F118 Healthcare is Diverse. Why Is Healthtech Investing Not? (Dr. Fiona Pathiraja)
Diversity is an increasingly debated topic in startup investments, since founders of under-represented backgrounds may it be gender, race, age, and too often experience inequality in opportunities.
US VC funding for female-founded or co-founded companies have been trending up in recent years. However, last year women were impacted by the pandemic also on the funding level. According to Pitchbook, during the first quarter of 2020, 4.3% of VC deals went to companies founded by women, compared to 7.1% during the first quarter of 2019.
Crista Galli Ventures Fund is especially attentive to giving an opportunity to founder with under-represented backgrounds. The fund was founded by Dr. Fiona Pathiraja who is a radiologist by training. She left medical practice to become a management consultant. After doing that for a year, she became a clinical advisor position at the British Department of Health. After realizing that change comes through innovation on the brink, she got an MBA and became an investor.
Minimizing bias starts with diversity in solution creation
What surprised her quite early on as an investor, was the lack of diversity in healthcare investments, compared to the generally present diversity in the NHS. “I'd spent most of my career since 2006 in healthcare, and most of that was in the NHS seeing patients. I realized that healthcare is very diverse. The doctors that you see are very diverse throughout the organizations. People you meet nurses, managers, are very diverse, and of course, the patients. Everywhere you look, there are people from these incredibly different international backgrounds. This was evident to me in a micro way and a macro way every day. For example, as a radiologist, my ultrasound list could include men and women of different ethnicities, somebody could be a judge, someone could be unemployed, somebody could be a teacher. And every day you'd see this diversity. And then when I started investing, and I started going to my first few meetings, I realized, investing in healthcare is not diverse. And actually, it was a completely stark difference, because on both sides of the investor and founder table is predominantly white straight men,” said Dr. Pathiraja. Crista Galli Ventures invests in AI-supported innovations. Because a lot of people entering startups in the AI world have an elite education (PhDs and post-doctorates this automatically means that those from more diverse backgrounds are often excluded, observed Pathiraja. This is what she keeps in mind when looking at investments. “Healthcare needs to be for people from all backgrounds. The solutions need to have the patients at the heart of them. Patients are diverse. This means solutions should be built on that. For example, patients need to be included in the creation or co-creation of AI and digital health tools. We need to make sure that the datasets that we're using are diverse, and that they're trying to minimize bias,” explained Dr. Pathiraja.
Lack of diversity in numbers
Dr. Fiona Pathiraja.
In 2019, female-founded companies received 2.7% of the total capital invested in venture-backed businesses in the U.S. according to Pitchbook. It’s important to put that in perspective. How many women vs. men founders are there? What are the inputs? In response to the question regarding how often she sees pitches from founders from underrepresented groups, Dr. Pathiraja said: “the majority of VC investors are white men. 87% of partner level, venture capitalists in the UK are men. And the majority of founders that received VC money are all male. Less than one penny in every pound invested goes to all-female founding teams. And that's the statistic from the British Business Bank.” As she further elaborates at Crista Galli Ventures diversity is looked at from the broadest possible perspective, whether it's female founders, those with an LGBT background, those from lower socio-economic status, people who are a black and ethnic minority. “I see these founders a lot very early on, but hardly at all, as they move to Series B, C, and exit,” observes Dr. Pathiraja. She sees the reason for this picture in investors - like everyone else - having their own unconscious biases. “When you have a very homogenous investor team you're likely to have unconscious biases and invest in people who look and sound like you. A classic example: I've invested in a company called Juno bio, which is solving issues around the vaginal microbiome. It's a company that's working on personalized medicine. The founder there is female and was told once before going into an investor pitch, that she shouldn’t mention the word vagina. That then makes things very difficult because you can't really talk if you can't even talk about what you're you're working on. How are you supposed to get great investment for it?” illustrates Dr. Pathiraja
Gender bias
Gender bias is among the most visible and addressed in society. In November last year, Germany's coalition government has agreed to a mandatory quota for women on the boards of listed companies. This is being hailed as a landmark moment for Europe's biggest economy. Solutions like this can potentially be problematic, since the fight for equality should be based on giving everyone equal opportunities, not force diversity for the sake of diversity.
In Dr. Pathiraja’s opinion talking about diversity on boards is important because a group of homogenous individuals with very similar backgrounds and experiences can’t offer support and guidance to the company as well as a heterogeneous group can. While positive bias is not the best way to achieve this, the German move shows that perhaps this is a route toward creating diversity. And if that is the case then it's definitely worth talking about. “If they're trying to bring up this kind of action, it means that people realize a problem is present, we need diversity, we need women on boards,” said Dr. Pathiraja.
Women are subject to a lot of negative bias. Assertive women are quickly labeled as aggressive. Women that want to lead, are marked as bossy. If you’re honest or ask hard questions you are “difficult” or “complicated”. None of these markers are attributed to men with the same behavior. Changing this underlying perception will take time. “One of the terms I don’t like is the term manel - where you have an all-male panel on a conference. I always call those out when I see them. Aren't there any other female investors? Aren't there any other female founders to talk in these discussions? But there is the flip side of it. Organizers sometimes say they’ve we've tried to reach out to a female founder or female investor, but it hasn't worked out. And they ended up a manel. We need to realize you can't always have extreme diversity on every single event or panel or anything that you do, but it's important that people are aware and sensitive to it,” said Dr. Pathiraja.
Some questions addresses:
Before becoming an investor, you worked as a radiologist in the NHS. I noticed that a lot of entrepreneurs I know are radiologists. What would your observation regarding that be?
Can you talk a bit about your view of the healthcare system in the UK as a doctor?
What did working as a clinical advisor at the Department of Health taught you about healthcare and the way the speed of change could be accelerated?
How does all the knowledge of working inside the NHS you in your advisory role for startups?
I want to focus our discussion around diversity because Crista Galli Ventures addresses the lack of diversity in health tech. 50% or more of the companies receiving Crista Galli LABS investments are led by founders from under-represented backgrounds. Why did your VC company decide to position itself as an advocate for greater diversity? Did you ever experience discrimination because of your race or gender?
How do you define diversity?
In November last year, Germany's coalition government has agreed to a mandatory quota for women on the boards of listed companies. This is being hailed as a landmark moment for Europe's biggest economy. What are your thoughts about that and the idea of positive bias?
Based on your experience, how can one influence bias? When we’re talking about negative bias against women Assertive women are quickly labeled as aggressive. Women that want to lead, are marked as bossy. If you’re honest you are “difficult”, or “complicated” when you ask hard questions. None of these markers are attributed to men.
Bias goes beyond gender and race. It can also be age-related and more. Do you see a different perception of older vs. younger founders?
Do you see any differences in the way women pitch vs. men? In a sense that men are often more confident, less risk-averse, and confident in saying they could do something they’ve never done before?
What would your advice be to women?