This article originally appeared here.
Statistics show that although women hold almost 52 percent of all professional-level jobs, they are vastly underrepresented in top leadership positions. For example, only 4.6 percent of Fortune 500 companies are run by a woman, and women make up just 16.9 percent of all Fortune 500 board seats. These numbers are not uncommon; in fact, it happens in large companies, booming startups and small businesses alike.
Are the numbers justified? Are men simply better leaders? As it turns out, gender diversity is beneficial, and including more women on your team could be the key to improving profit. At SXSW, I spoke with Sara Brand, the founding general partner of True Wealth Ventures, to get more insight on this topic.
Why Gender Diversity
Sara’s micro VC fund invests in companies that demonstrate gender diversity in leadership positions. The team doesn’t have to be all women, but there must be at least one woman of decision-making authority on the founding or early executive team. The importance of this guiding principle can be demonstrated in two points.
For one, women are largely excluded from VC funding. As Sara tells me in the interview, about 96 percent of VC partners are men, and only about 1 percent of those who make investment decisions are women. Since people tend to invest in people like themselves, this means the majority of venture capital goes to male-run companies. In fact, in 2016 only 4.94 percent of VC deals went to women-led businesses, which were awarded just 2.19 percent of the total VC funds.
The other reason why Sara’s company focuses on gender-diverse companies is that it makes good business sense! According to the data, companies with gender-diverse teams show significant financial outperformance. In fact, a study of about 22,000 publically-traded companies in 91 countries found that those businesses with 30 percent or more female executives made up to 6 percent more in profits. The authors speculate that by including more women in leadership roles, these companies increase skill diversity while decreasing gender discrimination, allowing them to find and retain top talent.
Sara urges more companies to think about gender diversity when hiring executives and creating leadership teams. As for female professionals, she advises women to leverage the strengths they have as women. For example, women tend to have higher EQs which can be an advantage in the 21st century where leadership is less hierarchical and more cross-collaborative.