New fund to address ‘quite shocking’ gender imbalance in Canadian investment landscape

Posted on November 05, 2019 | Sarah Smellie | 0 Comments

A group of Canadian women are trying to adjust a gender imbalance in the region’s venture capital landscape with the creation of a brand new fund.

Founded by nine Canadian businesswomen — six based in Atlantic Canada — The Atlantic Women’s Venture Fund aims to get more women investing and more women CEOs asking for investment money for their businesses. 

“There’s a huge hunger for this,” said Rhiannon Davies, a founding partner and former vice-president of GrandVision, a global eyewear retailing giant based in the Netherlands. Davies is from New Brunswick and recently moved back to the region.

“There are a lot of women … who don’t even go to the table to ask for venture capital. They’d rather bootstrap it or go to family and friends because they don’t see themselves on the other side of the table, and they don’t think there’s going to sympathy.”

The fund will be managed in Atlantic Canada and be open to women investors. It won’t exclusively support women-led enterprises, but will fund have “a central and strong gender bias,” targeting companies with solid diversity plans.

“We’re looking for businesses with women and men leading them. Because diverse perspectives have been strongly proven to build better businesses and more sustainable businesses,” Davies said.

More men, more money

The idea for the fund came up when another founding partner, Sarah Young, a managing partner with Halifax-based public relations firm National, noticed there weren’t many women making funding decisions. She polled other women, some of whom are now partners in the fund, and found they saw the same thing: few women asking for money, few women investing it. 

A bit of digging turned up studies and figures to support their observations, Davies said.

According to the fund’s investor information material, just 2 per cent of the country’s angel investors are women. 13.5 per cent of Canadian venture capital fund partners are women.

On the other side of the table, companies with women CEOs get about $900,000 worth of venture funding, on average, whereas companies led by men receive an average of $2.1 million.

“It is quite shocking,” Davis said. “That means not only are female founders not getting investments, but the products and the solutions that we’re creating with these innovations are not necessarily tailored for 50 per cent of the population.”

Davies said they also came across studies showing that when women did seek venture capitalist, they were asked different questions than their male counterparts, with more questions about risk aversion and plans for failure, where men were asked about their plans for success.

Investors from diverse income brackets

The planning for the fund began in earnest this spring, and they’re now hiring an investment partner to manage the fund as they continue to raise both private capital and funds from government and institutions. Accredited investors can join the fund with a minimum buy-in of $25,000 — a number deliberately set lower than the norm, in hopes of attracting more women who are new to the playing field. 

The fund is for-profit, so investors will get returns. That piece is especially important, Davies said, since women are so often encouraged to volunteer their time and donate money without looking for anything in return.

The fund will also have a non-profit arm, offering education and mentorship to both women in business and women investors, she said.

Davies says they’re also looking into ways to include non-accredited investors who may not have the $25,000 minimum.

Though there’s talk of the venture capitalism “bubble burst” in larger markets like Silicon Valley, Davies says there’s no concern about that happening in Atlantic Canada. Numbers show growth in the region’s tech sector outpacing the national average, but investment amounts in Atlantic Canadian tech startups lagging behind, Davies said.

“This market is far from over-heated and there is still significant opportunity and a need for innovation to grow the economy,” she said. “That said, we do have a very great responsibility, as investors, to execute outstanding due diligence on the companies we are investing in, exercise care in our development of the financial models we use, question unrealistically high valuations, and ensure we provide these companies with strong support as they commercialize and scale.”

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