Initialized's Alda Leu Dennis takes inspiration from 'Rooney Rule' to invest in more female founders

  • Initialized’s Alda Leu Dennis told Insider she’s “liberal” with taking pitches from founders from underrepresented backgrounds.
  • The percentage of US venture funding going to female founders dropped in 2020, according to Pitchbook.
  • 50% of Initialized’s partners are women, and the firm keeps a close eye on gender balance.
  • See more stories on Insider’s business page.

The venture capital market is ablaze with eye-popping deals these days — but relatively few involve female founders. That doesn’t sit well with Alda Leu Dennis, a general partner at early-stage venture firm Initialized Capital.

“It’s been personally very disappointing to see the number of female-backed businesses, given how hot the market has been,” she said in an interview with Insider. “It is distressing to me to see that.”

The proportion of US venture funding going to startups founded by women dipped in 2020 to 15% from 16.6% the previous year, according to PitchBook and the National Venture Capital Association. In the third quarter of 2020, funding to companies with female CEOs hit its lowest quarterly level since 2017, per PitchBook data.

That’s in part why Dennis has worked to bring in more diverse companies to her portfolio with a method inspired by the “Rooney Rule,” an NFL policy that requires teams to interview candidates from underrepresented backgrounds for every top coaching and football operations job. Several tech companies, such as Facebook, Uber, and Amazon, have come up with their own version of the policy to help boost diversity within their organizations.

“For me, personally, honestly I’m a bit more liberal with taking pitches from women and underrepresented minorities,” Dennis said. “Getting a foot in the door is often half the battle.”

Venture firms commonly rely on personal connections to source deals and to staff up, which can result in both portfolios and teams lacking diversity. Initialized — which was cofounded by Garry Tan, a former Y Combinator partner, and has backed Instacart and Coinbase — relies upon some of these fallbacks, Dennis said. Like other firms, it often finds investments through the networks of its VCs, and it places a high value on repeat startup founders.

Serial entrepreneurs, said Dennis, tend to get more funding at higher valuations. They’re also more likely to be men, she added, which may be one aspect that skews the data against female founders.

Yet three of Initialized’s six partners — Dennis, Jen Wolf, and Kim-Mai Cutler — are women, and the firm prioritizes gender balance in its hiring decisions, Dennis said. In her view, that gives Initialized a leg up in fairly evaluating potential investments from female founders. For instance, Dennis sits on the board of The Mom Project, a staffing agency that specializes in flexible jobs for parents and counts Serena Williams as a strategic advisor.

Dennis said she also uses speaking engagements as a way to look out for opportunities.

“I just did a class, speaking to some female MBA students about networking and wealth creation,” she said. “It’s important to me to have outreach to the communities I might be interested in investing in.”

Source: Read Full Article