Women invented windshield wipers, the first computer program, life rafts, wireless transmissions technology, the paper bag, Kevlar, fire escapes and, mind you, chocolate chip cookies. If good ideas had only come from people who looked like the founding fathers, then a wealth of advances and joys might have been delayed or missed entirely.


Today many of the most important new inventions are funded by venture capitalists (VCs). And these investors live in a world of metrics. It’s a data-driven business. It’s also a business that professes to want to offer equal opportunities to women — which is why I was surprised to discover how little data is actually collected on this subject. *


As a female partner at Bloomberg Beta, a venture capital fund investing in startups that aspire to make business work better, I am often asked what can be done to change the fact that less than five percent of partners in venture capital firms are women.


An idea I’ve been thinking about is to follow the money. Limited partners (LPs) — the investors who fund venture capital firms — have the power to change the dynamics. The money VCs invest in startups comes from their LPs, which are often big financial institutions: pension funds, university endowments, or insurance companies. They can also be corporations (like our fund’s investor, Bloomberg L.P.), wealthy individuals, or governments. LPs invest tens of billions of dollars annually in venture capital funds. Without LPs, there is no venture capital.


If LPs were to use their financial power to increase transparency into gender in venture capital, then this would send a signal to venture funds and make them more accountable.


Here’s how we can do this…


Ideally LPs would collect the data, in a consistent way from fund to fund, on the following factors:**


— Female non-partner investor hires at the VC firm. Women are graduating from engineering and business programs in sufficient numbers to significantly increase entry-level hiring.


— Female founders the VC has financed. Seven percent of venture funds go to women-owned firms. Yet, 23% of entrepreneurs seeking angel funding are female. And, gender composition of a VC firm matters to founders.


— Female partners at the VC fund. There are a number of women-led venture funds, and I expect that over the next few years, more women will move from senior operating roles to the venture side. LPs should continue to be open to investing in these funds.


— Composition of the VC-backed startup boards (number of female board members and total independent board members for the VC fund’s later stage investments).*** Again there are many talented women in operating roles who could be major contributors to a startup’s success. (We at Bloomberg Beta signed on as a founding partner of the Boardlist.)


Study after study shows this also makes business sense: we have ample evidence that inclusive teams make for superior performance. Of the over 20,000 venture backed companies from 1997 to 2011 that Dow Jones analyzed, successful startups had double the median proportion of female executives as the unsuccessful ones.


As startups continue transform our society, it’s important to take into consideration the potential gender inclusion can have on innovation. This holds true for other diversity as well.**** Having a narrow selection committee could mean missing out.


We’re simply asking that we VCs begin to collect the data and that LPs ask us for it — a sort of transparency pledge. Women contribute to 25 percent of the GDP growth. Women are starting more companies. Women outperform men in both brokerage performance as well as hedge fund performance. Why not see how this plays out in venture capital? With so many new funds being formed, the opportunity for LPs to change the game is now.


Special thanks to Adam Rothenberg, Angela Martin, Beezer Clarkson, Brad Feld, David Shipley, David Tisch, Emily Chang, Fred Wilson, Jennifer Klein, Joanne Wilson, Josh Kopelman, Ron Conway, Roy Bahat and Tim O’Brien for their help with this piece.





* Project Include and the Elephant in the Valley study are some strong new efforts to collect data on the technology industry in general. With VCs and startups initiating programs to collect the data, LPs can be a force multiplier.


** We at Bloomberg Beta are starting to collect the absolute numbers annually for the metric and for the total (for example, for the number of female non-partner investor hires, we are also collecting the number of total non-partner hires). Percentage of total, growth rates, etc. can always be calculated from the absolute numbers. The raw data will provide a good foundation to run future analyses.


*** We don’t typically take board seats for early stage companies. If we were a later stage fund or invested in portfolio companies at a stage where they have board members that are not part of the management team or the investor group, we would collect the data for this metric.


**** Racial and many other forms of diversity are also underrepresented and deserve support. I felt more capable to speak on gender inclusion based on my personal experience as a woman and welcome others to join in.


Editor’s note: This article was originally published on LinkedIn on June 16, 2016.