We caught up with Giant Leap partner Rachel Yang to coincide with the timing of new data from Equity Clear, a project that aims to foster a more diverse startup ecosystem by creating a better picture around which founders and startups receive investment.
Rachel started as an associate at Giant Leap back in 2017, where she is now one of three partners with an ownership stake in the firm alongside Will Richardson and Adam Milgrom.
In the Australian venture capital world, Giant Leap holds the title of being the first 100 per cent impact VC firm, meaning its investors analyse prospective deals through both a financial and social impact lens.
Giant Leap has to date invested in over 30 companies, including Who Gives A Crap, eco-friendly paper and bathroom products that support clean water and sanitation projects, and Conserving Beauty, a waterless skincare brand that has released the world's first plastic-free dissolvable makeup wipe.
Rachel's career has spanned transactions, management consulting, and now venture investing. As a woman with Taiwanese background, she straight up brings a different perspective to the venture game.
We enjoyed a free-wheeling dialogue about venture capital, gender and bias, which we've reproduced (almost) in full below as a resource to help stimulate your own thinking around these issues.
Missing Perspectives: Hey Rachel, thank you so much for making the time to chat today. So, the oft-reported statistic is that only 2-4 of total venture capital funding goes towards women-led companies. And yet, 60 per cent of Giant Leap's portfolio are "women-led" businesses. What in your view have been some of the most effective initiatives or strategies to change the look and feel of who actually receives investment?
Rachel Yang: My view is that with any decision, be that an investment decision or a broader operational decision, there is always bias, conscious or unconscious, at play. If there is a way to minimise that, I think that is really positive to result in a more inclusive and fair process.
That scene setting for me means that if you have a diverse team, those unconscious or conscious biases will not necessarily be in the same areas, so you can challenge each other in ways that will make for more fair decisions. If everyone is from the same background, and of the same gender, then there’s less likelihood of challenging each other on some of these biases.
In the hiring process, for example, Giant Leap uses a platform called Applied [MP note: Giant Leap is an investor in this company]. We don’t look at CVs, we don’t look at names when reviewing candidates, we simply look at their responses.
We just hired an analyst. We asked, for example, what’s the market size of one of our portfolio companies. And so candidates would step out their workings, and provide that answer, and we’d review all those answers at once with no prior knowledge of who that candidate was. That kind of mechanism helps to remove the unconscious bias from the process like hiring to then try and create a more balanced investment team.
We’ve foundationally set a diversity, equity and inclusion policy, which outlines all of our processes and targets around what we want to see from an investment team perspective, and operational perspective. So coming back to your question around what can be done - I think that being very intentional about a fair and inclusive processes, and also setting targets and being transparent. And as you note, 60 per cent of our portfolio are women-led businesses.
Is there anything that you’ve seen people try - and let’s model out hardcore misogynists or the rare people who only want to associate with and talk to people who look like them - I’m assuming that’s not most people in the venture capital world, who are going to be smart, curious, interesting people. Are there any strategies that you’ve seen that might be well-intentioned, but don’t actually work when it comes to changing the percentage of women-led teams that receive funding at the end of the day?
I think it’s more the absence of strategies that has been the challenge. I think there’s been a lot of talk around wanting to improve, and then not necessarily changing processes. Just saying things like "we’re not seeing businesses with women in the founding team." And for me it’s like… but they exist … so there’s got to then be a question where you reflect on yourself and say “well, why are we not seeing them?” We can’t keep doing the same things we’ve always done and expect the world to change. So that’s one area.
In terms of hiring, that’s another area where we hear “oh, we’re just not getting women applying for the role”. There could be factors in the position description that are deterring women from applying for the role. So, being intentional about the language that you use in position descriptions or your advertising can help attract women to your workplace. If you’re just doing the same thing but saying, "oh, no women are applying to the role that we’ve put out", and saying that there are no women who want to work in venture capital. What we see a bit of that kind of feeling that “oh there just aren’t the women out there with the skills”, which is not true.
So you're saying here that the biggest issue is where there is no strategy, or where there’s a lack of self-reflection from incumbent members.
I think that’s right, and also putting the burden on others to do the work, rather than necessarily reflecting on what you can do yourself to change the way you’re operating. Expecting women to meet you where you are, rather than meeting in the middle and saying, okay there might be a few more things we can do to improve the culture around the venture capital world, there may be a few more women who want to join this sector. You read a lot about the tech world, and the venture capital world, and it’s not that attractive on face value for a woman.
I didn’t know much about the venture capital industry before, it was the impact that drew me in, and I started to go… why is it like this? And there are some incredible women that have started world-changing startups, and they are trying to operate and raise capital in this environment, which is really male-dominated, and they continue to come up against barriers. The most recent Cut Through Venture report was released yesterday, and funding for women-led startups has gone to the lowest level since 2019, and 100 per cent of scale-up capital went to teams led by men. It’s just a disconnect in terms of these incredible businesses that these women create and drive growth in.
On the scale-up funding observation, we’ve investigated women’s sport, and the resource gaps, and how women are often doing so much more with so much less. We learned that at the Sydney Swans, the women’s team train on kind of sh*tty grounds in Sydney's Inner West. Meanwhile the male players have full access to the SCG - of course there are challenges with being a professional athlete, or being an entrepreneur, I don’t think anyone is suggesting that these are easy paths - but for men they’re just smoother and less interrupted.
It’s really interesting about the sport piece as well. You can’t expect women to perform at the same level if you haven’t set a level playing field. It’s just unfair. And the point about women doing more with less - a Boston Consulting Group report found that women-led businesses generate 12 per cent higher revenues using an average of a third less capital than their male counterparts. So they're also doing more with less in the business world.
People aren’t really registering that they’d have better financial performance if they invested in diverse teams and back women. Global GDP would rise. There are so many statistics out there - McKinsey released a report as well saying that the likelihood of financial outperformance is 39 per cent than non-diverse teams. But people just can’t hear those statistics in a way that would lead them to act.
We routinely hear that women-led companies receive about 2-4 per cent of total venture capital funding. We also hear that women-led businesses outperform all male teams on metrics like total revenue for the business. Now, I'm going to be a bit cheeky with my question here, but if I was a venture capitalist, either investing my own money, or having gone to the considerable effort of convincing other people that I was right person to trust with investing their money in early stage ventures, I'd be lying awake at night fretting that we were leaving this much obvious value on the table. What do these funding stats tell us? Does this mean that most venture capitalists are bad at their jobs? As a cohort, are they like the pre-GFC banking class? What’s going on?
I think it comes back to my point about unconscious bias. I don’t think they realise they’re leaving value on the table. I genuinely believe they are leaving value on the table. You can’t possibly preclude half the population from your portfolio and think you’re going to get great returns in my view. If you look at the data, and you’re data driven, it’s hard to believe that people are leaving this much value on the table.
But it comes down to not realising. Everyone is watching their own movie, and they’re living their life through their own lens, and they won’t necessarily see through their experiences growing up and in their careers that there is another way to do business. There continues to be this absence of women at the table all the way from founding startups to running listed companies. And if we’re not investing in women at the very early stages of these businesses being created, how do we expect the corporates of tomorrow to be gender diverse? We continue to perpetuate the problem. The decisions we make in the venture capital world flow on to the corporate world. But because it’s continued to be the same cycle for many years - people continue to do what they know best.
Like a bit of a status quo bias?
It’s a “I know what I’ve been doing, I’ve been doing it for years, why would I change? This is what the world looks like, this is what it should look like, this is what’s returned me money in the past, and what will return me money in the future, without having to improve or change." People hate change.
I guess the part that doesn’t like fully connect for me is that venture capital in particular is quite speculative and future-focused. So how is it happening that people are reverting to safety and what people know? Because in venture you need to be quite open to the future?
That's a good point, because you have to believe in a different kind of future when you’re investing in venture capital. You have to think about a world that’s potentially entirely different to the world today.
The example I often give is Airbnb, which started out with couch-surfing. You have to believe that people will open their homes to strangers, and at that point in time then they started out, that’s not something people were believing. I think that's true for venture capitalists that they need to have this additional risk tolerance and this idea that: “I can see the blue sky future that’s totally different to what it looks like today”.
I’ll give the example of femtech. 50 per cent of the population will go through menopause. It’s never talked about really, and men in these decision-making seats in venture capital are not going to suddenly go: “there’s a huge opportunity in menopause” because of the lens they have in life.
We’ve talked about gender, but women themselves are very diverse. That includes their socioeconomic backgrounds, race and culture, citizen or non-citizen. Do we have stats on diverse women receiving venture from Cut Through Ventures or Equity Clear?
The only report of this nature was done a couple years ago by the Creative Cooperative. And I can't remember the exact figure, but it was less than 1 per cent. You can’t get much lower than 2 to 4 per cent - but it was shockingly low. And I think that conversation around intersectionality is something that we talk about as well at Giant Leap, and we’ve got targets around racially and ethnically diverse founders as well.
So, when we’re having these conversations, baseline 50 per cent of the population is being ignored. And then, there are so many issues with people from culturally and diverse backgrounds that I think are not spoken about as much. I know personally from the rooms I enter both being from a Taiwanese background and a woman, it’s quite stark when you think about that lens as well, not only being a male-dominated industry, but not a particularly diverse industry from a cultural perspective as well. That bias plays into funding as well when you think about the lack of funding going into women that’s due to unconscious bias and layer on top of that other biases that relate to culture and diversity that makes it even harder.
I think we’re missing a lot around the perspectives of migrant entrepreneurs. Having to come to Australia potentially without even speaking English, and the level that they have to work at to get something off the ground and that’s not necessarily something that’s appreciated in our world.
There would be so many businesses to come out of those perspectives.
An example is a business called Shapes and Sounds, which is focused on destigmatising mental health issues in Asian communities.
Look, I’d love these conversations to go to these next level of depth, but still we’re at the gender conversation. We still kind of get asked "why does it matter?" "why is it worth investing in women?" and we’re still taking steps by seeing this most recent data where women aren’t getting funded at all at certain stages in their startup. It’s where I’d love the conversation to be, but we’re ten steps behind.
Just to reframe to try and be a bit more positive - places like California have mandatory reporting. There are regulatory requirements around investments. That’s the type of thing we need. The people involved in Equity Clear, we’ve all got our full time jobs, and we’re trying to encourage others to be transparent, and we’re meeting regularly, and ultimately they need to act. If there’s a lack of will within their organisation, there might be one person who wants change, but if there is fear within an organisation, or not wanting to show some stats that might be a bit unfavourable, they can’t do anything. But if it was a regulatory requirement, that conversation is totally different. That drive from government to say this is needed, we can’t accept the status quo. If we keep having the conversation among ourselves, it won’t change.
Deeper point, but we shouldn’t take for granted that we live in a country or business community where people from different backgrounds are truly valued, and varying perspectives are seen as a strength. There's evidence historically to show that during times of economic scarcity or political fear-mongering, societies regress back away from that. I think directionally, that’s not the way to go. There’s so much to lose from that, and so much to gain from going the other way.
When you have more views around the table, people can draw on that, they don’t need to know everything. That’s why we get stuck in patterns of sameness, because there is a bit of a fear of not knowing and not wanting to ask the question or understand a different world. For us, Will and Adam are really great at asking questions where they are saying something that might sound inappropriate because they are genuinely curious.
One conversation I had with a male investor was he said "I don’t feel like I can talk in the diversity space, because I feel I’ll be attacked." And so that’s a fear. I said: "it’s funny that you feel that way, because your voice is probably going to be the strongest in a room where sometimes it feels like an echo chamber where all the women are talking about how bad it is." But the people with all the decision-making power aren’t in that conversation.
People also might be worried about being "cancelled" about using the wrong terms. But what we really encourage at Giant Leap and Equity Clear is it’s better, not perfect.
Great message. That’s a warm point to end on, without shying away from reality. Thank you Rachel, you've given us a lot to think about.