In 2017, Ithacans Erica O’Brian and Elisa Miller-Out partnered with upstate New York’s Kathryn Cartini to found Chloe Capital, a seed-staged venture capital firm focused on women-led innovation companies with the mission of addressing the gender gap in venture capital (VC).
“We have perfected a touring VC model, so we travel around the country – hopefully, eventually, around the world – investing in women and running our signature programs that helps drive more capital and resources towards female founders,” Miller-Out said.
Chloe Capital, along with many other groups in the nation and Tompkins County, are responding to the disparity between investment funding to male-led versus female-led businesses.
Women-run businesses account for roughly 2% of all venture capital investment in the United States, and Tompkins County isn’t immune to the gender gap. That’s why local leaders are working to combat this problem both within and outside the county.
Venture capital, as Jennifer Tegan, managing partner for Ithaca-based Cayuga Venture Fund, explains, is a type of private equity – meaning investing in privately held and owned companies that are not on the stock exchange – invested at the earliest stages of the company’s life.
“Those companies are high-growth and high risk,” Tegan said. “The expectation is that the investor will get a great return/reward for the risk that they take on putting money into a company that is brand-new.”
A 2020 National Public Radio report showed that since 2009, the percentage of venture capital given to female-founded companies in the U.S. has hovered between 1.4% and 2.6%. This is despite the fact that women own 38% of U.S. businesses, according to The Global Impact Investing Network’s Navigating Impact Project. And, as First Round Capital reported, female-led firms out-performed their male peers’ by 63% in terms of creating value for investors.
“What we’ve seen from our pipeline is that female founders tend to over-prepare, which means that they are, in effect, de-risking the investments for us and oftentimes come to us with quite a bit of traction in terms of key partnerships, revenue, customers,” Miller-Out said.
Tegan said she has experienced the gender gap first hand throughout her journey with Cayuga Venture Fund, which began in the early 2000s. When she first joined the firm, nearly every company that was in the portfolio was managed by men. This, combined with other factors, required her to adapt.
“When I started, I was young and trying to find my way in a field new to me that was dominated by men,” Tegan said. “Thankfully, I had some great mentors. Although, I also had to navigate through some interesting waters. Some of that was my age, some of that was gender, some of it was just being in a new role and wearing a lot of different hats to figure out what I was doing.”
And even though that gender disparity has improved slightly since then, she said she still experiences the problem regularly.
“You get used to being the only woman in the room, which sometimes is great because when you are, you stand out, and so, you can use that to your advantage,” Tegan said. “But there are other times where it can be harder to be heard and to be taken more seriously.”
How did this happen?
Sources interviewed for this story cited numerous reasons for the VC gender gap, from fewer women-led VC firms to unconscious bias throughout the investment process. According to All Raise, a nonprofit that promotes diversity in the investment industry, only 9.5% of U.S. VC firms had women in leadership roles as of 2018.
Ryoko Nozawa, principal at Cayuga Venture Fund, said this lack of female investors is a large contributor to the investment gender gap.
“People work on what they’re interested in, and similarly, people invest in what they’re interested in,” Nozawa said. “There are so few female investors in the field that the money doesn’t necessarily go to female companies. … The interests do not really coincide.”
Miller-Out said that she’s seen this problem in her experience at Chloe Capital, where she’s seen many women-led businesses and entrepreneurs eager for funding while other investment firms argue there’s a “pipeline” problem, meaning they don’t see a lot of women asking for venture funding in the first place.
“We don’t see a pipeline problem because we’re going out there and reaching out to the founders and inviting them to come to the table,” Miller-Out said. “A lot of others folks in VC firms out in Silicon Valley might be just sitting and waiting for people to come to them from their network, and if their networks are all white men, they’re going to tend to see more white men and white male founders.”
Andrea Ippolito, Cornell lecturer and founder of Women Engineers Cornell (W.E. Cornell), added that this creates a “vicious cycle” that continues to prevent women from reaching VC leadership roles and women-led businesses from receiving funding.
“If you ask any venture capitalist how they get deals and how they make investments, it’s all from introductions, so women tend to know other women and men to know other men,” Ippolito said. “If you’re not imbedded in a network with these venture capitalists, you can’t get an introduction with them, you can’t get that investment.”
On top of these factors, there is an unconscious gender bias in the investment market, like women being treated differently at pitches. Miller-Out said that female founders often get asked questions that are based on past records and experience, while men are asked about their future, so women can be put on the defensive at the start and have to over-prepare for every situation.
Solutions and strategies
Tackling this issue requires strategies on a variety of fronts, sources agreed.
One of the biggest cited solutions was there needs to be more women in VC firms and more female role models and mentors, argued Julie Baker, COO and co-founder of Ursa Space Systems, a space technology firm in Ithaca.
“Role models are very important, which is why Ursa has sponsored networking events the past couple of years for women in technology and entrepreneurship,” Baker said.
Ippolito said that VC firms also need to make a conscious effort to combat unconscious gender bias and diversify their networks.
“It’s also important for organizations to have goals and pay careful attention in this arena to make sure they’re not engaging in unconscious bias and they are seen as welcoming and to make this a priority and to invest resources in recruiting women,” Ippolito said.
Miller-Out said women can help counteract these biases as well. She said she and the Chloe Capital team help teach women how to turn every pitch to their advantage, like answering questions about their past with a more future-focused approach. In addition, she said there simply needs to be more funds available.
“There’s no question that now is a fantastic time to be investing in women entrepreneurs and to be seizing this opportunity,” Miller-Out said. “We need to be raising billions of dollars so that we can really achieve true equity in the industry and truly maximize the opportunity to make returns on these types of investments and to diversify our portfolio.”
Baker said these strategies are crucial to help close the investment gender gap. When more women-led companies receive funding, she and others argued, the community is better for it.
“You want people to be able to fulfill their potential in life, and I think there’s a lot of valuable women leaders who have good ideas,” Baker said. “And we need small businesses to start and grow and provide opportunities for everyone. That’s really what drives a lot of our community.”Current efforts
Most cited in this article said that Tompkins County is significantly ahead of the rest of the nation in tackling this issue, with many programs and individuals working to decrease the investment gender gap within the region and beyond.
Tegan, as a leader of Cayuga Venture Fund, is working to support high-tech, high-growth entrepreneurs, and other sources referenced her as a role model for women in VC firms. She also serves on two boards for the venture capital industry, the National Venture Capital Association and the Upstate Capital Association, where members discuss diversity regularly and work to track and improve it. She said closing the gender gap is good for business and society as a whole.
“It leads to better decisions economically, and I’m beholden to make sure that I do a good job for my investors, and I think that that’s a smart investment strategy,” Tegan said. “The other part of it is I think it’s the right thing to do, for a society to support all members, to provide access and economic opportunity for all members of our community.”
Chloe Capital is another local VC firm working to close the gender gap.
“We’re catalyzing solutions to the gender and diversity gap in entrepreneurship,” according to the Chloe Capital website. “We recruit women-led technology and tech-enabled companies and use our national network to drive business after our investments.”
This year, Chloe Capital has partnered with the ECMC Foundation to provide funding opportunities of up to $250,000 for women-led startups. Those interested can apply at chloecapital.com/funding.
Ever since starting just a few years ago, Miller-Out said she has seen Chloe Capital grow significantly and is proud of the work her team is doing and the unique approach they take to venture capital.
“We’d love to see true equity in the industry,” Miller-Out said. “We’re 50% of the population, 50% of the funding should go towards women – it’s really that simple.”
In addition to her role at Chloe Capital, Miller-Out mentors through Cornell University as an entrepreneur in residence and works directly with local women-led startups in the county to help them grow their companies.
W.E. Cornell, a program of the Center for Regional Economic Advancement (CREA) at Cornell University, is actively working to increase the number of female entrepreneurs, specifically science, technology, engineering and mathematics (STEM) women pursuing entrepreneurship.
“The reason we started it is because Cornell has wonderful entrepreneurship programs, and we weren’t seeing as many STEM women, in particular, as we would’ve thought,” Ippolito said. “We wanted to create an onramp program to our existing entrepreneurship efforts that helped get women excited, empowered, energized, and also helped them learn the building blocks of entrepreneurship so that they felt confident and excited to pursue entrepreneurship moving forward.”
Ursa Space Systems is one of many local companies that prove how venture capital funding in female-led and diverse businesses can lead to great innovations. Adam Maher started the company in 2014, and shortly after, he moved to Ithaca to build the founding team. In 2015, Baker joined Maher and helped found Ursa.
Ursa Space Systems built a collection of small radar satellites and now uses the data those collect to build information products. Baker said that though, at its start, she was the only woman at Ursa, the company always worked to counteract any gender biases and now has a team that’s evenly split between men and women and has several women in leadership roles like herself.
“Diversity is just a number, but inclusivity is giving those diverse voices a seat at the table, and so, we’re very proud of the fact that we have that kind of a culture here at Ursa,” Baker said.
The gender gap in venture capital investment exists all around the country, and though there are many resources and groups in the county working to close it, Tompkins County still has room to improve, sources agreed.
“We need to do more, and there’s a whole lot more that we could be doing to get more and more women into entrepreneurship and more and more women into venture capital,” Ippolito said. “We’re not leveraging half of our population to the best we can, and leveraging half our population will help create economic growth for our county and our nation, more broadly.”
And when this issue is addressed properly, the county experiences more economic prosperity and broadens its diversity, as Tegan argued.
“All net new job growth in this country comes from high-growth startups, so the private equity industry and the venture capital industry are huge drivers of economic growth and employment growth,” Tegan said. “The more that we are open to supporting entrepreneurs, getting the talent and recruiting and retaining the talent here, and providing access to capital and the dollars that people need to grow those companies, the better it will be, economically, for our community.”
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