The City of New York is committing $10M in investment as a part of a new program called WE Venture that will target investments in women-led early stage companies. Through the program, WE Venture will effectively serve as a limited partner in venture funds that specifically have a demonstrable track record of investing in women and other underrepresented groups.
The City and New York City Economic Development Corporation (NYCEDC) has historically served as a catalyst for entrepreneurship in the city through various programs such as NYC Venture Fellows, NYC BigApps, and Take the HELM, but WE Venture is a groundbreaking initiative, the first of its kind in any municipality, to directly address disparities in the funding realm faced by women, at such scale.
In an exclusive interview to learn more about the City’s vision for WE Venture, AlleyWatch had the chance to speak with Alicia Glen, Deputy Mayor for Housing and Economic Development. Glen’s previous experience as the Head of Urban Investment Group at Goldman Sachs and co-lead for the 10,000 Small Businesses Initiative will serve the City and the NYC startup community well in ensuring that New York City is a fertile ground for all entrepreneurs, irrespective of gender.
Reza Chowdhury, AlleyWatch: The city is planning the launch of the WE Venture. Please tell us about that.
Alicia Glen, City of New York: There are almost 359,000 women entrepreneurs in NYC, and women contribute approximately $50B annually in revenue. But men own 1.5 times the number of businesses, have 3.5 times the number of employees, and generate 4.5 times the amount of revenue.
So what’s going on here? One of the biggest problems is that women aren’t getting the access they need to funding to build their businesses.
WE Venture is taking that problem head-on.
WE Venture will seek out venture capital partners who not only acknowledge the disparities women entrepreneurs face, but also demonstrate a track record of raising and deploying capital to companies owned by often-marginalized groups. Through an RFP process, we will create a funding consortium to facilitate investments in early-stage companies led by women, especially in the tech space. Our goal is to invest $10M alongside engaged VC partners who seek not only financial returns, but also share the City’s vision to serve as the top choice for diverse entrepreneurs in tech.
The sorry stats on women’s startup funding come as no surprise to anyone who’s been in this space: Across the country, women are 36% of small business owners but only receive 2% of funding. Women of color, who comprise the fastest growing segment of entrepreneurship in the country, receive only 0.2%. In NYC specifically, 13% of all women seeking funding actually received capital; and only 1% of that small group were women of color.
The root of the problem is a lack of diversity in the senior ranks of the VC firms dispensing this capital. Nationally, women are 21% of junior staff at VC firms and 8% of senior staff. Over the course of dozens of meetings with women VCs, entrepreneurs, and our Women Entrepreneurs NYC Advisory Board and Partners, we’ve come to the conclusion that without adequate representation of women, awareness of investment opportunities and willingness to commit capital will continue to be scant at best.
The good news is that NYC has a very strong tech startup industry, and over $8B has been put to work in our city across 1,200 transactions since 2009. In fact, NYC was the only city in the US to have growth in the share of VC funding in the past 3 years.
The strength of NYC’s startup economy gives us as an administration incredible power to move the needle here – and a lot of bang for our buck. Our bet is that a $10M City investment matched with approximately $50M in partner funding will be able not only to fund some great women entrepreneurs, but to serve as a model for cities around the country and around the world.
What data supports the city’s proposed investment in VC funds that support women?
I’ve always been a believer that women do better than men (call me biased, I’ll own it). And the data proves it! A great example is the research done by First Round Capital, one of the most reputable VCs in the business. With 10 years’ worth of data, they looked at 300 companies and 600 founders, and a number of characteristics – including value created for investors – that define success. Companies with at least one female founder on the team performed 63% better than the firm’s investments with all-male founding teams.
Arguably, data-driven decision making – something the sector touts as its hallmark – should get another look.
What would you say to naysayers who believe the role of the city is to champion entrepreneurship but not necessarily invest taxpayer dollars into it?
It’s our job in government to intervene where there are market failures, and to correct that imbalance on behalf of marginalized groups. That’s precisely what we’re doing here. I shared the stats with you earlier, there’s a clear lack of capital flowing towards women-founded businesses despite equal or better results than their male counterparts, and we’re here to do our part to fix that.
The venture cycle is a long one that will outlast this administration. What thinking has been done to ensure that there will be continuity in this program?
WE Venture is an investment that is being made through the NYC Economic Development Corporation, an agency that has a number of strategic investments across sectors, many dating back before my time. That means that once the funds are committed into an investment vehicle, it’s hard for anyone to back out.
Beyond that, I can only imagine that the next administration will be keen to support women, as they make up half our workforce and are huge contributors to our economy. Our own slate of programs to support women in business will help to foster a group of entrepreneurs who I’m sure will be powerful advocates for continued investment in leveling the playing field.
Or to put it simply: It’s just good policy.
What are the ideal types of funds that you are seeking to partner up with on this initiative?
We’ve purposely left the RFP to be as broad as possible, and we are hoping that the City’s “seed capital” will be leveraged by VC funding that totals approximately $50M. Based on average investment size, we would expect to support between 40-50 investments across a range of businesses in the tech sector. Our primary aim is to work with VC partners who exhibit our same values and goals – to deploy capital to women entrepreneurs and help close the gender gap in this space. We expect interest from a range of partners, including women focused VC firms and strategic investment arms of large corporates who are focused on diversifying their investment pipeline.
How can VC firms submit their interest?
VC firms can submit their interest here prior to November 9th.