Brandon Capital, Rampersand, Artesian lead local VC gender diversity push

October 8, 2018

Aussie venture capital funds are making significant strides in boosting the diversity of their portfolios, but women still make up only a tiny percentage of the investors in the sector.

A survey conducted by The Australian Financial Review of 10 of the top VC funds in the country revealed that of 448 investments made since the inception of the firms, 35 per cent had female co-founders, up from 26 per cent this time last year.

The 9 percentage point increase in a year is a huge jump for the industry, with the leading funds on gender diversity being Brandon Capital, Artesian,OneVentures and Rampersand.

Compared to other international markets, the local venture capital industry is streets ahead of its global peers.

A Crunchbase study looking at all global funds between 2010 and 2015 found only 12 per cent of investments had a female co-founder, while of the $US77 billion invested into companies in the first quarter of 2018 only 9 per cent went to firms with a female co-founder.

Leading funds on gender diversity

In the last year Brandon Capital has increased the number of companies in its portfolio with a female co-founder from 21 per cent to 45 per cent, out of its 40 investments.

Artesian, which has by far the largest portfolio of any venture capital fund in the country with 192 investments, was also a high performer, with more than 40 per cent of its investments having a female co-founder. Almost 40 per cent of Michelle Deaker’s OneVentures and Paul Naphtali’s Rampersand’s investments also had at least one female co-founder.

Managing partner of Artesian, Jeremy Colless, told The Australian Financial Review the most important steps it had taken to increase diversity were trying to remove selection bias and employing an equal number of male and female VC analysts from diverse backgrounds so as to ensure a more diverse group of investors in the future.

“Artesian’s early stage (seed/angel) VC strategy is to undertake due diligence on accelerators, incubators, university programs and angel groups to identify the groups with the most diverse deal flow, broad alumni and networks of mentors and investors,” he said.

“Artesian then generally invests in all of the start-ups that have been selected to participate in these program cohorts.”

Brandon Capital managing director and chief executive of the Medical Research Commercialisation Fund, Dr Chris Nave, said in the fields it invests, medicine and science, men were typically over represented, but it was having an impact by helping train the next generation in entrepreneurship and commercialisation.

“Brandon has run an intern program for the last nine years. This program has had a similar number of women and men participating in the program, as well as interns from varied cultural backgrounds including Chile, China, Germany, Indonesia, Malaysia, India and The Netherlands,” he said.

“In this way, Brandon is not only promoting opportunity for diversity within our own firm, but also for the broader innovation ecosystem.”

The fund is also a sponsor of the new WILD (Women in Leadership Development) Program through the MRCF, which will fund 20 woman currently working in STEM, to complete the Australian Institute of Company Directors Course and participate in a leadership skills retreat.

Male investors still dominant

But while significant progress has been made on gender diversity, it’s been an uphill battle for the sector to bring in more female investors.

“At Blackbird we have one of our four investment partners who is female and obviously the world’s gender breakdown is 50-50,” Blackbird Ventures co-founder Niki Scevak said.

“The industry is a long way off reflecting the diversity of our society,” Dr Nave added.

A study of 71 funds in the US released earlier this year by venture capitalist Chamath Palihapitiya revealed women made up just 8 per cent of the senior investment teams. This finding has also been backed up by Crunchbase research.

At OneVentures two out of three managing partners are women, along with 50 per cent of its investment professionals, but Dr Deaker admits this is unusual.

“When I entered the industry, I think there were only two female partners in [VC] firms. When I founded OneVentures I was told I was the first female VC to launch a firm in the Southern hemisphere,” she said.

“There were women but they weren’t in investment roles. The good news is the number of women joining the industry and enjoying successful careers in PE and VC is growing – there has been a 60 per cent increase in female investment professionals from 2014 to 2017 – however women still only represent approximately 5 per cent of the total sector in Australia.”

Other notable female investors rising in prominence include Jelix Ventures’ Andrea Gardiner, Skip Capital’s Kim Jackson and new chief executive of Scale Investors Ariane Barker.

Other funds to have made significant progress in increasing the representation of women in their portfolio companies include Blackbird Ventures (up from 19.5 per cent to 23 per cent, with 70 per cent of its investments in the last 12 months having a female co-founder) and Airtree Ventures (up from 30 per cent to 33 per cent). The only fund to slip backwards was Square Peg Capital, going from 24 per cent this time last year to 21.6 per cent.

But Square Peg’s Paul Bassat said the fund was actively taking steps to see more deal opportunities with diverse founders.

“One of the critical things to get right in a founding team is balance – homogenous teams, by design or accident, tend to be less resilient,” he said. “The most important step we’ve taken to increase diversity in the deals we see is by recognising that unconscious bias almost certainly exists. We’ve hired five outstanding women into the Square Peg Team in the last 12 months – in investment and non-investment roles.”

Westpac’s Reinventure was included in the survey for the first time and reported a gender diversity figure of 17.3 per cent (four out of its 23 investments had female co-founders), as was Rampersand who came in with 39 per cent of its 39 investments having gender diverse founding teams.

While Reinventure’s figures seem low compared to other funds, it is representative of the fintech industry. The 2017 EY Fintech Consensus revealed only 17 per cent of fintech start-ups had a female co-founder.

Of the 10 funds approached, only Blue Sky Ventures did not comment.

Racial diversity

Carthona Capital only provided figures for its investments in the last 12 months since it shifted to a traditional VC model for the fund, but this revealed that of the seven start-ups it has backed, 42.9 per cent of teams had a non-Caucasian co-founder and 28.6 per cent had a female co-founder.

It was the first time the local funds were quizzed about the representation of non-Caucasian founders in their portfolio.

Overall this revealed there was substantial room for improvement in creating more racially diverse teams.

Funds such as Brandon Capital, OneVentures and Reinventure all had less than 15 per cent of its portfolio companies with a non-Caucasian founder.

On the other hand Rampersand was once again a strong performer, with 39 per cent of its investments having a non-Caucasian co-founder, followed by Airtree (38 per cent) and Blackbird (32 per cent).

“In our deal flow process, we collect the founders diversity information as a primary data point. We can only improve what we measure,” Mr Scevak said.

“Every person at Blackbird [also] undergoes unconscious bias training.”

Yolanda Redrup
The Australian Financial Review
8 October, 2018

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