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08/24/18 | Funding, Gender

Portfolia’s CEO, on How VC Is Due for a Radical Shift

Founder and CEO of Portfolia Funds Trish Costello believes that we are on the verge of a whole new way to do venture capital, “What I call VC 3.0,” she says, and it will be marked by a wave of women investing in companies making products and services that women want to see in the world. How will this new age of VC dawn? With the help of her company, one of the only venture investing processes designed for women.

You have the goal of activating over 100,000 women investors in your venture funds by 2022. How close are you now, toward the end of 2018?

It used to be that you could only have 99 investing members in a fund and as soon as a new fund would open, our members would snap up all the spaces because they loved the Portfolia experience so much.  One could almost say our product was too sticky to grow our new membership base as quickly as we wanted. However, with the recent change in legislation which allowed us to open the fund to 249 members, we have seen immediate and rapid growth. On a parallel track, our engaged membership, people who log into our platform, attend events and follow us on social, has grown 50% to 15,000 users over the past six months. There are 5 million women in the US alone (we are in 8 countries) that are accredited and have said they would like to invest. With this move to 249 we are on track to connect with at least 100,000 of them by 2022.

[su_pullquote align=”right”]I believe we’re on the verge of a new way to do venture capital.[/su_pullquote]

Where did Portfolia come from? How did you come to start it?

After leading the prestigious Kauffman Fellows for over a decade and preparing dozens of new partners in venture capital, I realized the percentage of women in venture capital really hadn’t changed. For the most part, venture capital investing is practiced much as it was in the 1960s when women weren’t a part of the business or investing world.  I believe we’re on the verge of a new way to do venture capital, what I call VC 3.0, which activates sophisticated women in venture funds backing companies we want in the marketplace, and focusing our buying power and networks for their success. It’s really a radically new design for venture investing.

In what way are Portfolia Funds especially designed for women investors?

Our funds focus on entrepreneurial companies where women make markets, letting you diversify your investment across six to ten top performing companies over 12 months. Our accessible “learn by doing” model, and dynamic community of accomplished women are just a few of the ways we are able to engage more women in investing in the companies they want to see in the world.  

Portfolia’s standard minimum investment is $10,000, but we are focused on activating more women investors earlier on, and we’re sensitive to the financial pressures that younger investors may be experiencing, such as student loan payments.

We are thrilled to announce that in partnership with Women 2.0, Portfolia is extending a special pricing structure to Women 2.0 members so that they may begin to invest in women’s health and reap the benefits of investing earlier.

Very cool. Now, what are some of the current situations or stats around women investors that you’re either trying to change or make better?

The most important is that women now own significant personal wealth in the US. Many researchers say we’ve hit a tipping point where women now own a slight majority of America’s personal investable assets, in excess of $14 trillion.  Affluent women can shift the investing landscape by putting just a small amount 2-5% of their assets into funds backing innovative companies.

We invest in sectors where women make markets. Those are often areas overlooked by traditional VCs, such as women’s health, consumer tech or active aging. 75% of our portfolio companies are led by women CEOs.  

[su_pullquote align=”right”]Affluent women can shift the investing landscape by putting just a small amount 2-5% of their assets into funds backing innovative companies.[/su_pullquote]

We found First Round Capital’s 10 Year Results especially informative, in part because they had no ‘diversity’ interest or even a woman partner. In their lookback, they found their companies with a female founder performed 63% better than investments with all-male founding teams.  Further, they found three of their top 10 investments of all time, based on value created for investors, to have at least one female founder — far outpacing the percentage of female tech founders in general.

The Diana Project, a 2014 report from Babson College, found that venture capital firms with women on their team are more than twice as likely to fund a management team with women but only 7% of partners at the top 100 venture firms are women. 

We believe the best way to shift the landscape is to have more female venture investors, that can identify and back the solutions women want in the market. We have the right investing model for developing and mobilizing these women investors.

Are there any trends in the investing space, besides the recent legislation that more than doubles the number of members a fund can have, that we should look for around or affecting women investors?

The Boston Consulting Group maintains one of the most extensive databases on women’s view of finance.  They’ve so consistently registered their disapproval of financial products and services that BCG now calls finance “the industry women love to hate.”

[su_pullquote align=”right”]98% of women are unhappy with existing financial services including investing vehicles.[/su_pullquote]

The Luxury Institute has focused their research on the most affluent women’s views of 60+ industries, and the results are the same.  Though many industries such as fashion and cosmetics are rated highly in understanding their needs, brokers, bankers and financial advisors come in at around 2% approval rating.  98% of women are unhappy with existing financial services including investing vehicles.

What do women want?  Community, a customized approach, education, alignment of values, and most of all returns.  We aim to provide the full experience to our investors.

You also spend a lot of time training the women who participate in your fund, in addition to managing it, and you focus on being hands-on. Why is this so important to your investment process, or any investment process?

It’s incredibly important. Learning about investing is second only to returns, when our members sign on to a fund.   In fact, our FemTech lead investor and trailblazing venture capitalist, Nola Masterson, probably says it best: “The only way to learn is to get involved and put your money where your mouth is.”

Our goal is to customize the learning experience so it works for each individual investor. Some see this as a training ground to be an angel investor in their local community or a lead investor in a future Portfolia Fund–and we provide the learning path to take them there. Others are satisfied to follow the investments we make on their behalf or make occasional introductions or share company progress on social media. One doesn’t have to be a professional analyst to invest in the stock market, and one doesn’t have to be a full-time angel investor or venture capitalist to invest in innovative private companies, and add value to our investments. From attending pitch calls, vetting deals, joining a diligence team to adding value to our companies, our members have the option learn it all in their tailored Portfolia experience.

Your current open fund focuses on FemTech, which has traditionally been a more difficult space when it comes to capital raising and signing on VCs. You see this space as a huge opportunity. Talk us through that.

The Portfolia FemTech Fund is the first venture fund focused solely on women’s health. Frost and Sullivan calls it ‘the largest emerging space in healthcare’ and estimates it will be a $50B market by 2025. Yet 80% of healthcare venture capitalists have never invested in a women’s health company. We are keenly aware that our health, and that of our mothers and daughters, is compromised without new technologies and innovation tailored to our specific health needs. We are uniquely qualified to understand this marketplace and are becoming more aggressive in seeking solutions, making this the perfect vehicle for new women investors. It has the capacity to provide outsized returns and have a direct impact on our lives.

Are Portfolia Funds “impact funds?” and what can you tell us about that term?

[su_pullquote align=”right”]Women are the hub of the economy, the chief purchasing officers of the world, the early adopters in most industries, including health, education, consumer products, even most enterprise purchases.[/su_pullquote]

Over the past month, we’ve been asked that a lot. Impact is today’s investing buzzword, with everyone from Goldman Sachs and BlackRock to small angel groups tagging their work as “impact,” so much so that it’s lost its meaning. This is how we see impact investing: smart investing by women who care about the world. We believe when we activate women as investors around companies we believe in, we’re creating impact. Why? Less than 10% of private company investors – venture capital or angel investors – are women, yet we are the hub of the economy, are the chief purchasing officers of the world and are the early adopters in most industries, including health, education, consumer products, even most enterprise purchases. Our dollars shift industries, companies, and cultures and bring new innovation to the world. As an investor said to me recently, “Today, impact investing is so expected and mainstreamed that we no longer consider it a category. It’s synonymous with smart investing.” Our Femtech Fund is an example of this trend: by investing in women’s health solutions, you can back companies that align with your investing goals and your values. Join us!

VALUE ADD: Women 2.0 and Portfolia are offering a free webinar, which will give an investing overview, including new models geared towards how women want to invest today.   REGISTER >

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