"The First Follower is what transforms a lone nut [aspiring fund manager]
into a leader”
-- Derek Sivers, How to start a movement?
The first follower is an underestimated form of leadership in itself. We believe the first follower transforms a lone trailblazer into a leader and an idea into a success story.
Our purpose is to drive capital to conscious capitalism to create a positive impact in this world. We do that by being the first follower of conscious & diverse fund managers, and founders.
Until now, impact investing and investing for profits have been very segmented. We want to bridge it by bringing the focus back to the basics, i.e., capitalism can consciously solve the world's problems if we back the right people and initiatives.
“I think we desperately need finance to be humanized. That’s part of the problem today: People perceive it as a complex topic that is not accessible.”
- Mihir Desai
The case for diversity
Currently, women- and minority-led funds account for just 1.3% of the US $69 trillion investment industry in the United States — even though investment teams led by women and minorities perform better than funds that are managed by white men.
Until now, the asset management community has been very difficult to enter, due to persistent barriers that particularly impact first-time female and minority fund managers. Cultural and gender biases can make it difficult for women and people of color to raise capital from private and institutional investors. And fund managers generally need to commit 1-2% of the total capital for a new fund themselves, which prevents many women and minority fund managers from entering the industry. It’s a chicken and egg situation: Unless we break these societal, cultural, and financial barriers, we can’t bring diversity to venture capital or asset management in general. And without more diversity in the industry, these barriers will be hard to break. That’s why we need to make a concerted effort to democratize venture capital to make it more accessible for people from diverse backgrounds, making it easier for them to start venture funds and play a role in creating a conscious economy.
Diversity at the asset management level will also define what kind of capital allocation happens in the broader investing ecosystem. Diversity can help us achieve inclusion, equality, and equity at all levels.
“Diverse approaches lead to better investment decisions as they avoid ‘groupthink’ and allow the analysis of a single issue (or investment opportunities) from many different angles.”
- Ndeye Thiaw, Managing Partner, Brightmore Capital
With more women fund managers, there can be a much more scalable and significant trickle-down impact on the overall gender-lens investing in women-owned or led businesses.
The economic case for driving capital to gender diverse fund managers
There are three reasons why investors should consider directing their capital to emerging funds run by diverse fund managers from underrepresented groups:
Performance: Most emerging firms raise smaller funds than their more established counterparts. As a result, in venture capital, smaller funds generally outperform larger ones, as even a single successful investment can generate strong fund-level performance. And data shows that first-time fund managers usually outperform more experienced general partners.
Pipeline diversity: Smaller funds provide access to a unique pipeline, especially if their managers come from diverse backgrounds. Less-diverse fund managers often talk about the pipeline issue when explaining their lack of investments in companies with diverse founders — but data shows that this is a myth. In contrast, studies also show that gender diversity among investors leads to more investments in diverse enterprises — for instance, female VC partners invest twice as much as their male counterparts in female founders. It’s clear that investor diversity can have a significant trickle-down impact on the diversity of a portfolio.
New fund models: Greater diversity among fund managers promotes more unique, impactful, and efficient venture fund models that are better suited for emerging markets. These might include revenue-sharing funds, venture studio funds, and blended investment vehicles.
Curated resources for further curiosity
[Article] Female-managed US funds outperform all-male rivals
[Article] Female fund managers make the case for gender alpha in emerging-markets
[Podcast] Common Traits Shared by Top GPs, Why Underrepresented Fund Managers Will Produce Superior Returns
[Case Study] Institutional Investors Must Help Close the Race and Gender Gaps in Venture Capital by Harvard Business Review
[Report] PitchBook-All Raise Report on Venture Financing in Female-Founded Startups Shows Progress, Yet Continued Gender Inequity
[Report] Moving towards gender balance in private equity and venture capital IFC World Bank
Sagar's mission is to be the first followers of underrepresented
diverse aspiring fund managers.