In October, 38 women and four men from Vermont and New England gathered to participate in a workshop on “Addressing Unconscious Bias in Investing and the Workplace.” The workshop was put on by the Vermont Women’s Investors Network (VT WIN) in collaboration with the Northern New England Women’s Investors Network (NNE WIN). NNE WIN is a network of women in New Hampshire, Maine and Vermont that comes together to engage, learn and connect with others interested in angel and impact investing. VT WIN is a new initiative that supports female investors and the entrepreneurial ecosystem in Vermont.

The guest speakers, Jessica Nordhaus, Director of Strategy & Partnerships, and Lindsay Lathrop-Ryan, Career & Business Coach, brought to the table their experiences in working with Change the Story’s Business Peer Exchange, a collective of companies working together to ensure women thrive in their workplaces. They helped participants make the connection to their own unconscious biases as investors and how those biases can impact how they perceive women entrepreneurs and thereby influence their access to capital.

Why is this important? Female entrepreneurs receive less than 5% of all venture capital (VC) funding despite owning 38% of the businesses in the country.

Venture capital investors —over 90% of whom are white men— have a bias toward familiar faces. This bias is not always a conscious one, but it is there nonetheless. And, it is part of the reason why less than 1% of VC goes to Blacks or Latinos, and less than 5% goes to women.

Despite the fact that the number of female VC’s has increased from 3% of all VCs in 2014 to a “whopping” 7% today, the equity funding gap for female entrepreneurs has only widened. In a recent Harvard Business Review article, the authors described a study they conducted where they observed venture capitalists posed different types of questions to male and female entrepreneurs: they tended to ask men questions about the potential for gains (promotion questions) and women about the potential for losses (prevention questions). They found evidence of this bias with both male and female VCs. This difference in questioning appears to have substantial funding consequences for startups. Despite being comparable in terms of quality and capital needs, the total funding raised over time differed significantly: male-led startups in their sample raised five times more funding than female-led ones. It’s easy to see how prevention questions being asked to females can lead to less funding.

Did you know that 97% of all venture-funded businesses have male CEOs? According to a Dow Jones study, which analyzed 15 years of venture-backed companies and how women in leadership roles affected startups, a company’s odds for success increase as the percentage of females holding leadership positions increases.

In the words of Yuvan Atsmon in his recent blog post titled, “Why Confronting Our Unconscious Biases Is Both a Moral and Business Imperative,” Yuvan said, “Diversity and inclusion are a business imperative, and racial, ethnic and gender diversity leads to better financial outcomes, customer experience and employee retention.”

The predominant investor category in New England is white, male. If we all, regardless of gender, color or sexual orientation, have an unconscious bias to invest in what we are familiar with or what we look like, then we need to change the face of who is investing.

I’m not here to bash white men – I’m married to one. I’m saying we have some work to do today in our own shop, ladies, to ensure our cultural biases as investors aren’t hindering our female and diverse entrepreneurs’ ability to raise capital. There is overwhelming evidence that diversity in entrepreneurial teams leads to more successful businesses, and research reveals that companies with gender-diverse boards of directors and management teams produce a superior return on equity. Think of the great opportunities we can all discover if we acknowledge first that we have unconscious biases, and then seek to consciously overcome those biases in our investing. But it doesn’t stop there. We can help “change the story” in our work with the entrepreneurs to help them build diverse teams that have a greater chance of success.

As newly formed groups in Vermont and New England, the Vermont Women’s Investors Network, and the Northern New England Women’s Investor’s Network are looking to diversify the faces and stories of investors who are supporting our entrepreneurial ecosystems. As the founder of Pipeline Angels, a women-focused angel network, Natalia Oberti Noguera puts it in a recent Conscious Company article, “I wanted to put the issue of pattern recognition on its head and say, ‘Well, if we invest in what’s familiar, if we invest in what looks like us, let’s get more of us on the investing side, because we’re probably going to be more open about investing in more of us on the entrepreneurship side.’”

Janice St. Onge
Flexible Capital Fund

About the author: Janice St. Onge is President of the Flexible Capital Fund, a mission investment fund providing risk capital to growing businesses in Vermont’s food system, forestry and clean technology sectors. Janice brings economic and business development as well as financial expertise to the organization, having served in the technology and financial services industries, as well as higher education and state government sectors during her 25-year career. Janice is a member of the Vermont and NNE Women’s Investors Networks, and serves on the Clean Energy Development Fund Board, and advisory board for the Small Business Development Center.