Setting a higher bar for female inclusion

Setting a higher bar for female inclusion

Setting a higher bar for female inclusion

A recent report from the Canadian Venture Capital and Private Equity Association (CVCA) pulled back the curtain on a gender gap in the private capital industry. Drawing from a survey of its members, it found that women represented just 12% of 145 partners at 23 private-equity firms, and 11% of 132 partners at 36 venture-capital firms.

The situation isn’t totally bleak. According to the same report, the pipeline of female talent at PE and VC firms opens the possibility of more female representation at the partner level in the future. This is encouraged by various worthwhile initiatives that give money to ventures involving firms with a female presence.

But while that’s a good step forward, it may not be enough. “[T]hese programs are sometimes criticized for giving money to ventures that actually have very few women associated with them in any impactful way,” noted Duncan Stewart, CFA and director of technology, media, and telecommunications research for Deloitte Canada, in a note published by the CFA Institute.

Stewart pointed to one possible avenue for improvement: a better standard for woman-led companies. He noted the current definition used by BDC Capital’s Women in Technology (WIT) Fund requires that a company have at least “a female founder, co-founder, CEO or executive driving the direction of the business,” with executives having been in their role for a minimum of one year.

That’s just one of several yardsticks used by different programs, which critics have called out for being too varied or unambitious. Stewart cited Nancy Wilson, the founder and CEO of Canadian Women’s Chamber of Commerce, who recently proposed a minimum of “50-per-cent women-identified ownership and a minimum of 50-per-cent management representation with senior-level, strategic decision-making abilities” for investee companies, among other requirements.

“As a former VC, I applaud Wilson’s direction, but I think the bar she sets is unrealistically high for 2020,” Stewart said, arguing that the standard would probably mean that BDC would need well over 13 years to fully deploy its full $200-million WIT fund.

As a middle ground, he proposed a framework of Female Content for prospective awardee companies. It would involve a point system to measure female-led firms based on several dimensions, including:

  • Founders/Ownership – a half-point would be awarded for every female founder who invented a product or female owner with a stake of at least 10% in the company;
  • R&D Team – given that women fill just under 25% of IT roles in the US, firms with 37.5% female teams would get one point, and those at 50% or more would get two points;
  • Executive Team – each female executive would fetch the company one point, and a female CEO would be worth two;
  • Board of Directors – every female board member would be counted as half a point;
  • Advisory Board – a quarter point would be awarded for each female board member;
  • Workforce Representation – one point would be given to companies where women represent over 50% of all employees;
  • Female-focused Products or Solutions – firms that specifically work on something that serves female customers or solves a problem for women would get one or two points;
  • Female-led Investments – Companies that have received material funding from a female investment partner would earn another point; and
  • Mission Statement – firms that have a mission statement committing to gender equality, but don’t have any concrete evidence of that commitment, get zero points

“And let’s not leave it at that,” Stewart added, noting that the model could be adapted to other types of diversity issues like representation of different ethnic groups.


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