Unconventional Ventures, the first-ever impact venture capital firm that invests only in diverse founders and founding teams, has closed their second €30 million fund. General Partner, Nora Bavey, joined TFN recently to talk about the fund, and how her background took her on a journey to become, as she terms it, an ‘accidental general partner’ focused on making a big difference.
An accidental journey from war-torn Iran to General Partner
Bavey’s story began in 1980s Iran, “I came to Sweden as a refugee. My dad worked was working with Americans, so when the war happened in 1986 we left,” she told us. Resorting to people smugglers, they planned to get to America, but after six months, and all their money spent, they were caught in Denmark and became refugees in Sweden. Bavey’s parents decided to stay there to offer their children stability.
Having grown up in Sweden, it was by chance that, at 26, she started working for a startup spun out from Stockholm School of Business. It was, for Bavey, an introduction to a previously unknown world, “I was a single mom at 26, and I had never heard of Stockholm School of Business.” Adding to her accidental path to becoming a general partner, she started her job in digital marketing just before the launch of the iPhone transformed the sector.
With a job that took her around both the tech sector and the world, Bavey began to notice how unrepresentative tech was. “I got a lot of perspectives of what the world looked like, and what the world of technology looked like and what it enabled,” she said. “I realised that innovation was broken. We saw different sizes, with different colours of products and service, but it wasn’t really innovation.”
And she noticed that women, particularly, were excluded. “When Apple launched their watch, not a single person asked, ‘you can track all of these things, but no period tracker? Do you know how that shows the lack of perspective?’”
The diversity challenge no-one is meeting
Bavey was also very aware of how the Nordic region, despite its progressive reputation, was as much in need of more diversity as anywhere else. She points to the high quality of life in the region, but that it masks great inequality. “If you look at the quality of health care, the quality of education, the quality of access, or the pay gap, the divide between the wealthiest and the poorest people is one of the biggest.”
It was in response to this that Bavey began thinking about angel investing as an eventual destination, and began work on her own startup. It was then that she met Thea Messel, her partner at Unconventional Ventures. “It was very clear that she was the only one in the Nordics asking the right questions. And really seeing an opportunity beyond gender because that’s the next conversation we need to have,” Bavey said. “We started to work on an impact fund that focused on diverse founders with impact at the core.”
Unconventional Ventures is still the only European Fund with a diversity impact at its heart, something that Bavey regrets because of the scale of the task. “We have to acknowledge how bad it is, the conversation has obviously increased, but we need to go from conversation to action,” Bavey said. “If you look at the numbers, no one is investing. The European number for female founders is 1.3%. For ethnically diverse founders, it’s 1.1%.”
Better startups, and better outcomes
But for Bavey, it’s not just about equity or equality, but the loss of innovation. “We so desperately need to solve some serious challenges. Should we invest in more food service suppliers when we’re throwing away one-third of all food? We saw the rise of fintech. But we know there are lots of communities that don’t have access to financial services.” For Bavey, investing in diversity is just good business sense. “The data tell us the best decisions are made in companies that have diversity at the core. From a gender perspective, it’s up to more 25% better in pace of innovation and revenue. And with ethnic diversity, it’s as much as 45% better performance.”
Bavey is also passionate that the people affected by tech should be involved in the decisions, using climate funds as an example, she asked, “who do they impact? If they affect marginalised communities, shouldn’t those marginalised communities be represented? Otherwise, you’re building Frankenstein’s monster, pouring money on problems that will never be useful for the end user.”
Unconventional Ventures’ portfolio is currently 80% female founders, and almost 30% from the global majority. They also have around 10% of founders who are part of the LGBTQ community. They are looking to continue to fund diverse teams, and their main criteria is that startups they fund have a positive impact and are at least 50% diverse.
However, as well as looking for more startups, who can apply through Unconventional Ventures’ website, they are also calling for more limited partners to invest. “We’re super proud of the limited partner community we’ve built around the UV mission and vision. But we need more of them,” she said. “Change needs to come, and ultimately, it’s the LPs that can make sure that we get more products or services and innovation for our society.”