Principle 2: Internal
We will stand behind the female founders and leadership team.
Protect founder’s interest in the cap table, and create diversity in leadership and ownership with intentionality and manage founder/CEO transition responsibly, ensuring fair outcomes for the female founders and the leadership team at exit.
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Intentionally source gender-smart companies. Back female and gender-diverse co-founding teams and leaders, and intentionally address unconscious bias in deal origination. (See A Fund Manager’s Guide to Gender-Smart Investing)
Consider and advise the founders/leadership on classes of shares that help preserve the influence and ownership of female founders.
Develop a shared understanding of the investee’s vision, growth plans and likely exit routes; challenge taken-for-granted assumptions of what a ‘desirable’ exit is and ensure genuine alignment.
Consider the right financial and investment instruments aligned with the founder’s / leadership’s vision for the company.
For LPs:
Discuss carry allocation to women on the fund manager team, GP ownership allocation, IC composition
Be aware of GBVH, especially sexual harassment of other potential LPs against female GPs and team and the particular sensitivities around this
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Conduct due diligence with a gender lens; pay attention to ‘valuing’ vs. ‘counting’ women, mission alignment and culture.
Reflect on power dynamics that may lead to gender bias in negotiation outcomes.
Recap if the previous investors or male co-founders have a big chunk of the cap table relative to the female founder in-line with her role and responsibilities.
Challenge gender-bias in valuation at entry; go the extra mile to challenge assumptions in valuation models with a gender lens.
Be creative about sustaining female ownership over the company’s different stages of growth.
Don’t handcuff the female founder/leader and also don’t pressure her out of the company.
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For following rounds, consider share classes with differential voting rights, well-designed anti-dilution provisions or incentives for founders/management to increase or earn back equity. Be cautious about replacing female founders’ real equity with ESOPs that have no rights attached.
Be a strategic thought partner and advisor to management to plan funding rounds, be creative in instruments (e.g. revenue-based bridge rounds)
Ensure adequate representation of the founder and team on the Board. Tap into diverse talent pools and networks for Board candidates such as TheBoardroom Africa.
Challenge gender bias and stand behind the female founder/CEO when the press or other stakeholders make biased, unfair or unfounded allegations
Manage founder/CEO transition responsibly, ensuring fair outcomes for the female founders and the leadership team at exit:
Create a skills matrix to objectively determine if the founder/CEO can be upskilled to stay in the CEO position over different stages of growth if she wants. Build an ‘army of strategic advisors/experts’ around her as you would do if she were a ‘male founder genius’.
If a founder/leader transition is necessary, make sure the succession planning and recruiting process is gender-smart. CEO replacement shouldn’t equate to diversity loss at the leadership level.
Aim for mutual transitions. Support the founder/leader in making the right decision and ensure an optimal outcome allowing her to keep influence (e.g. on the board).
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Go the extra mile to find an aligned buyer. Ensure a fair outcome for the female founder/ other female owners and for the diverse leadership. If the female founder/owners exit and/or the female leadership does not continue, explore ways with the buyer to ensure continuity of gender diversity in ownership and leadership.
Consider management/employee buyout as an option and provide support to make it happen.
Ensure fair outcomes for female founder/ other female owners, both in terms of financial gain and influence
LPs: Assess and fully understand the impact and potential unintended consequences of any changes in your institutional mandate on priorities at investee level including gender outcomes. Critically reflect on the pressure you may be exerting on GPs to exit at a specific time or at founder-unfriendly terms.
GPs: Manage change in responsibility among investment professionals for a certain investee responsibly, especially when this leads to changes on the Board. Pay particular attention to how this may affect gender dynamics and outcomes, during investment and at exit.
Practitioner insights
Shuyin Tang
Partner
Beacon Fund / Patamar Capital
One of the things that we saw a lot not only with this company but also in our investment work more broadly across Southeast Asia is the equity gap. Female co-founders tend to have less equity than male co-founders. Research has shown that women typically only have 39 cents of equity for every one dollar that men would own. Less equity means less payout in exits - and given that exit proceeds are often a big source for women to become angel investors or even to start their own funds, this has a larger impact on the ecosystem which is important to address.
In this deal, we actually played a key role in restructuring the cap table to be more equitable to the female co-founders. We were the first institutional investor - and when we saw that the two active co-founders who were women actually had relatively small amounts of shares compared to the part-time male co-founder, we determined that it did not make sense in terms of gender equity nor in terms of rewarding those doing the heavy-lifting of running the business full-time. So we made it a precondition to our investment that the cap table would be restructured. To their credit, the team did execute the restructuring.
Maisy Ng
Managing Partner
Delight Capital
The investment took place at a time when founder CEOs (male or female) did not lead the companies from inception all the way to exit. Facebook and other companies changed that rhetoric and it became more common for founder CEOs to take the companies they founded to exit and beyond. Hence when it came to Series B, it was not unusual that a VC even before meeting the founding CEO requested for the CEO to change. I told him - look, you haven’t even met her. At least meet with her before you make the decision. In the end, the VC did not come in and we thought it was for the best. The company went on to raise additional capital from other investors. At the closing of the round, I brought in a new chairperson - another woman who was a C-Suite senior executive in a large US-company. The chairperson and the CEO got along well, and the company took on a new energy. The two of them brainstormed ideas to advance the business, and the chairperson opened doors for the company in the US as well.
Shelly Porges
Founder
Beyond the Billion
Personal example as an entrepreneur: Subsequent to my corporate career (50 years in business) - American Express, Bank of America - we turned the company around on the back of 7 major initiatives I led with my group as Chief Product & Marketing Officer for the bank. What that taught me is the criticality of male allies that I had who saw my potential in the company. When I left the bank to start my first of 6 companies in the Bay Area, I took that lesson with me, and I can’t emphasise that enough. As you build your network, it’s critical to involve men, to help each other move forward. We need male allies to push us forward. My first company, I self-funded and eventually had a female co-founder join me about 2 years in. After 7 years, we sold the company to men who were my competitors - because they watched me take up more of the market share, our business was growing and they weren’t advancing as fast.
Eventually, I started two internet companies in the early days of the internet in the financial services space and had two good exits. All my investors were men - there weren't women out there at that point to invest. It never even occurred to me until decades later when I looked at the systemic issues that women were in fact challenged because I had male allies behind me.