Women in VCs: Why empathy and diversity are key to successful startup investment

Gender — and thought — diversity is good for venture capital firms and the startups they invest in, according to a panel of female VCs.

Speaking at the University of Technology Sydney Women in Venture event last week, run in partnership with Tech Sydney and Reinventure, panellists highlighted empathy as an important part of investing in startups.

Having come from a background working at a startup in the UK, Jackie Vullinghs of NAB Ventures said having operational experience helped her learn “a huge amount of empathy”.

When investing in startups it’s important to understand the “severe levels of stress and emotional issues” that can be involved, she added.

Georgina Turner of Bailador Technology Investments said while startup experience isn’t necessarily required for VC investment, “it definitely does help”.

Sometimes, it’s simply a case of being able to relate to the founders you’re working with, she said.

Reinventure’s Lisa Fedorenko echoed this, noting a large aspect of being an investor is in the networking.

Initially, Fedorenko had expected to spend more time evaluating startups. When they’re at an early stage, however, “you’re basically having a guess”, she said.

“The vast majority of the work is really on the empathy, and getting to know the founders,” she added.

The panel also discussed the importance of risk appetite in startup investment, with Reinventure Group’s head of venture community Lauren Capelin asking whether female investors have a lower risk appetite than their male counterparts, and whether that could be a disadvantage to the VCs and the startups involved.

“Are stereotypes doing us a disservice?” she asked.

Connie Lee of Tempus Partners claimed to be the “most risk averse” person on her team, adding this is something she has had to work on.

However, being risk averse is not necessarily something that’s a detriment to a venture capitalist, Lee added, it’s merely a case of “being conscious of it”.

Different levels of risk aversion lend a “different dimension to investment discussions”, she added.

At Bailador, female investors actually tend to be more pro-risk, Turner said, however, she also suggested the concept of risk tolerance isn’t as important in the VC space as people might think.

“It’s not like you’re running around and throwing cheques at random strangers,” she said.

“There’s a genuine, structured investment process that you’re following … by the time you’ve done that a few times over, it’s very easy to take the emotion out of the investment.”

Investors use data to back up their decision making, she added.

“Beyond that, it’s actually more about you as an individual investor and how you relate to the founders that are running the business, and how much you believe in the founders,” she said.

“That’s when it becomes a very, very personal kind of job.”

Fedorenko noted VC firms should avoid hiring people who think in the same way — and this includes hiring diversely for risk appetite.

“One of the things you want to avoid is having everyone think the same,” she said.

“The more diversity you have and the more different ways of thinking, the more you’re going to see different outcomes to everyone else at the table, and the more you’re going to be valuable.”

VC investment is “the least groupthink-style job you can find”, she added.

While admitting there’s still “a long way to go”, Vullinghs noted there is “actually a lot of women” in the Australian VC space.

“That’s been really inspiring,” she said, “I still massively believe that you can’t be what you can’t see.”

Equally, “there’s a real openness here”, when it comes to discussing diversity, and that also includes male VC partners.

“They understand that diversity of thought makes better investing,” Vullinghs said.

Fedorenko also suggested that gender equality in VCs has improved.

“There’s a still a complete under-representation of gender [in VCs], but it’s further ahead than other fields,” she added.

She named portfolio management in finance, trading and computer science as areas that have significant room for improvement on the gender diversity front, and suggested that better gender balance can “make a huge impact on culture, and a pleasant environment for people to work in”.

“Hopefully this helps drive some other industries to fix the balance too,” she said.

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