Photo by Kathryn Elsesser

Dan Morrell: Monica Dodi (MBA 1984) has spent much of her career as an entrepreneur and tech executive and was well aware of the challenges facing women in her field. But it wasn’t until she got into the VC world, sitting on the other side of the table, that she realized the extent of the funding problem that female founders were facing. It was bizarre, Dodi thought. She knew that a diversity of views meant a higher return on investment, higher productivity, and higher profitability—a fact that is supported by plenty of research. And yet only 2.2 percent of VC funding goes to female-founded firms.

So in 2011, Dodi founded the Women’s Venture Capital Fund with HBS classmate Edith Dorsen (MBA 1984), intent on funding teams with at least one woman in the mix and turning them into an investment opportunity that traditional VCs are simply overlooking. In this special episode of Skydeck, recorded live at Fall Reunions, Dodi speaks with Associate Editor Jen Flint about the challenges that female founders still face—and what real progress will take.

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Flint: As a woman in VC you are among the 9 percent of venture capitalists who are women, so talk about what happens when there is a woman in the room, when there is a woman who’s writing the checks and making the decisions.

Dodi: Well, there’s been a lot of studies, but there's more of a risk-intelligence approach where, instead of trying to go for those home runs all the time and the next Google or the next Facebook, you know, you can certainly make great returns when you go for singles and doubles. And we've seen that by having a diverse group of people, the results are far better.

Because, you know, you have to think about your consumers, too. I'd like to mention, you know, there was this study done maybe 10 years ago by the Boston Consulting Group. They interviewed about 25,000 women across 20 countries, and their conclusions showed that the female consumer will grow faster and be bigger than Russia, Brazil, China, and India combined. It's a huge market. But they also discovered that over 90 percent of female consumers, who are responsible for most of the shopping, are dissatisfied with the goods and services that are out there. Top of the list are financial services, but also anything including electronics, internet services, health care. And they are the caregivers of their families and their communities, and so it's a huge opportunity that has yet to really be tapped in terms of really creating IP and products that really understand the female consumer.

Flint: You’re offering series A and series B financing now, this is the second fund. You closed the first one in 2013, launched the second in 2017, and you started with seed funding. And that seems to reflect this kind of movement up the ladder that you've seen generally in the ecosystem—there's more funding for women moving up the ladder, but there's still not a lot in the growth stage. What can we do to fix that?

Dodi: Well, that's the million dollar question or billion dollar question. Because also across the board, the landscape has changed from even 10 years ago. We don’t have the number of IPOs that we used to. So the exits for investors—and that’s what it’s all about for venture capitalists. You know, you could be an entrepreneur without getting outside funding, so just talking about companies that need outside capital and they need the capital to bring the product to market, which would be, you know, seed and series A. We see that there are a lot more female investors that are getting involved. But there’s a bottleneck for the exits that typically venture capitalists are looking for in terms of going public. Now you have a lot of these private companies that are basically funded by private equity firms because they’re requiring hundreds of millions of dollars just to get to a certain point, whereas normally you would get it from the public markets.

And why there are not more women involved in the later stages: I think it’s largely a function of the makeup of the VC firms themselves. In your more traditional venture capital, we've seen that there is a definite correlation between investing in more women later stage if there are more female partners involved.

Flint: What about raising capital as a female-focused or diversity-focused fund: Are there particular challenges for you raising capital for series A and series B financing?

Dodi: Definitely. The bulk of venture capital comes from institutions, whether they be pension funds or endowments. But their ticket, their minimum investment size is typically $10 million or even more, and they don’t want to represent more than 10 percent of any fund. We've got a lot of encouraging feedback from institutions, especially the pension funds—CalPERS, for example. Huge. But they want to invest in much larger funds. And so getting to that point of creating a $250 million or $500 million... Then the other thing is also this gender focus is something that they have to avoid. You know, it's sort of like affirmative action for lack of a better word. So the institutions do not have the mandate to invest in anything that might look as if they’re investing for anything other than returns.

Flint: So in the space of eight or 10 years since you've been in this work, the numbers haven't gone up very much. What would it take to really move the needle?

Dodi: Well, as I mentioned, the institutions are really driving over 90 percent of the VC money. We need to figure out a way for the pension funds, the endowments, the foundations to understand that it’s sort of like investing in sustainability or anything that is an impact fund. So a corporation B, where it’s not just about return on investment, but it’s also about having an impact in our environment, in our community. There’s so much data out there: Women-founded companies create two times more revenue with one dollar of investment than male-founded companies. So there’s just a lot of data to support it, but it’s just moving the institutions to make, you know, a friend of mine is chief investment officer CalPERS, which is trillions of dollars. But she can't convince her investment committee to go beyond the bottom line, and so we need to have all that data ready to sort of slowly move that that oil tanker around.

>Hi, I'm Georgia Zocca (GMP 23) from the General Management Program in 2017. My question is, if we want to invest in women entrepreneurs, what’s the most effective way to do that? Is it by going to a fund or just finding a friend? Do you have any tips on that?

Dodi: So I think it definitely depends on the size of the check that you’re willing to make, because typically there are ways around it, but normally you can’t have more than 99 investors and in a fund, or 99 LPs, unless you want to go to the next level of regulation and oversight. And so if you’re trying to raise a $500 million fund, that means the price tag is $5 million, let’s say, as an investor. So that’s why I see a lot more women involved in angel investing. And there are a lot of angel groups as the Harvard Angels, which is excellent. But I live in Los Angeles. So we have tech host angels. We have Maverick angels and they get together once a month. A lot of things associated with USC, UCLA, the universities have always been a driving force in innovation anyway. And they also have been a driving force in entrepreneurship for a long time. So I see that just to get your feet wet is to maybe get involved with angel groups anyway.

And go to conferences, because there’s also pooled opportunities where you can get together on a specific investment or across the board kind of matching investment. Like I'm going to a conference in Berlin in a couple of months called the Falling Wall Conference. So there's 25 companies that are coming from all around the world focused really on innovation, like the latest, greatest stuff in agriculture, in climate change, in health care. And that's where you meet like-minded people, birds of a feather in terms of interest in supporting these entrepreneurs.

>Thomas Bittar (OPM50), founder of a venture capital fund in Brazil, we’re still in fund two, moving to fund two. And we are facing the same challenge as you, which is how to break through the institutional barriers, institutional investors, which we need for a fund two and will need for three. But we are putting a lot of effort into this diversity to not only women, as you said, but also to have teams with diversity in our portfolio companies that are diverse. My question is, have you been able to break this huge barrier from the institutional investors? And if yes, can you give us some advice?

Dodi: We did raise money from some institutions in particular from the state of Oregon and a few other trusts that invest, the Meyer Memorial Trust and all that. So it was, a lot of it was developing a relationship with them and giving them a lot of information. They want to know what the team is, what the investment team is. We actually met with the Harvard Endowment in the early days and we got a lot of support, and so they think they didn't close the door. The door is ajar. It’s just a matter of, a lot of it, I think is building relationships. There are a lot of people keeping their eye on us. And so I think as you develop a reputation, they see what you can do, your level of commitment and overall your numbers, I think we’re going to start cracking it. They haven't closed the door. It just takes a lot of time.

>Hi, my name is Adriana Herrera (AMP 193, 2017). I think change is about micro-pivots in the ecosystem. You’re fortunate enough to have a great platform not just here, but every time that you speak, you have an audience, so what would you suggest that we all walk away with collectively, to start making those micro-pivots and possibly that network effect?

Dodi: Well, my first knee-jerk reaction—and I certainly don't want to be flippant—but it really comes down to putting your money where your mouth is. It’s definitely skewed for a reason. Part of it is this unconscious bias, but we just need more women to feel comfortable writing checks and supporting women entrepreneurs. But not necessarily seed companies that are trying to piece together some money to start something, because there’s a 20 percent chance that they’ll go to the next level anyway, regardless of how accomplished they are. But it's really writing those checks. A lot of the guys that I know, who I went to school with, who I love, are just—certainly in my experience—this is more qualitative than quantitative in my view—are just more comfortable investing their own money beyond the stock market. So, you know, it’s great to mentor. It’s important to mentor and support one another regardless of age or socioeconomic background in something that drives your passion. You don’t want to mentor somebody in something that bores you to tears. But something that you really enjoy and really, at the end of the day, it comes down to money. And that's where we just need more women to step up on that regard.

Skydeck is produced by the External Relations department at Harvard Business School and edited by Craig McDonald. It is available at iTunes and wherever you get your favorite podcasts. For more information or to find archived episodes, visit alumni.hbs.edu/skydeck.

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