"One hundred percent of my returns the last six years have come from companies run by women," says Shark Tank investor Kevin O'Leary. "I don't care why. I care about the actual financial results. So this year on Shark Tank, I'm investing in a lot of women."
Kevin's sound bite summarizes a new experience of a lot of investors are having. Look for these four trends to create an eye-popping year for gender diverse technical founding teams:
You can't escape the math. First Round's Ten Year Project made public that gender diverse founding teams out perform male-only teams by 63% financially.
Gender diversity is increasingly understood as an investor power move with real pay-off.
- This month, Ray Leach of JumpStart launched a seed fund specifically for Ohio diverse founding teams.
- Adam Quinton of Lucas Point Ventures is another convert to the cash advantage of investing in female founders. "Disparity should spell opportunity. Because if the current investor community is missing great companies because of a 'pattern recognition' fail, there is an opportunity to compete with that status quo and make money," he says.
- Kapor Capital is pushing its portfolio of over 50 companies to commit to a diversity pledge and start tracking. In the future, it will only invest in startups with a diversity approach. "This isn't a check-the-box exercise," Frida Kapor Klein says. "This is something that's been carefully thought through and tuned to be a strategic business advantage, as well as the right thing to do."
- Tech Stars just opened its Foundation to impact diversity in tech. Hint: get in your grant application.
- Intel launched its Diversity Capital Fund last year, led by Lisa Lambert.
(See more: 8 VCs Speak Out About Female Founders.)
New York-based Female Founders Fund, one of the first institutional investors to focus on female-led companies exclusively, says in their 2015 recap that, "Women with backgrounds in marketing, data analysis and brand building are taking advantage of affordable technology to build and scale tech-enabled businesses-- effectively, efficiently and inexpensively."
About 20% of early-stage deal opportunities originate from gender-diverse teams, according to Crunchbase. Yet only about 3% of venture capital goes to them, Babson's Diana Project pointed out.
That 17%-ish innovation gap deserves attention. There isn't a pipeline problem in the founder community--it's in the investor community. And that spells . . .
Dollar signs for investors.
Consider how many down-round/unicorn-plague stories you've read. It's clear that young companies that jump off the block with reasonable valuations and scale potential are a critical resource in the race for value.
Looking down the pipeline for companies like these, top technical universities are also turning in strong report cards. Georgia Tech, a short bike ride from my back yard, is investing in making its campus and curriculum welcoming for the brightest of the bright--regardless of gender. "41% of Georgia Tech's incoming freshman class is female," says Dean Maryam Alavi of the Scheller School of Business. And, she adds, a sizeable percentage of student leadership. Today, student leadership--tomorrow, startup.
3. Personal power moves.
Female founders are using practical, tactical way approaches to move their own access to capital.
- Sally McPherson, founder of industry news curator Quibb, was frustrated as a frequent and popular speaker at tech conferences because she was often one of the only women. Organizers told her they didn't know any other women to ask. So last July, she created the 50/50 Pledge. It's broad, searchable database of quality professional women executives who want to speak at tech conferences.
- Addressing the perception that there are not enough qualified women for boards, ex-Googler and entrepreneur Sukhinder Singh Cassidy just organized The BoardList, a growing database of over 600 diverse, peer- recommended board candidates for tech firms.
- Her #ChoosePossibility list of over 450 active women tech founders is one of the ultimate conversation-stoppers on the concept that there aren't plenty of women-led tech firms.
- Rent the Runway's two female founders heard their customers asking them to invest in women's entrepreneurship. "Totally unprovoked, they would tell us, 'When we shop at Rent the Runway, we feel that element of support for female entrepreneurship, and female empowerment," says co-founder Jennifer Fleiss. "Knowing our brand meant that for people, we wanted to take it a step further." They partnered with UBS to run Project Entrepreneur, a competition to train and fund best in-in-class female founders.
- On a more personal note, after years of lobbying for change as a leader within the Entrepreneurs Organization (~90% male membership), I realized that if I wanted more material about women entrepreneurs, I would need to do that myself. One year ago, I launched Female Entrepreneurs, an online magazine exclusively by female founders, for female founders. Today, it gets thousands of visits a month from women building companies.
4. Pervasive: local meets global.
Now is also a time when local leaders are choosing action over discussion. Just one example of this trend: under the advocacy of Mayor Kasim Reed, Atlanta just opened the Women's Entrepreneurship Initiative. It's co-located with Microsoft's new Innovation Center, the second so far in the U.S.
The opportunity? American Express reports that Georgia leads the nation in the growth of women founding companies. But it's only #25 when it comes to scaling those companies into top-revenue producers. Thus, there's a critical gap between the entrepreneurs that the state produces, and the investors who should be fueling their scaling.
Global innovation leaders like Microsoft paired with local innovation leaders like Reed are the type of natural power couplings occurring across the country that help money flow.
2016: female founders set the pace
2015 saw major leaps forward for female founders. In 2016, women entrepreneurs are stepping up the pace even more. Investors and corporations who want to keep up, like Kapor Capital and Intel, have the opportunity to reap substantial financial, as well as social, rewards.
(Disclosure: I am the founder of the first venture fund that invests in gender-diverse technical founding teams, Valor Ventures. )