Principle 3: External
We will challenge gender bias in valuations of the female economy.
Scrutinize gender biases in valuation at entry and at exit, critically assess assumptions in valuation models with a gender lens and Advocate fair valuation of businesses in the female economy.
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Expand your horizon of ‘investable sectors’ and market opportunities, and open up your sourcing channels to receive more diverse pipeline
Scrutinize gender bias in estimations of the market size of underfunded sectors of the female economy; advocate for gender diverse investment decision-makers with relevant sector expertise to adequately assess the value proposition and market opportunity
Help create data transparency for founders on valuations to counter bias with data and ensure female founders get market terms
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Align with co-investors on key aspects of the business model, strategy, value creation, and exit scenarios with a gender lens
Consider which sector/thematic experts and diverse perspectives have a keen understanding of the value of the female economy and can unlock opportunities
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Leverage influence as an existing investor to find aligned co-investors for following rounds, challenge gender-bias in valuation and terms at each round and pay attention to female founder’s ownership dilution to ensure fair terms
Educate the market about the business opportunity and market size of underfunded sectors of the female economy
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Challenge gender-bias in valuation at exit
Go the extra mile to build relationships with prospective buyers early on and (if necessary) educate them on the business opportunity and market size of the female economy
Make a compelling case to buyers about the value of the female economy in the case of this specific company, based on gender-smart data of the company collected and analyzed over your holding period
Practical insight
Consider using the Candor Clause approach which entrepreneurs/ investees can propose to their potential investors directly, ideally through their lead investor who should know this clause and proactively suggest it.
Practitioner insights
Shuyin Tang
Partner
Beacon Fund / Patamar Capital
We also tried to be thoughtful about how much dilution the co-founders would be taking overall as part of this early round. We asked that the company raise more capital than they had planned, to give them additional runway. On our part, we were more flexible with the valuation so that the founders actually ended up with the same dilution as if they had raised a smaller round. This was a leap of faith for us, and ties to Principle 3 - valuation of companies which focus on the female economy.
We were aware of the biases that came into play when valuing female founders whose businesses predominantly targeted female customers. When being more generous with the valuation in our round, we did have to take a bet that the company would be able to command a higher valuation in subsequent rounds. Ultimately, we’re pleased to say that it was possible but we really had to work for it. We supported the founders with the messaging during the fundraise - how to showcase traction of the company and the strengths of the team which some VCs may have seen as not the typical or traditional path.