect Ventures

Theresia Gouw left Silicon Valley venture capital group Accel Partners in 2014 to found Aspect Ventures with Jennifer Fonstad. In 2015, Aspect led a $10m investment into The Muse, below, a female-founded jobs and career website targeting millennials.

Is Aspect female-led by design?
It wasn’t on purpose. We saw an opportunity to be laser-focused on [early-stage] investments as a bridge between seed funds, angel investors and larger firms. Our investing team is half male and female and our portfolio is 40 per cent female-founded.

What led you to The Muse?
An angel investor, who happens to be female.

Do you look for female founders?
We look for the best founding teams. It’s not gender specific, but we’re drawn to founders whom we call domain experts and The Muse’s genesis was that Kathryn Minshew and Alexandra Cavoulacos were looking to solve a problem for their peer group.

Kathryn Minshew, co-founder, The Muse

Were you looking for a female backer?
I wanted the person who could best help us navigate the challenges of scaling. I knew that at Accel, Theresia (Gouw), above, had invested in companies that I looked up to, such as Trulia and LearnVest, and I talked to their CEOs about working with her.

What was different?
We used to encounter a lot of gross generalisations such as “outside New York and Los Angeles, women don’t really care about their careers”. Theresia understood that there were many career-minded women who were feeling not understood by other outlets, and that allowed her to very quickly see the opportunity.

What was the first meeting like?
It was a videocall with Lauren Kolodny, one of Theresia’s colleagues. Sometimes it seems like investors live in a land where everyone is “crushing it” all the time. I felt able to talk about the good things and also the challenges and that continued when I met Theresia.

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