Venturing Out: Closing the Funding Gap for Female Entrepreneurs

Speaker 1 [00:00:01] Hey, it’s Theresa. It’s no secret that Covid has had a devastating impact on people and businesses. But the pandemic hit female dominated industries, especially hard sectors like food services, education, retail and health care hemorrhaged workers once lockdowns began. Female participation in the workforce plummeted to a low of 55 percent, a level not seen in decades. Things have since bounced back, and according to new research from RBC Economics and thought leadership, more than eight in 10 working age women were working last year. That’s the good news. But even in this hot labour market, there remains a nearly eight percent gap between working age, men’s and women’s participation rate, and that gap doubles for women with young children. The challenges women face are everywhere, from the shop floor to the corner office to the boardroom. If we’re serious about growing our economy, we need to get serious about tearing down the barriers for women’s participation. Every year, we don’t have parity. The Canadian economy loses out on $100 billion, but boosting the share of women owned small businesses could create billions and create economic momentum for decades to come. To get there, we need to change not only who gets hired or funded, but who does the hiring and funding. And that means ensuring women have a seat at the table and have a say in major decisions. Women’s participation in the labour force is not just another economic statistic. After all, it’s a benchmark for how well we’re doing as a society and how much further we have yet to go. This is disruptors, an RBC podcast, I’m Trinh Theresa Do. In this episode and recognition of International Women’s Day, we’re taking a look at what progress women have made in Canada’s labour force, especially in high skill fields such as business and finance. But we’re also asking some tough questions about why parity for employment and funding is still an issue in Canada, even as women are becoming business owners and entrepreneurs at a faster rate than men. To help answer some of these questions, we’ve convened two figures well versed in this space. Michelle McBane is managing partner at StandUp Ventures, which invests in women-led startups and just secured more than $30 million in initial capital for its second fund. RBC, full disclosure, is an investment partner contributing $5 million over the past few years, and Laura McGee is CEO of Diversio, which uses AI technology and human expertise to help organizations create tailored diversity and inclusion benchmarks against their peers. Laura Michelle, welcome to disruptors.

Speaker 2 [00:02:50] Thanks.

Speaker 3 [00:02:51] Thanks for having us today. I really appreciate it, and it’s always good to see Laura on the other side.

Speaker 1 [00:02:55] So I’d like to start with a perception about women and access to capital. Namely, their supply of capital is not the issue that there are lots of funds ready to be accessed by women entrepreneurs. And yet female-led startups get a tiny fraction of the total VC funding worldwide. I think Crunchbase data recently showed that in 2020, the proportion of dollars to female only founders declined to two point three percent, which is tiny. So what’s going on? And Michelle, I love to start with you.

Speaker 3 [00:03:23] Sure, it’s been an ongoing evolution, I would say, of investing in women that are co-led ventures. And so the numbers are particularly low when it’s 100 percent female founding team and where we focus and where we invest is at this stage because that’s where often the typical pattern recognition that you’ll see VCs and investors look for so successful founding team or telling a really, really big story that may or may not be something you can achieve or pitching folks across the table who don’t look like you. That’s where the challenge is really at the seed stage for. For folks who aren’t part of the flow to raise money, it’s always challenging to raise venture money. It’s challenging for any business. And not all businesses are venture great deals. But when you layer some of these other elements there, it makes it particularly challenging. So our goal is to get companies through that seed phase where there’s very limited data, very limited metrics, right? So that is that first piece. The second piece is often women are building companies that not all investors truly understand, and we do focus more on the traditional VC B2B enterprise. But many women founders are disrupting other industries, and that may not again be well understood by the investor across the table. So the other thing you’re seeing, particularly in the U.S., are a whole bunch of new funds focused on exactly those types of businesses. And those are also the emerging pools of capital in the new groups who are raising funds to invest in a different kind of business.

Speaker 1 [00:05:03] Michelle, you mentioned a lack of pattern recognition that some of their ventures are not as well understood. Laura, I want to turn to you. Could that be in part explained by the underrepresentation of women in these VC firms?

Speaker 2 [00:05:14] I think that’s a big part of it in our research and our experience it comes down to. And I’ll give you maybe the data and then our experience as a startup. So on the one hand, the data tells us that women are less likely to ask for capital. A lot of that comes down to women often prefer loans to equity. But also, there’s that scale of having a network that helps you go in and ask and value your business and ask for a significant amount of money. And then on the flip side, when they do ask where they’re less likely to receive it, I mean, we struggled to raise early on. Michelle is, I think, an outlier, an exception of someone who said, I think that this business has legs, others. The primary objection that we heard is we don’t believe that this market is willing to spend money. We don’t believe that diversity and inclusion is something businesses will actually pay for, and we’re not completely convinced that it’s going to improve business performance. And that assumption was wrong. We obviously bootstrapped and did incredibly well and raised a series on fantastic terms when we didn’t have to. And I think looking back now to a powder team on the back that we saw an opportunity that a lot of men benefiting from the existing work system we’re benefiting from. And it was hard for them to, I think, sometimes see a future that looked a bit different than that.

Speaker 1 [00:06:29] It reminds me of when I was in grad school four years ago, I organized a panel discussion on innovation and we had featured a VC investor, the founder of a tech ecosystem, organization and policy expert and a female entrepreneur. And I was honestly quite shocked at how open and cavalier the discussion got about how the reasons why women were not funded and the investor had said directly that they didn’t. IT funding because they were deemed not ambitious enough or they look like they were a motherhood, pregnancy age, and so my go away and have kids or they might lose momentum or they just overall didn’t seem as committed as men. And I mean, these are hurdles I’m sure you both are not unfamiliar with at all. I’m curious, Michelle, how are you set up differently to eliminate those biases?

Speaker 3 [00:07:12] We do catch ourselves as well. I think we intentionally catch yourself with some of our biases. In fact, I have seen so many pictures over the past two weeks where I’ve challenged the founders to actually raise more money than they put out there. You know, if they believe in this, they really believe that they’re ready to spend some money. And I’m not talking about, you know, if you want to raise one go race 10, I’m saying if you want to raise some fifty one should raise one and a half to two, right? Just just really think about it a bit more broadly. And I’ve been seeing that as I as I reflect on that right now. I’ve been seeing that a lot over the past the past two weeks for some reason. And so what we try and do is intentionally think about the way we engage. It’s very clear on our website what we believe in and why we do what we’re doing. I would say the founders, we’ve made 16 investments now since we started. The founders have now started to tell our stories. And what I’m also seen is I’m just so excited by this. The founders in our portfolio who’ve gone on to raise some substantial rounds of financing and have gone through, you know, when to turn to 50 to 200 employees are now coming back and spending time with the younger generation of founders, the first time founders and sharing their stories. And I think that, to me is what’s particularly unique is the power, the community that we’re building, and that’s what we’re really doubling down on

Speaker 1 [00:08:33] as an investor. To what extent do you encourage or influence the companies you invest in to implement some of those D&I efforts or ESG in their organizations,

Speaker 3 [00:08:43] so we don’t in the early days? Our view is that if you have and we focus on gender primarily, but if you have a more gender balanced leadership team, founding team from the get go, that’s going to trickle down and you’re going to be naturally going to be able to attract a different pool of talent. And so that’s proven to be very true and we just updated our data. But from memory overall in other employees and in all of our portfolio, 50 percent are women versus the norm. Gosh, I don’t know, Laura, 10, 15 percent in the tech startup world, there are 38 percent women on boards and all but one company has a woman on the board. So different, different other level of leadership. So the 50 percent in senior leadership, 42 percent of women overall, and we measure that regularly. And so that’s our thesis in action. And it’s really not surprising. I often talk about Uber because they’re not here, but in the early days, you know, everyone looked and felt like that CEO. And because you hire her, you know, in the early days, then you hire from your pool of talent. And it’s been fascinating to watch. So do we actively put different programs in place? We don’t at the early days and we just they just kind of naturally evolve such that when you have to start implementing them, they’re already happening.

Speaker 1 [00:10:01] Yeah, well, that’s really an encouraging statistic. 50 percent. And Laura, I want to turn to you and February diverse you and the Canadian Venture Capital and Private Equity Association released a survey on the state of diversity, equity and inclusion in the private capital industry. I’d love to hear what were the findings that most surprised you from that research?

Speaker 2 [00:10:20] I would say the first thing that surprised me about that effort was actually how willing VC firms and private equity firms were to engage and how different the conversation is now that it was three five years ago when it comes down to the actual data. There was some improvement on gender representation in venture capital, racial and ethnic diversity in Mudrick Capital. So I think we are seeing some improvement on representation. For me, the most meaningful findings are on that inclusion piece. And so what experience are our investors having when they’re sitting at the partnership table, when they’re trying to make their way up the associate track? And so some of the key barriers that we saw come through are, for example, women at the partner level are struggling on a few metrics. So things like do they feel like someone senior to them is invested in their career development? We saw about basically half the degree of confidence among women, as we did among men. Workplace flexibility is another example. Women are saying that they are not always able to balance their work and home care responsibilities. It’s not about working fewer hours, it’s about working them flexibly. And so I think servicing those opportunities for how do you create a workplace where women and other diverse employees are able to do their best work, put their best ideas forward? That’s a real opportunity area. Yeah.

Speaker 1 [00:11:35] And I really appreciate how we are advancing the conversation from diversity to inclusion, and I hear this phrase a lot. Diversity is what you have or don’t have. An inclusion is what you do with it. Laura, can you explain what you mean by inclusion and how does diversity track it?

Speaker 2 [00:11:51] Right, so. I and everyone completely agree, and we are obsessively focused at divers here. How do you improve business performance through diversity and inclusion and getting the right people at the table is really half the battle? And so for us, when we started early on, the first problem statement was how do we find the concept of inclusion? How do we define a concept of allowing everyone to bring their best selves to work, be engaged, be productive, you know, hit those targets. And so what we did is we worked with academics and we came up with basically a framework that looks at six key metrics that are measurable. Objective can be compared to peers and collectively define what it means to have an inclusive workplace. So you’re looking at things like inclusive culture, for example. So whether your opinion is valued by your team, obviously critically important in the investment industry, which is all about, you know, the marketplace of ideas and getting to the right answer all the way to things like workplace safety. So is the workplace free from harassment? Mental, physical, sexual, which you know for obvious reasons, not only inhibits performance but creates meaningful risk in a social media era where MeToo scandal will absolutely bring down your business?

Speaker 1 [00:12:59] I would imagine that as a as a leader in an organization that that can sometimes be really hard to track and I am very curious. Michel, have you experienced any challenges just measuring inclusion?

Speaker 3 [00:13:10] So I’m just starting to peel that back. And so with the CDC report was very much focused on the capital allocators and at the venture level and measuring it there. I’m excited to start thinking about how we can share this with our portfolio, and I know Laura has done some work at diversity with some of the Canadian companies and measured across some VC funds the inclusion metrics in their portfolios. And I think there’s been some pretty interesting data there. The other piece is, you know, when we did the CBC benchmark report, it was to benchmark and it was seen when we do this again in two years from now, has some action been taken and has there been some changes then? What we did find just simply at the VC level is the women partners from a study that was done two years prior to now have gone up from was it 12 to 19 percent. So already a significant movement in two years of more women at the partner level allocating capital. And I think that’s the first step that you have to have to start kind of trickling down into the investment space. So. So I’m pretty excited to start thinking about how we could work with diverse you at the portfolio level because I think there’s some pretty interesting opportunities there. And the founders are ready for it.

Speaker 1 [00:14:23] This has been really energizing, but we’re going to take a quick break. Coming up more of my conversation with Michelle McBain and Laura McGee.

Speaker 4 [00:14:35] You’re listening to Disruptors, an RBC podcast. I’m Dawn Desjardins, deputy chief economist at RBC. As you’ve heard off the top, RBC Economics has just released a report called The Turning Point Leveling the Playing Field for women in Canada’s labor market, and we look at the importance of boosting women’s pay and participation in the labor force and tackle some of the solutions, like establishing greater parity between maternity and paternity leave and reducing the financial burden of taking parental leave, creating more opportunities for upskilling and pathways for women into senior roles, and recruiting more women into the skilled trades. To learn more, check out the link in the show notes of this episode and visit RBC dot com slash thought leadership. And be sure to follow disruptors wherever you get your podcasts.

Speaker 1 [00:15:28] Welcome back. Today, to commemorate International Women’s Day, we’re talking about how Canada’s VC industry can better support female investors and entrepreneurs. With my guests Michelle McBain from StandUp Ventures and Laura McGee from Diversio. I’d like to dig a little bit deeper, so in my reading of the CVCA report, I noticed there were findings for how women experience the workplace. Findings for how racialized people experience the workplace for those disabilities and people who identify as LGBTQ 2+. And perhaps I minute missed it, but I was curious as to why there was not more mention of people who fall into more than one category. And so I guess, Michelle, how would you go about addressing these barriers for women who live at the intersection of different identities?

Speaker 3 [00:16:12] Oh, that’s a really great question. I’ll tell you, when I first started this fund in 2017, the questions I was getting around, you know, finding women just as the start was, well, venture funding should be around meritocracy and there really isn’t an issue and, you know, all these sort of things. So I think that, you know, the second part of the journey and really bringing everything to the table, and we’re very intentional about working with as many founders as we can. But for us, that means us going out and meeting founders that spend a little bit more challenging, you know, attending events and doing all that other stuff. The flip side is making sure at the funnel, at the top level that we’re seeing everyone that we can. We try to contribute where we can, even if a company’s not a fit, but at least meeting with people, having a conversation with the founders and getting to know them. And so do we have something formal in place? We don’t? Do we think about it? Are we as intentional as we can be about it? I think we do an OK job on it and we can always do better. It’s about how we how we just to track as broad a pool ourselves of founders to stand up. So I think

Speaker 2 [00:17:19] it’s such a good question. I think size does come into play. So to your question around intersectionality, when you get to a certain number of employees that allows you to protect their anonymity, it is critical to look at things like does someone identify with one two three four even non-dominant characteristics in the organization? And we do see it’s a capability of our dashboard. Significant differences if you deep dove and white women, for example, and women of color. For most organizations, that gap in terms of exclusion does grow. So I think the implication here is, you know, you have to know where the barriers are and what kind of individual is affected and the more granular like any other kind of part of your business, the more granular you can get, the more precise you can be with solutions and interventions. But I think it also your earlier point really does, I think, reinforce you can’t assume that because you bring diversity in the door, that inclusion will necessarily result. So especially as companies grow, you need to keep an eye on creating that culture. Some of the most inclusive leaders I’ve ever worked for have been straight white men. Some of the most inclusive leaders I’ve ever worked for have been women of color who are part of the LGBT community, so everybody has the opportunity. I think it’s critical to look at both pieces together,

Speaker 1 [00:18:36] going think about racialized female founders and entrepreneurs. What are some of the specific steps that could be taken there to support them?

Speaker 3 [00:18:42] So community has been our approach, and for us, it’s helping the founders find a community that makes sense for them, and it could be identifying by gender, but identifying by their various other identities. And it’s getting tricky because our goal is to have more women, founders, starting companies. And so we’re building that pool and it is taking probably longer than any of us would want. But I do see a lot of momentum. So just bringing more folks around the table and then helping them find their peers, you know, the Kapoor Foundation did a study and it was around tech and in some of the larger tech companies. And in fact, they found that a black woman didn’t identify with other women they actually identified with black peers. And so it’s a combination of all of these pieces of elevating folks together, making space for it. We’re just learning all the time and all I do and what I try to do as best I can is just listen and learn every time. And you know, I started with the data of what we’re seeing and what we’ve seen over four years. So if we can take that and just continue doing these different approaches across communities, I think that’s super important. And we call the firm stand up after the little girl standing up to the ball. For us, she was a role model for the founders. She’s confident, she’s curious, she’s fearless. She’s everything you look for in a founder. And so we wanted her to be the muse for the women founders. And so I think what we’ve proven is that community does matter and role models do matter.

Speaker 2 [00:20:19] I agree with everything Michelle says wholeheartedly. I actually have a very different answer around what would it take to get diverse founders funded. For me, inspiration, role models, community critical. But for me, I think an equal lever is we need straight white men at venture capital firms to personally mentor and sponsor UP-AND-COMING aspirational entrepreneurs. I had a. All today with a brilliant potential entrepreneur with this fantastic podcast company that she’s already doing is already generating revenue, incredible data and was about to go to the market and ask for about $200000 for twenty five percent of her business and had a deck. And I say this was so much love. She’s a good friend. A deck that was 40 pages long didn’t outline the size of the market and outline how she filled the business to be a unicorn. There’s like three secret things that need to be included in a deck. It’s like an exam that are not honestly well understood unless you have people in your network who have done this before. So you need, for example, what’s your line of sight through 100 million in revenue? It’s a market $10 billion or more. You know who’s on your advisory team? What is the strength of your network? Why are you the person that people are going to believe? There’s this kind of secret shortcuts that women are not always privy to? And so I think it’s going to take the veterans who have been in the industry taking those people under their wing and saying, Listen, this is how it works, and let me personally use my social capital to get you in front of the right people.

Speaker 1 [00:21:47] I want to turn to some of the other issues facing women in the workforce, especially women with children. And it’s an issue whether you’re working for somebody else or leading your own business. And my question and we can start with Laura is what role do things like child care policies or support for parental leave play in leveling the playing field in business and finance?

Speaker 2 [00:22:07] It really does vary by type of business and even within businesses. It varies by group. Often, things like flexibility are those unwritten rules of a particular team where, you know, some groups tend to not have meetings before 10am a.m. or after 3:00 p.m., which is convenient for parents. Other groups don’t have that culture. So for us, I think, you know, assessing individuals perception of flexibility is key number one, to identify where there’s a problem and then there are really high impact proven programs and policies that can have can make a difference. So, for example, when one of my favorites is having four hours. So scheduling all meetings between 10:00 a.m. and 3:00 p.m., which allows parents to do what they need to do in the morning or after school, you know, other things like shared hours, shared scheduling. Sometimes two people can do the work of one, and those two people now have twice as much time off, which benefits both of them and doesn’t hurt the business. So I think there are a lot of shortcuts, a lot of hacks that can be implemented that have been proven and don’t just really it’s a win win.

Speaker 3 [00:23:08] What’s been really interesting through COVID cover, it was really challenging for parents and families in the early days for all the reasons we know well. But what you saw happening after was a really efficient process for raising capital. So one of our founders just sat in her living room and had meeting after meeting, after meeting and within, you know, three weeks had a term sheet. And it was because the partners that the funds weren’t traveling, you could get to them fairly easily. They were open to taking meetings. Their whole lives were more efficient because they didn’t have to travel to board meetings. And so it was really, really exceptional and how you could run a process. And in fact, last year we had a founder who was. We just realized they were growing really, really quickly and were like, Oh my gosh, you should be out fundraising, but oh dear, you’re eight months pregnant. Why don’t you give it a go anyways? And she agreed, and so she could fundraise because she’s sitting behind the camera. And so that bias a woman who’s eight months pregnant walking into your boardroom isn’t there. You actually listened to her story before you saw that.

Speaker 1 [00:24:12] Our final question, companies can do a lot to shift the balance. But I want to ask about the role of education and media representation. There’s been tons of studies done that show how in articles about entrepreneurs, only men tend to be quoted as experts and a lot of entrepreneurship courses in university and college. They’re typically taught by male instructors who then bring in male guest speakers and then that reinforces these long held stereotypes. Laura, how do we change the perception of what it means to be an entrepreneur?

Speaker 2 [00:24:41] I recently spoke a good friend of mine is at Stanford Business School, which is kind of undeniably one of the best business schools and her biggest complaint and shared among classmates is they have no class on how to bootstrap a business. The entire curriculum is how to raise capital, how to get to the most important VCs, how to get that big stretch valuation. And what we’re seeing is a lot of women and actually a lot of men as well. They want to keep their equity, they want to build a sustainable business. They want to focus on the piano. You know, education role models needs to showcase not just another gender, but another way of doing business and building a company. And that’s going to benefit an equal opportunity for all individuals in society. So I think it’s critically important the role modeling piece. I think, you know, similar to the information sharing I love how you put it, Theresa, is all about showing people how it’s done and who can do it. And that role modeling, I think, is not just for the entrepreneurs who are up and coming. It’s for the VCs and showcasing like, Look, when this person walks into your office eight, nine months pregnant, let’s look at Joanna, who founded Knix, and let’s look at the massive success story that that company was. And you better not miss out because she’s probably running a business that has a good piano. It’s profitable. That’s going back into growth. And in an industry that you and many other competitors don’t know a lot about.

Speaker 1 [00:25:58] I love that. Michelle, how do we make it easier for female led founders to succeed?

Speaker 3 [00:26:03] You know, I’m going to speak specifically to two venture backed companies because that’s our world. And the answer is the answer. That’s right for the founder, not for us. But we do need to be aligned because if you are going to take external money, take partners in your business, you have to understand what our expectation is because of the promise that we make to our investors. So what we try and do is really talk founders through that journey from the very beginning and share with them, you know, any good readings. And we really encourage them to think deeply about this being the journey they want to go on or not. And then the other piece, you know, as Laura said, like, don’t give up too much equity. We my colleague actually had a thread on Twitter about raised more than you need and actually sure that you know that a valuation that is good for you because otherwise, you know, we’re not at the front of the line building the business. And if you’re not feeling alignment and and you, you’re motivated by your equity to build something, then it’s just not going to work for either party.

Speaker 1 [00:26:59] Those are extremely helpful tips for entrepreneurs and Laura. Michelle, thank you so much, both of you, for your time today and for being on the show. Thank you,

Speaker 3 [00:27:07] Chris.

Speaker 2 [00:27:08] It’s great to have to get.

Speaker 1 [00:27:11] So this has been my favorite conversation I’ve had on disrupters thus far, especially on a topic so important to me. It was animating to hear from both Laura and Michelle on the tangible steps to improve outcomes for women investors and entrepreneurs. I particularly loved Laura Straight-forward tips on the key questions female founders need to answer when making a pitch and shocked to learn that it’s not something most women are aware of the simple solution to just tell them transfer that knowledge. And I was encouraged to hear from Michelle about the support of community she and stand up ventures is creating around female founders. It reminds me of something I read recently about the effect of hiring women leaders on the rest of their organization. After General Motors named Mary Barra as CEO, an interesting trend emerged at the company. People began associating leadership qualities like decisiveness and assertiveness with women throughout the firm. Could simply tapping women for leadership roles changes how an organization perceives women? There’s lesson in there for investors, founders and companies everywhere. Thanks again to our guests Michelle McBain and Laura McGee. Next week, join us for the latest tech and innovation buzz with our 10 minute tech series. Until then, I’m Teresa Do and this is Disruptors an RBC podcast. Talk to you soon.

Speaker 5 [00:28:35] Disruptors, an RBC podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. It’s produced and recorded by Jar Audio. For more disruptors content, like or subscribe wherever you get your podcasts and visit rbc dot com, slash disruptors.

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