Female Founders, GPs, and High Conviction Portfolios
The following is a true exchange between a female founder and a VC:
“Your message is fine,” he said. “Your pitch deck is not the issue.”
“What’s the issue?” I said.
“You’re a woman.”
I let the words hang in the air.
Finally, I said, “Seriously?”
“I’ll let you in on a secret. When female CEOs pitch a deal that we like, the first discussion we have after she leaves is what role we could put her in,” he said. “It’s this unspoken thing. No one wants a female CEO.”
“How can you just discriminate like that?”
“Because every startup goes off the rails at some point. We’re forced to have hard conversations with the CEO, and no one wants to yell at a woman. It would be like abusing your mom or your sister.”
“That’s ridiculous,” I said.
“I’m not defending it. I’m just tell you the truth. How many female general partners have you met at firms you’ve talked to?”
“None,” I said.
“Well, there you go,” he said.
“How do I even deal with this information?”
“What else can I tell you?” he said. “That’s just how it is.”
That’s just how it is.
(excerpt taken from “Finding the Exit: It’s Not Where You Start. It’s Where You Finish” by Lea A. Ellermeier)
First off, if you’re a female founder (or investor or GP), I just can not recommend Lea’s book highly enough. It will make you laugh, cry, shake your head in disbelief, and inspire you more than you expect. Lea is a Dallas-based serial entrepreneur who sold one of her companies to 3M for… Well, buy the book and learn for yourself! My respect and admiration for this woman knows no bounds.
My topic this week is “High Conviction Portfolios”… what they are, how to build one with women-led companies, and the impact they have on the “broad” market. (yes, pun intended)
The traditional approach to a High Conviction Portfolio is to focus on short-term price movements and quarter-end earnings results and build portfolios of 75 to 100 securities/companies to diversify market risk and minimize the impact of individual holdings.
However, at Cassandra Capital, we believe, like Warren Buffet once said, that “wide diversification is only required when investors do not understand what they are doing” (i.e. what they’re investing in).
In our portfolio, we have high conviction around women’s “Proximity to Problems” and our targeted investments focus on the fact that women make 80% of ALL consumer decisions and 85% of ALL healthcare decisions.
Women are often the group most directly impacted by company/ product/ service choices. Solving these problems creates investment opportunities.
Investment opportunities through high-quality, early stage investments that have a strong competitive position and high potential market share.
Now for three insights on high conviction portfolios that I explored this week:
- What Does High Conviction Mean? by The Common Investor: “… The qualitative characteristics required to have high conviction in a company include an understandable business with reasonably predictable future cash flows, a business that has control over… “
- Here Are 9 Women-Owned Businesses That You Could Invest In by Finance Buzz: “… If you invest in women-owned businesses, you can grow your money while also potentially impacting social change. Values-based investing is a great way to support causes you care about, including closing the gender gap. Women are still under-represented in Fortune 500 companies, holding only 8% of leadership roles. Women entrepreneurs also have difficulty accessing the capital and mentorship needed to grow their businesses. But gender diversity can drive innovation and help reach women consumers, who control the majority of household spending.“
- The Case for High Conviction, Active Investing by Oppenheimer Funds: “… Even net of fees, high conviction, low turnover active strategies have outperformed passive products over various time frames both domestically and globally...” (While this article focuses on common stock equities, we believe that the philosophy applies to women-led companies.)
So, what do you think about this issue?
