Most of Australia's startup funding comes from men, and goes to men. Here's why that's a problem.

Women are significantly underrepresented as venture capitalists and as startup founders in Australia and New Zealand.

This has flow-on effects for the pipleine of diverse female talent, according to top Australian and New Zealand venture capitalists.

LinkedIn News Australia asked five leading VCs — whose firms are investing in women in order to boost representation across the tech and startup sectors — what the consequences of this disparity are, and how to fix it. They are:

1. Phoebe Harrop from Blackbird Ventures , who was recently appointed as General Partner at the firm.
2. Laura Warden from Folklore Ventures , which has one of the best records of backing solely women-led startups, representing about 30% of deals over four years (compared to the average of 8%).
3. Will Richardson from Giant Leap , which in the last four years has allocated more than 60% of its deals to female-only or mixed founding teams.
4. Alexandra Clunies-Ross from Artesian (Alternative Investments) , which has a Female Leaders Fund that only invests in startups with strong female representation in the founding team.
5. Jackie Vullinghs from Airtree , whose Explorer Program helps people from under-represented groups across Australia and New Zealand become angel investors.

Read through their responses below, and if you would like to learn more about what is needed to drive equitable outcomes for women at work, then check out these Top Voices’ insights and share your thoughts in the comments below or in a post using #IWD2023.

Why are there significantly fewer female VCs compared to males?

Phoebe Harrop, General Partner at Blackbird Ventures

"There are two issues. First,?you can’t be what you can’t see. Women are more likely to consider a career in VC if they can see other women who have succeeded there. They might also be more likely to get hired, mentored and developed by another woman.

"I’ve been lucky to work for female General Partners both at Generation, where I started my investing career; and now at Blackbird. That’s incredibly unusual. There’s also a pipeline issue. Great investors come from all sorts of backgrounds, but most fall into one of three buckets: former tech founders, experienced tech operators or people like me with finance and consulting backgrounds. Across all three groups women are under-represented."

Laura Warden, Head of Operations at Folklore Ventures

"While we’re starting to see this shift, the VC, finance and tech industries have been male-dominated. It’s a complex issue that stems from a lack of representation in STEM, unconscious biases and other obstacles preventing women from pursuing careers in these industries."

Will Richardson, Managing Partner at Giant Leap

"VC is a relatively new industry segment of the financial markets and much like its traditional counterpart is heavily skewed to males. In addition, the Australian VC industry is over-represented by people who formerly worked in or led technology companies and investment firms; these industries are predominantly male skewed."

Why do we need more female venture capitalists?

Alexandra Clunies-Ross, Portfolio Manager at Artesian

"Australia, and the broader Asia Pacific region, needs more female VCs to bring a greater diversity of views into the investment process. People tend to invest in ideas and in teams that they can relate to. With fewer women in investment roles there are correspondingly less female founders, receiving relatively smaller amounts of capital, less diverse teams, and also less role models to inspire future gender diverse investors and founders."

Jackie Vullinghs, Partner at AirTree

A diversity of experiences around the decision-making table leads to more variety in perspective, fewer blind spots and, ultimately, stronger ideas. This will lead to better returns for limited partners in the long term."

Phoebe Harrop, General Partner at Blackbird Ventures

"As a group, VCs decide which founders get support to turn their visions into reality. Having diversity in that decision-making group can only lead to better capital allocation, and gender is only one important facet of diversity. In Aotearoa, we have an even more pressing problem around Māori and Pasifika representation in our sector. Early-stage investors need an unusual mix of empathy, incisiveness and strong networks. Many women have all three, and make great investors."

Laura Warden, Head of Operations at Folklore Ventures

"Diversity of thought leads to successful business outcomes and growth of the Australian startup ecosystem. More women investors can positively impact the amount of capital that flows to women founders due to their acute awareness, empathy and mentorship for women founders. On the flip side, women founders can feel more supported, especially during negotiations, by women investors. At Folklore, we’re committed to bringing more women into VC and we have a program to support this coming soon. Watch this space."

Will Richardson, Managing Partner at Giant Leap

"By excluding women from the venture capital world, we are excluding half the population and that can’t lead to good decision making. A simple example of this is that teams with higher gender diversity in their leadership outperform other businesses financially by 25% and we believe this is true for venture capital funds as well. 波士顿谘询公司 found that women-led businesses generate 12% higher revenues annually, using an average of a third less capital than their male counterparts. BCG also found that if women and men participated equally as entrepreneurs, global GDP could rise by approximately 3% to 6%, boosting the global economy by $2.5 trillion to $5 trillion.

"There is research to show that in general, women tend to found more impact-focused businesses. We also see this in the data we have collected from reviewing over 6,000 investment opportunities since Giant Leap began in 2016.?Australia needs to continue to innovate to compete on the world stage. This is made more complex by the massive social and environmental issues our globe is facing. Allocating more capital to startups with more diverse leadership is likely to lead to favourable outcomes for Australia’s economy, jobs and our environment and community."

How does having fewer VC founders impact the pipeline of female talent at a founder and employee level?

Laura Warden, Head of Operations at Folklore Ventures

"The consequence of this disparity is multifaceted. There is a root issue of the disparity of women studying STEM, leading to fewer women founders of VC-scale tech businesses. However, we believe bringing more women into VC has a number of follow-on effects, including more capital and support going to women founders, more diversity across the startup ecosystem and more opportunities for women across the board, including in tech roles."

Phoebe Harrop, General Partner at Blackbird Ventures

"On the talent front, we’ve seen from our own portfolio that female founders magnetise more women in senior leadership and more gender diverse teams overall. The same search for mentorship exists within startups as within VC funds. So, yes, more female-led startups should attract more women into tech jobs. It will take time to shift investors’ mental models of what a successful-founder-in-the-making looks like. Impressive women like Mel Perkins at Canva , Flavia Tata Nardini at Fleet Space Technologies and Laura Bell Main at SafeStack help expand our imaginations."

Venture funds with women on their teams have been found to invest in women founders 70% of the time. Why do you think this is?

Phoebe Harrop, General Partner at Blackbird Ventures

"One factor at play is probably the familiarity bias: as an investor you’re more likely to trust, and want to work with, people that are similar to you. Male founders have long benefited from this, now female founders are too.?On the other side, female founders might be more comfortable (or successful) pitching female investors, and when they’ve got multiple term sheets on offer they may choose to work with another woman."

Laura Warden, Head of Operations at Folklore Ventures

"Representation drives results. But it’s important to call out that women alone should not be responsible for investing in women; all investors have a role to play in creating a diverse and inclusive ecosystem and fuelling funding equity."

Will Richardson, Managing Partner at Giant Leap

"Humans naturally look at the world through their lived experience and this results in bias. When there is an absence of diverse perspectives, it is more likely that the group’s perspective will be more homogenous and skewed. Rebalancing teams to be more reflective of the general population will naturally lead to different perspectives and decisions."

The share of funding received by solely women-founded businesses fell from 3.8% between 2017 and 2021 to just 0.7% in the 2022 financial year, according to data from Deloitte. Why is Australia struggling to make improvement in this space?

Phoebe Harrop, General Partner at Blackbird Ventures

"That’s disappointing. There are so many factors at play. In addition to the pipeline and mentorship challenges, and potential for unconscious bias among investors, there’s an ongoing gender parity issue that female founders face. We work with founders for a decade or more. Most of them are, or become, parents during that time. The reality for many women is that they are the ones who take primary carer responsibility, as well as a far greater share of household responsibilities — the very thought of that can be enough to dissuade women from even considering building both a startup and a family. Annabel Crabb ’s excellent book The Wife Drought goes into depth on Australia’s challenges here, and potential solutions."

Laura Warden, Head of Operations at Folklore Ventures

"Comparatively, Australia is stronger performing than its global counterparts, such as the US. That said, we’ve still got a long way to go. The 2022 State of Australian Startup Funding report showed that one in three of the top VC funds in Australia didn’t invest in a woman founder last year. It’s great to see that investments into women-founded companies saw an uplift at the pre-seed and seed stages last year, but we need to see a concerted effort to open up access to capital and support across all funding stages."

Will Richardson, Managing Partner at Giant Leap

"If you look at the numbers, half of Australians are women. There is ~$3b in superannuation funds who are major investors in VC funds. The super fund members who are women would no doubt want better representation of women receiving VC. There is a lot of talk around ESG. But, what is measured matters and since the super funds do not put those requirements on the VC managers then there is little impetus to change.?Mandatory reporting could be introduced to ensure VCs report on areas such as the percentage of deal flow they are receiving from women-led startups and the percentage of capital invested in women-led startups. Increasing transparency would drive better conversations between super funds and VC managers and would no doubt increase the flow of capital to women founders."

How do we get more women into senior positions at VC firms?

Alexandra Clunies-Ross, Portfolio Manager at Artesian

"We need to both seek them out and train them. Most women coming into this space won't have VC experience, but are no less valuable than their male counterparts. When I started in this space I had little to no experience, but I was trained by the partners in my firm, I have been encouraged to challenge the status quo, and my alternative perspectives have been put to use as an investment principal and been promoted accordingly. The industry needs to be willing to train women to become investors as well as ensure our hiring and investment processes are free unconscious biases."

Jackie Vullinghs, Partner at AirTree

"Venture capital as an industry hasn’t done much to disrupt itself, despite using its capital to fund disruption in other industries. The steps and initiatives we have in place at AirTree to dismantle the status quo and create a step change in the ecosystem are three-fold:

1. We publicly share our own data: 50%?of our partners are women, 25% of our investment team are women. As one of?the few firms with equal representation at the most senior level, we’re here to support and advocate for the next generation of senior VC talent?across Australia, but we recognise we still have work to do maintaining?representation at the junior level.
2. We believe in the power of?communities to affect change. AirTree’s Explorers community is training the next generation of women investors. Two Explorers have gone on to full-time senior VC investing roles
3. Representation matters, and you’ll see a deliberate and consistent commitment to promoting stories of women founders and funders across our internal and external activities."

Laura Warden, Head of Operations at Folklore Ventures

"This comes down to the equity and inclusion aspects of diversity, equality and inclusion. One way in which VC firms can create inclusive environments for women is through considered policies, such as transparent pay bands, parental leave, flexible working conditions and providing mentorship opportunities, as well as elevating networks such as the community that VC Women Down Under has created."

Will Richardson, Managing Partner at Giant Leap

"There is no single silver bullet for this issue. Some of the factors that we believe are important include:

1. Role models: It is hard to imagine yourself somewhere when you can’t see anyone like you. There have been some incredible trail blazers like Brigitte Smith , Dr Michelle Deaker and Kerri Lee Sinclair who are very senior early stage investment professionals. We need more and it is great to see leaders like Kate Morris transition from being a successful founder to an investor.
2. Combating bias in hiring: Giant Leap uses Applied to remove unconscious bias from the hiring process, whilst also making clear that no investment experience is required for our roles. We are of the opinion this increases access and has been a key part of us hiring amazing women investment team members.
3. Creating conditions for success: senior roles often require raising capital which is incredibly hard. It is even harder for women as research shows men often have stronger business networks for a range of reasons. At Giant Leap, we seek to help contribute to the ecosystem by supporting organisations that help women succeed and opening up our networks."

News Editor: Marty McCarthy