A conversation with an LP recently got me thinking about VC dealflow — more specifically diverse dealflow.
VCs often talk about backing more diverse founders in the industry. I don’t doubt that every investor — male or female — actively supports this.
What makes this hard in practice is that most investors work off of dealflow — namely, deals that get sent to us, whether by other investors, by founders or inbound.
The problem with this kind of dealflow is that it not surprisingly tends to be reflective of past investments and existing networks.
So, if your past investments and existing networks are made up of predominantly men, then chances are that the startups that get sent to you by predominantly male co-investors will be predominantly led by male founders. On the whole, men recommend men.
When we look at the last 50 enterprise software deals that were shared with us here at Work-Bench, only 2 of them were led by women founders.
It’s far more difficult to go upstream or outbound and it’s even harder to go out of your way to find diverse founders.
But in our experience that’s what we as investors have to do, especially if they want to meaningfully invest with a diverse lens.
Out of the 13 deals we have invested in for Work-Bench Fund II, 3 of these companies were co-founded by women. We went out of our way to actively source and reach out to 2 of them.
We collate this Women Founders of Enterprise Startups Database with women founders of enterprise tech companies — that we share publicly, newly relaunched here — and that we review together in our Investment Committee meetings every quarter. We make it a point to review newly founded startups led by women, and if they don’t come to us via dealflow, we reach out to them directly and proactively.
We know that there is still much more we can and need to do on this front. Hopefully this one hyper-tactical change can help other VCs too, since it is more clear to us than ever: only when we change the existing dynamics of our dealflow, can we truly change the profile of our future investments.