Improving startup results through female leadership

During my career — spanning entrepreneurship, academia, arts management and venture capital — I’ve learned the importance of female leadership in contributing to successful outcomes.

Diverse perspectives, including those of female leaders, improve problem-solving and decision-making. I believe that novel perspectives generate “additive” moments: instances when one member of a team makes another member’s idea even better. Teams made up of like-minded people from similar backgrounds are limited in their breadth of perspectives, and, as a result, they limit the potential of their companies.

So, the question is this: Are you hiring and organizing to access the widest range of ideas and perspectives?

As a partner at Pegasus Tech Ventures, I’m aware that the VC industry boasts about finding teams with outlying and industry-changing ideas. However, the truth is that the industry has a low percentage of female leaders compared to other industries.

Not only are there few female partners in VC funds, we are also not doing enough to support female founders. Startups received an unprecedented amount of financial investment during the pandemic, yet female founders lost ground.

Research has proven repeatedly that diversity is good for business. Public companies with at least one female board member typically outperform companies with only male members. Diverse teams have also been found to produce the most creative ideas.

A key tenant of the Design Thinking and Lean Startup methods — which have served entrepreneurial ecosystems well — is to lead with action. Let’s take specific actions that will result in more female leadership in the startup world.

Here’s what I’m doing; I hope it will inspire you to take actions of your own.

Hiring to improve results

I believe that startups (and venture capital firms) need to change their hiring practices to diversify their teams. While it is easier to rely on the founders’ existing networks to recruit, it’s worth the effort to expand your outreach.

One technique I’ve used is to partner with top-tier universities around the world that have made the commitment to recruit diverse student bodies. This helps me tap into a bigger pool of diverse talent, including female leaders. These new recruits have a wider range of backgrounds and life experiences, so they bring novel perspectives to the table.

It’s also helpful for startup leaders to host open office hours during which potential applicants can ask questions about the company’s culture, open positions and how to apply for them. Personally, I’ve been successful in attracting a more diverse pool of applicants when I made it a comfortable and welcoming process. Make sure that applicants understand your company’s objectives and your belief that diverse perspectives contribute directly to the creativity and productivity of your teams.

Here’s a great case study: Orchestras discovered that they naturally achieved more gender diversity when they auditioned new members with review panels who did not know the names of the candidates and could not see them. By focusing only on what matters — their musical talent — they were able to overcome unconscious biases.

How can we do that in startups? Some companies hide the names of candidates while resumes are reviewed, and some give tests or other assignments where candidates’ aptitudes for specific types of work can be evaluated, independent of their gender or background.

Investing in diversity

On the VC investment side, the parallel to hiring is selecting what type of leadership teams you want to invest in. By seeking out entrepreneurial teams with female managers and employees, you are likely to find more creative, more resilient startups.

It’s better to challenge and improve products during the development process, not after they launch. A diverse team gives you a better opportunity to see your target market accurately and understand the customer’s perspective. As an investor, you’ll get exactly what every investor wants by supporting more diverse teams: more financial reward for a given level of risk.

A healthy, diverse team will challenge old ideas and generate a wider variety of novel solutions. If you are investing in consumer-facing companies, you can’t afford to exclude women from leadership roles. Since women control the majority of spending decisions and an increasing amount of wealth, you’ll be improving your chances of success by investing in teams that include female decision-makers.

We should also look in the mirror. These principles would benefit the operations of venture capital firms, not just our portfolio companies. Staffing your VC firm with diverse talent helps broaden your perspective on where the next big idea may come from. By diversifying investment teams, we will counter unconscious bias and recognize great ideas no matter where they come from.

At Pegasus Tech Ventures, we strive to hire diverse employees. About 40% of decision-makers at Pegasus are women.

I don’t believe we should promote more female participation in startups and venture capital just because it is fair. Smart startup founders and investors should pursue their enlightened self-interest: Recruit and invest in female employees and leaders to improve your results.

By doing so, you’ll be establishing and supporting startups that are set up for long-term success. Better ideas, more innovation, higher revenue and long-term profitability will be your reward.