Nashville women claim their seat at the investors' table, challenging the status quo

As Published in the Tennessean, September 20th, 2018

By Jamie McGee, Nashville Tennessean

Monique Villa was first brought into venture capital world for her business development skills. But as she continued to offer input that startup CEOs found valuable, she considered taking on bigger roles -- determining which companies received investment and advising them on their growth. 

Now, Villa is on the investment team for L.A.-based venture firm Mucker Capital, looking at Southeast companies, and she has created a local firm focused on supporting regional startups. She built a fellows program for aspiring venture investors and has hired three fellows -- all are women.

Villa is among Nashville women changing the statistics that investment communities share nationally -- a lack of women at the table. They are launching funds, leading private equity groups or joining the investment teams of existing firms, challenging the status quo and helping to bring other women up the ranks with them.

"I turned around and figured out I was not the same as everyone else in the room," Villa said. "I'm in. I need to make the most of this."

Investors are shaping business landscapes in every sector they choose to support and they are also reaping the financial benefit of successful deals, which further extends their influence in business, civic life and philanthropy. If women are not present, they are missing out on the returns, and company leaders are missing out on their insights.

Women make up 21 percent of venture capital employees, 11 percent of senior-level positions and six percent of venture capital board members nationally, according to a 2017 Preqin report. The proportion of venture capital deals led by female partners increased to 9 percent in 2017, up from 6 percent in 2014.

Because introductions are often based on networks, a lack of diversity among investors can influence which companies obtain funding. In 2017, just 2 percent of venture capital funding went to U.S. companies founded solely by women. Black women founders raised less than 0.2 percent of venture capital funding between 2012 and 2014, according to Fast Company, citing ProjectDiane

"We are asking ourselves the same question, how can we fix this?" said Danielle O'Rourke, CEO of ROND Capital in Nashville. "How can we help more people get into roles like this in Nashville and get a little more diversity?”

Climbing the ranks

Katie Gambill, who co-founded and leads Nashville private equity firm Council Capital,remembers male colleagues reluctant to travel with her on business trips in her early days at Equitable Securities because it might appear inappropriate. On one trip, the business meeting was booked at a men's-only club. Instead of giving the presentation she had prepared, her male colleagues did it for her. 

"I just went shopping for the day," Gambill said. "It was almost funny."

Gambill rose from investment banking to the chief investment officer role at Equitable Securities to leading the entire firm as president. When she started, there were no other women she knew of in the investment sector, outside of investment banking. Gambill gives praise to the many men who believed in her and promoted her along the way, but she also credits her success to her work ethic and performance. 

"I put in my time and made sure I was the best person in the job every step of the way, so they had to let me do the next step," Gambill said. "I didn't have to be equal, I had to be better."

Council Capital typically invests between $15 and $20 million in growth companies, mainly in health care, but has also focused on early stage capital through its TNInvestco fund, Council & Enhanced. 

Gambill has observed an increase in the number of female CEOs seeking Council's funding, but she estimates the number is still close to 10 percent.

"Investment banking was sort of a men's club to begin with, and it took a while for women to break in, but they did," Gambill said. "On the investing side, it's just a little slower."

Because private equity firms make long-term investments, there is not as much turnover of jobs, which curtails the number of opportunities to enter the niche, especially in a smaller financial market like Nashville, she said. She expects the local demographics in investing to shift as more investment firms, including AllianceBernstein, move to Nashville, bringing with them more entry-level positions and opportunities for growth. 

"You can't get to the top until you have gone through the steps," Gambill said. "You don’t walk in at the top and start managing people's money... Having those entry-level jobs in investment is what will make Nashville attract and get more high-level positions."

From entrepreneur to angel investor

Sherry Stewart Deutschmann launched her own angel investment fund, Nashville-based Sunset Ventures, in 2016. Her experience with investing came from launching her own patient billing company in 2002. She was rejected by banks for capital and she was not able to get the terms she wanted from local investors. She auctioned off her furniture and used her 401(k) to create LetterLogic, a company that employed more than 50 people and generated close to $43 million in revenue when it sold in 2016. 

"I knew how hard it was for a woman to find investors," Deutschmann said. "It is definitely getting better, it is just very slowly moving."

Deutschmann invests between $50,000 and $500,000 in companies through lines of credit, a model she relied on when growing LetterLogic. Her mission is to help support women entrepreneurs and change the dynamics that limit access to female founders. Seven of nine investments she has made are in companies led by women.  Among her local investments are fashion brand ABLE and Studio Bank.

"I am seeking people who are like-minded when it comes to how they treat employees, but that are also women with scalable companies," Deutschmann said.

'It is a lot folks who come from similar backgrounds'

O'Rourke helped create ROND Capital as a spin-off of Nashville venture capital firm Martin Ventures in 2016. As CEO, she is targeting companies with $5 to $15 million in revenue that would not qualify for private equity but that need an alternative to the typical venture capital model.

Most of the time, O'Rourke is the only other woman in the room when deals are made, she said. When it comes to business owners referred to her or those reaching out to her in the last year, 98 percent were men. The diversity problem extends beyond gender and is one that seems to be rooted in the earliest stages of career paths. 

"There is a very specific hierarchy when it comes to how you enter the field and how you advance," O'Rourke said. "A lot of these roles tend to start at a very junior level and that influences a lot of your career trajectory... Part of it is very much a pipeline issue."

When O'Rourke studied business at Indiana University, the class makeup was about half male and half female, she said. Once she selected the finance track within the school, she became one of just a few women in each class. Now,when O'Rourke is hiring, she will receive 200 resumes, nearly all from men. Hiring outside of the white male demographic means being proactive, she said.

"There is very little racial diversity, there is very little background diversity," O'Rourke said. "It is a lot folks who come from similar backgrounds and have very similar views and lenses of the world."

The pipeline issue is what inspired Villa to create a fellow program. Earlier this year, she spoke at Vanderbilt University and learned that there were several students and graduates who were interested in venture capital but did not know how to get into the sector. Partnering with LaunchTennessee and securing other grants, she has offered paid fellowships for work at her new firm, ModernCapital. 

Villa is also working on a map of resources for female founders that can connect them to one another and to investors across the state and, eventually, the region. 

"VC funds in the future will be more representative," Villa said. "It's not the case now."

In Chattanooga, a group of women launched The JumpFund in 2013 to combat the lack of women entrepreneurs gaining funding and being represented in the community. They had attended the initial 36|86 entrepreneurship event, then Southland, and saw too few women represented on panels and none presenting their companies in a pitch competition.

"It was one of our many 'aha' moments," said Kristina Montague, JumpFund managing partner. 

Five years later, the firm has raised $7.7 million and invested in 22 companies, including Stony Creek Colors and UtilizeHealth of Nashville. Several Nashville investors have joined the group. In the most recent three years of pitch competitions at the 36|86 event, women have led the teams that won funding, two of which are in the JumpFund portfolio, Montague said.

"That is a big game change in just a few short years. We  have seen nationally a huge rise in the number of funds and networks engaging women's capital now," Montague said. "It is quite a sea change and a right movement now."

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Jordan Lipson