The Power of Diversity & The Future of Funding
In the venture capital industry, the term “unicorn” is often used to categorize startup companies with a value of over USD 1B. Pre-pandemic, unicorns were rare and are often the envy of all startups. Whilst they are still the dreams of startups, they are more common now due to the convergence of private and public market interactions.
However, what continues to be scarce is the number of women in leadership positions. This is despite the emergence of numerous reports proving women in leadership positions along with gender balanced boards are extremely beneficial for businesses. Often, even lending an edge.
According to a report by IFC and Oliver Wyman titled “Capital”, female leaders are present in only 15% of such firms. The situation is not very different when talking about the portfolio companies of these private equity and venture capital firms. In fact, only 20% of portfolio companies have leadership teams that are gender balanced. This continues to be the case despite the fact that gender balanced teams often experience better returns and higher valuations.
For this installment of our Take V series, we discuss fostering an inclusive and diverse work environment in the venture capital industry with Lori Hu, Managing Director of Vertex Ventures HC.
The journey into healthcare and early-stage venture capital
My passion for healthcare was inspired by my mother who was a physician in China. When I was a teenager, she brought me to visit the hospital where she worked and I was inspired to work in global healthcare. After pursuing my undergraduate and master’s degree in biomedical engineering at Duke, I dove headfirst into healthcare consulting where I could get exposure to the opportunities and problems the industry was facing. Through consulting, I broadened my industry knowledge beyond the US by working in Singapore, Shanghai, and South Africa. I joined Bristol-Myers Squibb in their business development group focused on Asia-Pacific partnerships. After returning to the US to earn my MBA at Wharton, I realized healthcare investing would be a way of making a global impact and was thrilled to join Vertex Ventures HC in 2015. Joining the venture capital world was a natural progression of my interests and I was excited to apply my background from the “Big Pharma” side to earlier stage companies. I feel privileged to be part of a global venture capital firm where I have the opportunity to meet renowned scientists, physicians, and entrepreneurs.
In venture capital, every day is different as the market is incredibly dynamic. We meet with new companies and entrepreneurs every day and work alongside our portfolio companies through their ups and downs. We make investments with a long-term horizon. Seeing companies move from paper to lab and onwards to clinical success is incredibly motivating and inspiring.
Dynamism is key, so I believe a leader needs to be grounded in the right values to stay consistent and motivated. My personal value is to be a thoughtful partner and sounding board for people I work with. Through networking and sharing with like-minded individuals, I’ve built a strong ecosystem that supports this. The ability to share insights on various topics contributes to developing one’s individual brand. At times, networking can get a bit of a bad reputation, but bear in mind that it is not about exchanging business cards. Instead, it is knowledge exchange where there are opportunities to learn and help others. It is critical to be candid, direct and honest. But simultaneously, you should also be kind and respectful of others, particularly when collaborating with entrepreneurs and their life’s passion.
These values are reflective of our investment strategy at Vertex Ventures HC where we are always on the lookout for people who are excited about the technology and science and want to contribute positively to healthcare. Our team enjoys a great camaraderie, and our approach is hands-on and high-touch. Our guiding pillars include strong team, product-market fit, and innovative science.
Champion Minority Voices
As a female leader, there are times when the odds are stacked against us, and we continue to be underrepresented in leadership roles. Often, we are the only woman in the room. I am passionate about promoting diversity across the C-suite of our portfolio companies as well as in the board rooms. We need to increase the visibility of female executives interviewed for key roles and ensure that there is equitable compensation. It is important to have a diverse cross-section of experiences and leadership styles. When working with recruiters, we stress the need to have a diverse pipeline of candidates to interview. We also emphasize these values when selecting and highlighting diverse voices in conferences, panels, and media interviews.
Vertex Ventures HC also walks the talk and we are proud to launch a fellowship programme specifically targeting underrepresented communities to accelerate their growth into full-time roles within the venture ecosystem. As a venture industry, we need to take action to promote talent at every level.
In advocating for my community, I’m pleased that the Securities and Exchange Commission (SEC) has approved the NASDAQ board diversity listing standards last year which will require public companies to have at least two diverse board directors. It is a catalyst to encourage boards to think more broadly about talent.
Stay Curious, Be Disciplined and Make a Difference
For those starting out, it is important to remain curious as you build expertise and experience. I encourage aspiring venture capitalists to develop a thesis around a topic they are passionate about and follow companies they find interesting. This is a great way to approach venture capitalists and show your interest and understanding. Pique their interest by sharing your researched convictions. Identify one of their portfolio companies you would be interested in working for and be prepared to show how you could solve a problem or pursue an opportunity. Moreover, EQ and IQ are important, both in terms of the strategic advice one can offer and how that is communicated to create change. If you can take a step back and challenge the assumptions that the company may be facing and translate it to making a difference by drawing on your own experiences and network, you will be able to positively influence decisions made around the table.
At Vertex Ventures HC, we are fundamentally focused on the science first. We are not momentum investors and instead maintain a disciplined approach through various bull and bear markets.
I will continue to advocate for the underrepresented through the work we do at Vertex Ventures HC and on the boards I sit on. I am proud that Vertex Ventures HC is one of the only women-led healthcare funds managing north of USD 500M AUM managed alongside my co-Managing Director, Christine Brennan.
We are at the beginning of an inflection point. With a conscious effort to increase underrepresented voices through promotions and placements, we will be able to create a workforce and funding environment that is more equitable.