In Q3 of 2020, venture funding for female founders hit its lowest quarterly total in three years. Whilst the current Covid-19 pandemic stands as one of the greatest disruptors to our way of life in living memory, when we have disruption and crisis we also have opportunity to do more, and to do better.
There is no greater force in wealth and jobs creation, and ability for impact in financial inclusion than through the power of entrepreneurship and innovation. And yet, venture capital – a primary source of capital for innovation and job and wealth creation – invests less than 10% of total venture capital money into companies with women in positions of power and influence on the executive teams, with inclusion of Black women and other intersectional forms of diversity facing far more dismal numbers.
The argument for greater diversity within business is obvious. A recent McKinsey study showed that companies in the top quartile for gender diversity on executive teams were 25 per cent more likely to have above-average profitability than companies in the fourth quartile. Yet there lacks a coordinated effort to work towards equity in the investment landscape. It’s one thing to argue in favour of diversity within venture capital, it’s another to take action.
The vast economic cost of gender inequality has long been recognised as a pressing global issue, and its impacts are increasingly acute. In 2020, the World Bank highlighted that economies across the globe are losing $172 trillion solely due to the differences in lifetime earnings between women and men – a significant increase from the $160 trillion it projected only two years earlier in 2018.
Add to this that women make over 85 per cent of everyday buying decisions and in a few years, they will own half the world’s private wealth. Investing in women clearly makes good business sense.
As part of Mastercard’s ongoing investment into and support of women leaders, we are the lead investor in Astia’s $100 million early-stage venture fund, aimed at addressing the extraordinary disparity in funding for companies that include women in founding or executive roles. This example of support is nothing new for Mastercard, as we are constantly looking for the right partners and opportunities for women, especially when it is more critical than ever in the wake of the pandemic’s impact on women-owned businesses.
We recently made a commitment to a female-founded impact investment platform, CNote, to deposit $20 million into the CNote Promise Account in service of helping women – and minority-owned businesses across the U.S. – recover and grow.
As a direct impact of Covid-19, women entrepreneurs have been left in a more vulnerable position, as they are more likely to draw on their private capital and family finances, leaving them particularly vulnerable as a result. Our commitment to Astia and others is an action to help change this.
Across the venture investment community, we’re seeing greater commitment to addressing the woeful amount of investment into underrepresented entrepreneurs. The British Venture Capital Association (BVCA) recently released a best practice guidelines blueprint to help increase investment in underrepresented founders and drive diversity and returns across the investment sector.
With leading investors, including Astia, KPMG, Diversity VC and Diversio, the guidelines offer practical advice and best practice suggestions for all investors, regardless of what stage or sector they invest in. We know that research increasingly demonstrates that firms with more female executives outperform less gender diverse peers, and I hope this blueprint is used to make the change that is sorely needed.
Clearly the pandemic has led to a step back in the fight for diversity within business, as a crisis can always lead to the retreat of those who would otherwise strive to make change in times of prosperity. I say differently, and will continue to work with Mastercard to use action rather than words to create more diverse businesses across the globe.