The Significance of Gender Balance in Private Equity and Venture Capital

In the private equity (PE) and venture capital (VC) landscape, it’s rather common to be the only woman in a room full of men. As such, it often feels like we’re playing against a stacked deck when it comes to getting our voices heard and our concerns taken seriously. But as we trumpet how the alternate capital landscape in India has matured, we must recognise that we are still falling short on gender diversity. This debilitating gap can be bridged only if we start seeing the push for gender balance as a strategic necessity rather than a vanity metric.

Gender parity stands as a vital element contributing to better decision-making processes, fostering greater innovation, and laying the foundation for sustainable business growth. The performance of the world’s top companies is strongly and positively correlated to gender balance. A study published in the Harvard Business Review reveals that women surpassed men in 84% of the competencies distinguishing outstanding leaders from average or poor ones. These competencies include taking initiative, demonstrating resilience, engaging in self-development, pursuing results, and exhibiting high levels of integrity and honesty. The findings suggest that women in leadership roles often excel due to their commitment to higher standards, possibly influenced by increased accountability compared to their male counterparts.

Additionally, ongoing research consistently indicates that teams characterised by diversity outshine those with a more uniform composition, demonstrating a range of creativity and critical thinking. Within the realm of investments, a team with gender balance is more adept at recognising opportunities, conducting comprehensive risk assessments, and making well-informed decisions that mirror a more comprehensive understanding of the market.

Yet, despite the multifaceted benefits, women face underrepresentation in leadership positions across PE-VC firms and their respective portfolio companies. A mere 15% of leadership teams in firms and 20% in portfolio companies have achieved gender balance. The scarcity of women at the executive level also complicates efforts to attract more women, creating a vicious cycle that reinforces the prevailing situation.

The only remedy is to have more diversity in leadership. To illustrate, 2.5 times more women in senior roles are present in startups with at least one woman founder versus those with an all-male founding team. Having more women at the top will lead to better recruitment outcomes for women, especially at the entry level. This will lead to the creation of a sustainable pipeline of female talent, the next generation of change-makers that the world needs.

With inclusivity being one of the cornerstones of India’s next phase of growth, it's time to shift the needle and take diversity from just an idea to a reality. The seeds of change can be sown with fund managers leading by example and influencing their portfolio companies themselves. Limited partners (LPs) should take a stand and hold themselves and their fund managers accountable with tangible, actionable, and measurable targets. That’s when intentions will translate into action. The endeavour may not be easy, but it will be one that is unquestionably worthwhile.