We talk a lot at Village Capital about a (hopeful) future where we’ve collectively removed the modifier “impact” from “impact investing,” because companies will have a critical imperative to take sustainability and societal issues into account if they want to be successful.

In a world of limited resources, large food and beverage companies will need to think about generating clean sources of water if they want reliable and low-cost inputs. As companies in health, education, and financial services saturate established markets with traditional products, their best prospects for growth will be to deliver better outcomes to new and underserved markets more affordably. Providing affordable access to people who previously lacked the necessary purchasing power doesn’t just represent a new market opportunity—it also means investing in the economic security of an inclusive society, which yields its own returns for businesses. These are long-term views on how to build lasting value—a principle that has informed value investors’ strategies long before “impact investing” was ever a term.

I’m starting to feel the same way about removing the modifier “gender lens” in “gender lens investing”.

Investing in women is just better business:

  • Women-led public companies outperform (19.5% vs 14.9% within S&P 500)
  • Women-run hedge funds outperform (8.95% vs 2.69% in index of reporting hedge funds)
  • Public companies with board-level gender diversity outperform (by 26%, compared to companies with no women on their board)
  • While there is less data to readily compare in private companies, we are seeing results in the same pattern. In a small sample-size study (128 entrepreneurs) we did with Emory University’s Goizueta Business School in 2012 on our past program participants, we found that while female entrepreneurs were raising only 60% as much capital as male entrepreneurs, their ventures were 40% more profitable (off of a lower average revenue base).

These results seem to make the current allocation decisions in venture capital irrational:

When we try to find a rational explanation for the above numbers, the discussion turns to long-winded debates about structural / educational challenges (like the need for more girls in STEM), entrenched cultural biases held by both women and men (though men often make bigger and more public missteps in harassment/discrimination, with one of the latest examples leading to TechCrunch’s public apology after the Crunchies award show in San Francisco), and long-standing challenges to gender equality in the workplace.

At some point though, rather than continuing to talk about WHY we think these investment strategies are important, we need to act—implementing investment strategies that more effectively deploy capital to better-performing companies.

In that spirit, we’re happy to talk about how 67% of our latest peer-selected deals from our East Africa Ag & Energy, Louisville Ag and South Africa Education cohorts had women founders or co-founders. Across our portfolio since inception, that brings the number of women-founded enterprises to 34% (still not high as we’d like it to be at parity, but better than industry average of 4% of venture capital portfolios).

Refreshingly, we are seeing these results not due to meeting quotas, but through an investment process better designed to give women and men a fair shot at opportunity. When I asked the female founders of Ubongo, Lekki Peninsula Affordable Schools, and FIn Gourmet if they had the same war-stories that most female entrepreneurs do about fundraising in a male-dominated environment, I got fewer comments on sexual harassment or discrimination, and more on how fundamentally-different (collaborative, empowering, equal) it felt to be assessed by other entrepreneurs in our program, rather than investors.

Village Capital’s model focuses entrepreneurs on evaluating each other against our investment criteria—and leveraging their own experience as founders to inform how they think their peers will perform over time. While we certainly can’t claim to be removing personal bias from the process, it is a more collaborative and merit-based one, rather than rewarding who you know or how you pitch. And it’s yielding results that reflect the world we want to live in. We’re thrilled about adding all of these companies to our portfolio (and the recent male-founded ones, as well!), and encouraged that maybe we’re getting closer to a world where long-term thinking and diversity are awarded with funding because they represent the best opportunities—not because they’re in siloed buckets.

We encourage people who want to invest in under-represented, under-valued companies to work with us to continue to implement strategies and ways to build better processes that overcome our implicit biases in society. We applaud our partners at the Kapor Center for Social Impact for the work they are doing to promote equity in tech entrepreneurship, and we are encouraged to see others like 500Startups changing both sides of the table. The facts suggest that the firms doing this right now will outperform in the long run.