I knew about the statistics. Today, roughly 2% of female founders receive venture capital (VC) funding. Women of color (WOC) receive, on average, around 1% of total VC funding each year. Before joining the Wharton Social Impact Initiative’s WISE project around gender lens investing, I thought this problem could be solved simply by directing more capital to female founders and founders who identified as women of color.
However, I recently learned that this solution was shortsighted. In reality, the myriad of challenges in every step of the investment process also feed into the gap of VC funding that women and women of color receive.
The Task
As a WISE Fellow, I worked alongside WOCStar Fund, an emerging VC fund that will invest in tech startups founded by women of color. The founders believe that not only is it impactful to invest in women, but more importantly, it is smart, profitable, and will drive innovation and grow economies globally.
Along with my WISE Fellow teammate Falon Dominguez, WG’20, I developed a robust and comprehensive investment process and created a point-of-view (POV) on blockchain, an area in which the WOCStar fund is keen to invest.
We thought about our goal: to create a robust, vigorous due diligence process that acts as a signal to not only the founders, but also to the market and VC community at large.
To help develop the investment process, I thought about what I learned in Prof. Luke Taylor’s class on VC and the Finance of Innovation. We learned that the most important factor VCs care about when deciding to invest in an early-stage company is the team behind the company. The second most important factor is fit, followed by product, business model, market, and industry. With that in mind, we made sure we obtained as much information about the founding team as possible. This meant, for example, asking them for a 60-second elevator pitch video during the first phase of the process, rather than waiting until the second or third phase.
Next Steps
With priorities aligned, we then focused on creating a vigorous investment process, one in which founders went through several rounds of due diligence. In return, we created a “Leave No Woman Behind” policy, as a commitment to providing clear, direct, and consistent communication at every stage of the investment process. The goal was to skip the lip service, low-value feedback, and limited access to general partners that WOC founders frequently encounter.
For the second part of the project, I had to develop my own perspective on blockchain and its applications across sectors and industries before creating a POV on the space. Initially, I was overwhelmed by the sheer amount of information and blockchain resources that were available, from blogs and white papers to tweets and podcasts.
There is, however, a visible shortage of women in blockchain. As I researched more and more, I became concerned that WOC founders and entrepreneurs would be discouraged by the lack of women, particularly women of color. To mitigate any potential frustration, I highlighted several women founders in blockchain, as well as women who are vocal in the blockchain community. My initial blockchain market research revealed that, while the educational resources are plentiful, they are lacking in reach. As WOCStar Fund continues to attract entrepreneurs who are using technology to drive innovation and solve large-scale problems, the team will simultaneously use their platform to educate and inspire the next generation of WOCStar founders and the diverse startups teams that include them.
As I look back on the project, I believe that our efforts will make an impact for women of color in the future who are seeking funding to grow their businesses. WOC can know with confidence that there are investors out there who have put a substantial amount of consideration into their investment processes and educational materials, so that they can continue building impactful and successful companies. More importantly, we are helping close the funding gap and unlock untapped innovation, technologies, and products. I think our future just got a bit brighter.
— Chanelle Lansley
Posted: February 4, 2019
