A plan for transforming one of the most male-dominated industries in the world

Women invented windshield wipers, the first computer program, life rafts, wireless transmissions technology, the paper bag, Kevlar, fire escapes and 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 the subject.

As a female partner at Bloomberg Beta, a VC fund investing in start-ups that aspire to make business work better, I am often asked what can be done to change the fact that less than 5% of partners in venture capital firms are women.

One 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 capital that VCs invest in start-ups 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), high net worth 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 about 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, based on the following factors:

Study after study shows this also makes business sense: inclusive teams make for superior performance. Of the over 20,000 venture-backed companies from 1997 to 2011 that Dow Jones analysed, those with the best-performing forms had double the median proportion of female executives compared to the unsuccessful ones.

As start-ups continue transform our society, it’s important to take into consideration the potential gender inclusion – and diversity in a broader sense – can have on innovation.

It’s a complex issue, but all we’re asking for now is that VCs start to collect the data and that LPs ask us for it – a sort of transparency pledge.

Women contribute to 25% of 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.