Venture capital (VC) investments have been growing steadily in the US market. The VC market value is approximately $107 billion, with 60% of the investors categorized as male. The number of women VC has been increasing, but the minority females are still low at less than one percent of the market. The amount of capital allocated to companies associated with female entrepreneurs has not increased since 2012, indicating VC allocation’s gender gap.
Here are three simple steps that institutional investors can use to close the VC business space’s race and gender gap.
Sensitize Decision Makers About the Gap
Sensitization is critical to creating awareness among VC decision-makers about marginalized investors. The administrators will give more attention to business pitches from the marginalized groups and approve their financial applications.
Female entrepreneurs should also be empowered to make a good case for their business before the interviewing panel. This approach will convince the investors about the marginalized groups’ capability by showing them the business’s profitable side.
Have a Standard Criterion for Evaluation
Most of the VC panelists ask a random question that varies from one candidate to another. According to research, women’s questions differ from what interviewers ask men.
The VCs want to hear more about the promotional aspect showing growth, goals, and rewards an enterprise will achieve in the end. Female candidates should understand the market size, show the gaps, and know the market share they are pursuing. If both candidates are judged equally, women can make a good case for themselves.
Diversify the VC Panelists
Having VCs from several diversities can help improve fairness on capital allocation based on gender and race. Humans are attracted to other people with whom they share something natural in common. This fact is only a human aspect, but the critical factor is the value presented.
The venture capitalists are business leaders who support social justice for all, including racial and gender-based issues. They share ideas amongst themselves, and they are likely to listen to one of them who have a different but convincing opinion. Venture capitalists drive the economy. The investors know what they want, and even though the statistics are not showing a poor trend, they can only help close the gap if they start receiving winning proposals from the target groups.
The ball rolls back to the entrepreneurs who fall under this category. They have to show the success aspect of their business so that VCs are convinced they can generate excellent returns.