Women-led funds are succeeding despite obstacles

Even as they become more powerful in the venture ecosystem, women must overcome unique challenges when they are fundraising.

As the number of women in the venture industry grows, so too does the amount of capital they raise for new funds. And yet, women-led funds raised less than 2 percent of the $166 billion raised by venture firms globally in 2022.

Julie Castro Abrams, co-founder of early-stage venture firm How Women Invest, told me in May that there has never been more women with as much power and wealth as there are now, but that “only 1.4 percent of all asset managers are women and people of color. The number is so small they had to combine those two groups!”

To address that issue, Venture Capital Journal has put together what we believe is the only list focused solely on women-led VC firms that have started marketing or have closed a fund since the beginning of January 2022. We hope our list of more than 100 firms will help LPs find the women in the market with funds.

See our exclusive list here.

As part of my reporting on new women-led funds over the past year, female VCs have told me about several unique issues they face while fundraising. Here are three key pieces of advice that successful women-led funds shared with me.

1. Seek out other women

The median size of the funds in our list is just $17 million, well below what any institutional investor would consider worthwhile to commit to, especially when you consider that most women-led funds are just getting started and therefore don’t have the substantial track record LPs look for. This leaves women-led firms without access to the largest pools of capital, and they must turn to other sources for their first, second and even later funds. Abrams says finding other women, both in leadership roles at LPs and high-net-worth individuals, is one of the key ways women are able to raise funds.

“Going through the traditional process of pitching institutional LPs, the cost just isn’t worth the benefit anymore,” Abrams told me. “I’m going to the women I know. I’m having them fund it. I’m going to go to women on the boards of companies.”

2. Know your worth

There’s plenty of coverage around how diverse teams help create more successful start-ups, but what about more successful investment firms? Research cited in a 2020 Forbes article states that when US venture firms increased the proportion of female partners, they achieved 9.7 percent more profitable exits and a 1.5 percent increase in overall annual fund returns.

JoAnn Price, co-founder and managing partner of Fairview Capital Partners, was at the helm of one of the first women-led venture firms when Fairview started nearly 30 years ago. She told me in an earlier interview that having self-confidence is the most important thing for a woman when starting a venture firm.

“You have to be really confident and comfortable in what it is you know and what it is you can do,” she explained. “You have to have a belief system. If you don’t, when you’re doing something new, something that has not been done before, something where people are going to be skeptical, somewhere within yourself you have to believe that you can get it done.”

3. Have a strategy to overcome bias

Many of the women I’ve covered have told me about some form of bias they’ve experienced in the venture ecosystem. As much as we hope that we won’t let bias influence our decisions, it does, and multiple studies tell us that it is extremely difficult to avoid.

Allison McGuire, founder of communications coaching platform the McGuire Method, noted that investors like to put their money in people they trust, which is a big hurdle for a new woman-led fund trying to secure a check. Most LPs are men, and the people they trust the most are those that look like them, in other words, other men, she said.

McGuire, who has coached numerous female VCs and start-up founders, told me that trust and respect are closely related, and that both are imperative parts of the LP-GP relationship.

“What we coach women to do is focus on their authentic selves,” she said. “People will respect you more if you are authentically yourself.”

How women are treated by the venture capital industry is an issue I take personally, as my younger sister is interested in VC. If you know a woman raising a fund or starting a firm, please reach out to me at ryan.h@peimedia.com

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