Goldman bet on women-run startups takes shape with $100 million
Goldman has made more than $100 million in investments in women-led companies, including a Chinese pediatrics company and a New York-based retailer.
The first year-end message by Goldman Sachs Group Inc.’s new chief executive officer was a somber one, with David Solomon defending the firm’s role in a corruption scandal that’s cast a pall over his first months in charge.
But he did point to one bright spot: progress on the bank’s pledge to fund more female entrepreneurs. Goldman has made more than $100 million in investments in women-led companies, including a Chinese pediatrics company and a New York-based retailer.
It’s a move aimed at correcting a lopsided ecosystem for entrepreneurs that’s stymied opportunities for women, who account for just one in 10 partners at venture capital firms. Goldman’s pledge to inject $500 million into firms run by women may both help fix that situation and burnish the bank’s reputation among budding businesses, where its name doesn’t yet carry the same cachet as it does on Wall Street.
“What’s not to love about a big institution like Goldman, coming out loud and proud that they are going to find more investment opportunities?” Sarah Friar, one of the most prominent female executives in the tech industry, said in an interview. “They need more buzz around here.”
Friar is CEO of Nextdoor.com Inc. and was previously chief financial officer of electronic-payments company Square Inc. She has been counseling New York-based Goldman on its venture, spearheaded by the bank’s chief strategy officer, Stephanie Cohen.
In the past decade, Goldman has dedicated hundreds of millions of dollars to philanthropy for women and small businesses. The moves have helped blunt attacks on the firm in the wake of the financial crisis. But Friar isn’t bothered if the latest effort is seen through the lens of boosting the bank’s brand. The foray has been set up with profit as the central goal, something that will work to the firm’s benefit, she said.
“They are business people -- they know when they do this, there’s a halo effect,” said Friar, a Goldman alumna. “Honestly, I don’t care whether it’s good PR or not. Whatever the genesis of the idea, they are putting time to work, money to work and people to work.”
Called “Launch With GS,” the program aims to invest capital in businesses run or founded by women as well as provide a support network for them. The firm also is raising client capital for a fund to back female money managers. It will invest in women-led funds across private equity and venture capital strategies.
“If you live in Silicon Valley, you can’t go online or on the radio without this issue coming up,” said Steve O’Hara, a prominent venture investor. “I like what Goldman is doing. They have a bigger stick and a bigger bullhorn than we do.”
Male investors have a bias toward meeting with companies led by men over those led by women, according to a survey by Cindy Padnos, founder of venture capital firm Illuminate Ventures. Companies founded by men raised 36 times as much money in 2017 as those founded by women, according to PitchBook Data Inc.
“Women entrepreneurs are perceived by venture investors as different and having a much more significant barrier to success compared to their male counterparts,” Padnos said. “I don’t think most people are aware that they are thinking this way.”
While Padnos, who has met with Cohen and her team at Goldman Sachs, commends the firm for its efforts, her one grouse is over guidelines the bank has put in place for its venture: Investing is focused on institutional fundraising rounds rather than on the seed capital founders need to get their ventures off the ground.
“By not addressing that first round,” Padnos said, “we are still reducing the opportunity set of women-founded companies.”