The Need for More Diverse VC Teams in VC Funds

I have been reflecting on how, at IGNIA as a VC firm, we are more sensitive while looking for potential business opportunities when they relate to the personal life experiences of the partners. So, it has been crucial as a team that all of us come from different backgrounds and have different ways of looking at life. That diversity has made us stronger.

For example, lately, we have been receiving inbound pitches from entrepreneurs in femtech and I believe, as a firm, we have been in a better position to understand this entrepreneurship vertical that has just started to boom in Latin America thanks to my partner Christine Kenna. To those not familiar with the term femtech, it is the business category related to software, diagnostics, products, and services that use technology to focus on women's health. This sector includes fertility solutions, period-tracking apps, pregnancy and nursing care, women's sexual wellness, and reproductive system health care. 

Of course, as a man, my relation to, for example, menopause is way less relevant than it is to any woman. That blind spot does not excuse our team from  bypassing a sector that can involve a market that taps 51 percent of the world’s population. A recent publication from McKinsey.com on femtech states this is a big market where there are still many blank pages to fill, especially in our regional market: “Depending on scope, estimates for FemTech’s current market size range from $500 million to $1 billion. Forecasts suggest opportunities for double-digit revenue growth. On the digital health front, FemTech companies currently receive 3 percent of all digital health funding. In our scan of hundreds of FemTech companies, we found concentration in maternal health patient support, consumer menstrual products, gynecological devices, and solutions in fertility. Funding reached $2.5 billion by early December 2021. In some cases, FemTech companies are filling gaps not yet addressed by biopharma and device incumbents, such as in the area of maternal health. Yet this is clearly, and promisingly, only the beginning of what FemTech can address.” 

This is a clear example of why having diversity in a team as a VC is one of the greatest assets you can have. Of course, I’m not saying that just because we have one partner from the under-represented gender at IGNIA that we can call ourselves “fully diverse.” We still have a long way to go, as does the entire ecosystem in Latin America. I can count with the fingers on one hand the VC firms operating in Mexico (and sadly even in the region) who have women as partners.

That said, every day, I increasingly value the founding teams that are gender diversified  because I know they are better prepared to see things from different points of view. As I have said several times, one of the companies in our portfolio is a growing, well-managed startup; however, when we revised the number of users, we became aware that it was mostly men who used its financial services. Why? After thorough research, we discovered that it was an all-male team who was speaking to all-male customers. We were alienating half the population as a potential customer just because we were not speaking to them. That has now changed. It became clear how substantial it was to have a more diverse team. Since then, whenever we start our due diligence in a potential company for our portfolio, I look into diverse teams more carefully. 

Also, whenever there is a more diverse team at the top of an organization’s chart, the diversity trickles down to the bottom. For us, it has turned out that we have a team with 70 percent women, which is fantastic.

A few years ago, this was not something that came naturally into the conversation. But now, the entire ecosystem is way more aware of the need for gender diverse teams. We now understand the true value of gender diversity. And that value is the ability for a team to be able to uncover the many blind spots one can have, due to gender, culture, or socio-economic biases. One man’s blindspot is another woman’s opportunity-spot. The lame pun apart, it is true. Diversity makes us better decision-makers, better marketers, better everything. Also, it brings more economic growth for the world overall. 

According to a study from the International Monetary Fund, because women bring new skills to the workplace, the productivity and growth gains from adding women to the labor force are larger than previously thought: “Indeed, our calibration exercise suggests that, for the bottom half of the countries in our sample in terms of gender inequality, closing the gender gap could increase GDP by an average of 35 percent. Four fifths of these gains come from adding workers to the labor force, but fully one fifth of the gains are due to the gender diversity effect on productivity.”

I know that striving for diversity in your own business is not easy. One is drawn to the familiar. And we must set diversity as a KPI in order to achieve it, even if at moments it does not “feel necessary.” I believe that if we strive to have a diverse VC team, more founders will also create diverse teams and the entire ecosystem will have a better diversity balance and will, in the end, be better prepared to tackle the struggles ahead. We must create the conditions in our firms to accommodate the needs of diverse teams and be prepared to grow that way.