500 Startups: How Diversity Drives Deals

500 Startups: How Diversity Drives Deals

By Barbara Stewart, CFA Posted In: Drivers of Value, Economics, Standards, Ethics & Regulations (SER)

The venture fund 500 Startups was named the “Most active global investor by VC deal count” in PitchBook’s 2018 Annual Global League Tables, a comprehensive ranking of global private equity and venture capital activity for the year.

I recently interviewed 500 Startups’ innovation director Vera Futorjanski. Futorjanski has a diverse and fascinating background: In her early career, she was a professional Argentine tango dancer, and she has lived in 10 countries and is fluent in five languages. In addition to her role at 500 Startups, she serves as a global ambassador and mentor for Vital Voices, a nongovernmental organization (NGO) led by Hillary Clinton and Madeleine Albright that works with women leaders.

We talked at length about what it takes to be a deal leader. The big takeaway for me is that diversity drives deals: There are many ways to do business, so don’t be afraid to be different.

Barbara Stewart, CFA: 500 Startups invests in geographically diverse markets. How does this factor into your success in terms of deal activity?

Vera Futorjanski: What makes 500 Startups stand out is that we have been looking at emerging markets from the very beginning of our firm. Almost half of our portfolio companies (49%) are from outside of the US. We don’t shy away from investing in founders and companies in markets that are not necessarily known for their big tech successes (yet!). We invest in them because we believe in them.

Our mission is to discover and back the world’s most talented entrepreneurs, help them create successful companies at scale, and build thriving global ecosystems. 500 Startups has been investing globally since 2010. The number of countries we’ve invested in is now 74, which means we’ve invested in almost 40% of the world’s nations. We recently added 155 new companies, bringing our total portfolio count to 2,210 companies and over 5,000 founders.

Half of our unicorns are from emerging markets— I think that is impressive. We have 10 unicorns in our portfolio — Talkdesk, Credit Karma, Twilio, Grab, SendGrid, Canva, Intercom, Bukalapak, GitLab, and Revolution Precrafted. We are also the most active VC in the region where I am based (Middle East and North Africa), and we aim to maintain that lead and continue to get access to the best deal flow through our No. 1 position in the market.

How and why does gender diversity come into play in your organization?

Diversity permeates throughout the 500 Startups organization, and one of our core values is to “Be Inclusive.” Understanding the importance of a gender-inclusive culture, we believe that venture capital and private equity firms of the future shouldn’t look like firms from the past and that moving toward greater diversity will differentiate us.

We are a team of over 150 professionals of which 51% are women. Our CEO is a woman. When we run investor training courses hosted in partnership with top universities like Stanford and Berkeley for up-and-coming investors around the world, we always ensure that at least one-third of each group of the course participants are women, and we offer scholarships for female investors when needed.

You have a big focus on investing in female founders. Why?

I think it’s this inclusive outlook on the world that contributes to 500 Startups’ success, combined with a very strong female leadership.

First Round’s 2016 research findings showed that portfolio investments in startups with at least one woman founder performed 63% better than investments in exclusively male teams. What an opportunity!

I am proud to say that 26% of our investments are led by at least one female founder. At Batch 24 — they recently hosted a full-house demo day — 40% of the companies had a female founder and 50% had a female minority founder.

Moreover, 525 companies in our portfolio of 2000-plus startups have at least one female founding team member, which is more than three times the industry average. In the two most recent batches of our San Francisco Seed Program, more than one-third of the companies had at least one female founder. Additionally, 4 of the 10 “unicorns” 500 Startups has invested in — Canva, Credit Karma, Grab, and Talkdesk — include a female co-founder.

It is truly shocking to me that, as per TechCrunch, only 2% of US VC dollars go to women-led startups. My driving force is to ensure we get more money and more opportunities for women-led startups to empower them and help them thrive.

What advice can you give those who aspire to become founders?

First of all, at a high level, think not in terms of “I want to be a founder” but rather, “What real issue am I solving?” From there, clearly you need to be passionate about what you do, but you also need to be persistent and resilient at the same time. In other words, don’t give up when the going gets tough. But importantly, also be able to recognize if an idea is not worth pursuing.

My top three pieces of advice are:

1. Don’t be afraid to change paths in life. Even if the clear path is not visible at the time, your job changes might lead to something much bigger. My own career is a perfect example. I started as a political consultant in the European Union. After three years, I jumped to a fast-paced environment at Rocket Internet leading their global communications during the largest tech IPO in Germany, and then I moved to Dubai to build a startup that I launched and ran for a year.

From there, the Dubai Government headhunted me to be part of their founding team to build the Dubai Future Accelerators. That opportunity was possible only because of my three previous very diverse experiences [that gave me an] understanding of politics, communications expertise, and entrepreneurship experience.

As Steve Jobs said, “You cannot connect dots looking forward, but you can connect dots looking backwards.”

2. Be a leader, not a boss. It is only then that people will believe in you and your vision. In order for your business to be a success, you have to find the right talent — it is imperative that you have the right team around you. You need to hire people who will work very hard . . . as if it were their own business. This requires strong leadership skills and a team focus.

3. Network! This advice needs to be taken seriously, especially by female founders. Men have it slightly easier because of the longstanding traditions of boys’ clubs and other networking opportunities. Often it is during the private networking times that important connections are made that later lead to job or funding opportunities.

People are more likely to invest in those founders to whom they can relate, in whom they might even potentially see themselves. Hence, it’s so important to get more women into the VC space.

We still have to do a lot of work on mind shift and perceptions. As the saying goes, “You can’t be what you can’t see.” It’s of the utmost importance that we get more women in leading positions, on boards, as CEOs and as heads of state and world organizations.

For more on how diversity drives investment results, don’t miss the Women in Investment Management 2019: Opening Doors Conference this September in Montréal.

If you liked this post, don’t forget to subscribe to the Enterprising Investor.

All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: ©Getty Images/ lvcandy

Continuing Education for CFA Institute Members

Select articles are eligible for continuing education (CE) credit. Record credits easily using the CFA Institute Members App, available on iOS and Android.