Op-Ed: What’s a ‘Women-Led’ Company? We Need a Standard Definition

By Nancy Wilson, Founder & CEO, Canadian Women’s Chamber of Commerce

How many women does it take to make a “women-led” company? It turns out you just need one. That is, if you are a tech company looking for investment from a venture fund marketed to support women’s entrepreneurship and participation in the tech sector by the Business Development Bank of Canada (BDC).

Recently, the BDC Capital Women in Technology Fund announced its investment in an up-and-coming tech company with a management team of four: three men and a woman. The three men founded the company in 2014 and successfully received several rounds of funding. They hired a chief marketing officer, a woman, three years ago.

With $200-million to invest in “women-led or co-led technology companies” over five years, according to the BDC website, BDC’s Women in Technology Fund is “one of the world’s largest venture capital funds dedicated to investing in women-led technology companies.” In response to an email, Shawn Salewski, Director of External Communications for BDC explained that, “women-led means the company must have a woman founder, co-founder or in an executive position driving the direction of the business and have been in her role for at least one year.”

Based on BDC’s definition of “women-led,” the Women in Technology fund portfolio indeed represents women-led technology firms. However, a closer look at some of the investments reveals what I believe to be a flaw in the broad definition employed by the fund.

One company funded by the BDC’s Women in Technology fund, founded by a team of men, has one woman in a VP of business strategy position. However, the company also has a male director of business development who has been with the company in this capacity for at least four years longer than the VP.

Two men and a woman founded another company in the Women in Technology fund portfolio. The female co-founder still works for the company but is not in an executive role. At the time of investment, the company had a woman in a VP position. She left the company two months after the funding round closed. A man now does her job, leaving no female representation in management.

I congratulate these companies on their success and don’t doubt that they deserved funding – but not from a fund designated to supporting women. I also don’t doubt that BDC is investing in women-led ventures; the majority of the Women in Technology portfolio is evidence of this.

However, at a time when only 4 per cent of Canadian venture capital investment goes to women founders, I’m concerned that the cause of women’s entrepreneurship is being used to further marketing goals above actual progress. For this reason I am compelled to ask: What is the purpose of a woman-focused tech fund, and are these objectives being met by venture funding programs such as the BDC’s Women in Technology Fund?

According to Tara Wood, Founder of Purpose Communications, a communications and public relations firm that works with BDC, the goals of the Women in Technology fund are twofold: first, to deliver returns; and second, to invest in women-led tech firms and build a robust network to support and encourage women in technology and investment roles.

Earmarking funds to support women in tech seems to be a step in the right direction. But how can we be sure that the funds are reaching women founders and women-led firms? Shouldn’t there be commonly defined criteria or at least clear and public disclosure of terminology when the term ‘women-owned’ or ‘women-led’ is used?

On the corporate procurement side, rigorous criteria are in place to ensure only majority women-owned and -led companies are eligible for supplier diversity programs put in place by large corporations. Wal-Mart Canada and General Motors, for example, all require majority women-owned companies to be certified in order to participate in their supplier diversity procurement programs. Women-owned companies must pay annual certification fees for the privilege of proving their ownership and management structure to potential vendors, while corporations reap the well-documented benefits of supplier diversity.

I propose that similarly strict criteria be introduced to the financing side regarding the definition of the term ‘women-owned and led’ for all funds using this terminology: a minimum of 50 percent women-identified ownership and a minimum of 50 percent management representation with senior-level, strategic decision-making abilities. For firms that rely on equity investment, it is unrealistic to require gender diversity concerning ownership. Therefore, the definition of ‘women-led’ should be used, requiring a minimum of 50 percent women-identified representation in management with senior-level, strategic decision-making abilities in order to be eligible for funding.

Finally, if a fund is directed to support women in a particular industry, at least one of the women in a senior leadership role must be in a position directly related to that industry; in the case of tech, that requires a woman-identified person in a CEO, CTO or other tech or development role at the most senior level.

In the absence of these criteria, what differentiates a ‘women’s’ fund such as that operated by the BDC from any other fund? If a program, fund, or initiative wants to bank on the social capital of promoting women entrepreneurs, then the public deserves to know who’s really benefiting.

This op-ed appeared in the Globe & Mail on May 2, 2019.  If you are a subscriber to the Globe & Mail, you can view it here.