A new global consortium to address the gender funding gap is seeking to mobilise as much as $1 billion to invest in women-founded companies within the next decade.
Called The Billion Dollar Fund for Women (TBDF), it plans to invest $100 million in such startups by 2020. The consortium has so far secured pledges of over $460 million from global investors including Gobi Partners, Golden Gate Ventures, Rethink Impact, Springboard Growth Capital, Backstage Capital, Different Funds and others.
According to a release, Gobi Partners has pledged to invest $50 million in women-founded startups by 2020. The venture capital firm said it has so far invested about $30 million in such startups in sectors including agritech, e-commerce, fintech and property management.
TBDF is led by managing partners Shelly Porges and Sarah Chen and co-founders Anousheh Ansari, Nadereh Chamlou and Anu Jain. Its $1-billion target includes re-investment efforts from the initial $100 million.
Citing data from the US, the consortium pointed out that all-women companies received just $1.9 billion or 2 per cent of the total $85 billion invested by venture capitalists in 2017. Women-founded companies also often struggle to expand their capital base or increase their capacity to invest.
“Having ourselves experienced the challenges faced by other female founders and seeing latest research showing that women-founded businesses deliver higher returns, we are thrilled to be able to bring together our combined knowledge, experience and, most of all, networks in finance, technology, and entrepreneurship to mobilize capital for female founders and innovators,” said Porges.
“This is the first time we’re seeing a consortium linking all venture funds in a single voice to invest in women. We know our bargaining position will be different in the eyes of institutional funds we have already been in talks with,” said Chen.
Backers of the consortium say the move makes business sense. “Gobi has seen real empirical data and real financial performance that come from women-led companies to date, as one-third of our total portfolio are women-founded companies… We are absolutely thrilled to be part of this initiative by TBDF and will do our part to help bolster and address this vastly underserved market,” said Gobi Partners venture partner Shannon Kalayanamitr.
In addition to raising capital for women-led companies, The Billion Dollar Fund for Women also aims to inspire larger investors to see these funds as an opportunity to diversify their portfolios, especially in areas of gender, environment, social and governance.
The latest consortium joins the ranks of other women-focused funds such as Female Founders Fund and Halogen Ventures, both of which target female-led technology companies.
New York-based Female Founders Fund closed its $27-million second fund in May, with previous investments in companies such as Rent the Runway and Shine. Female-led SoGal Ventures, which has offices in Singapore, China and New York, takes on investment themes focusing on how the next generation lives, works and stays healthy.
Others tackle gender as part of driving a wider diversity agenda. Los Angeles-based Backstage Capital, for instance, invests exclusively in black, LGBTQ, Hispanic and women founders through its $36-million diversity fund announced earlier this year.
Earlier this year, Aileen Lee of Cowboy Ventures launched All Raise, a non-profit aimed at increasing the amount of funding female founders receive. Its primary goals include doubling the percentage of female investment partners at tech VC firms over the next 10 years and increasing the venture funding going to teams with a female co-founder from 15 per cent currently to 25 per cent in five years.
Q&A with Sarah Chen, Managing Partner, The Billion Dollar Fund for Women (TBDF)
1. How did the idea of TBDF come about?
If you look at the founding team, all of us have played one part or another as venture capitalists or entrepreneurs in philanthropy and international development. Over the years, we have seen VCs fall short when it comes to women founders. We saw an opportunity to coalesce to change the paradigm.
One of the key issues we identified is the lack of ability to continue investing, despite the best intentions. We believe that the past efforts have been fragmented and the capacity to pump in continued capital has been lacking without larger backers such as institutional funds.
This is the first time we’re seeing a consortium linking all venture funds in a single voice to invest in women. We know our bargaining position will be different in the eyes of institutional funds we have already been in talks with.
2. How has the response been like so far?
The response has been overwhelming! Our initial goal was $100 million pledged to be invested through 2020, and now we’ve hit $460 million. The $1-billion target includes re-investment efforts from an initial $100 million through a ripple effect. The goal was to do this within 2028, but I believe it will be earlier than that.
3. What is your investment focus, apart from investing in women-led companies?
Our focus is in the following areas:
– Increase investment into women-founded companies
– Include women-founded companies in deal flow and highlight to investment committee
– Provide feedback to women founders we decline
Our ticket sizes are between $250,000 to $10 million or more depending on the funds who sign our pledge.
What we are addressing is an unconscious bias in the investment community. The larger institutional investors like pension funds and sovereign wealth funds tend to have a legacy investment model. They tend to invest in people with an attributable track record, which creates a vicious cycle if you think about it. What happens is that they don’t invest in smaller funds, especially those that are smaller than $100 million. The challenge is further compounded when women entrepreneurs are already facing difficulties finding the right backers.
What we want to do is provide a platform through a $1-billion fund to highlight the successes of all these funds and encourage larger institutional funders to break the mould to back what really matters.
4. How different are you from SheEO? They’re also raising $1 billion for women-led entrepreneurs.
We are not an angel network or a non-profit, like SheEO. I believe we play a bigger game of catalysing venture funds to create impact.