Kamal Hassan Loyal VC

Tackling Unconscious Bias in VC Funding with Kamal Hassan, Founder of Loyal VC

Kamal Hassan is a venture capitalist and one of Canada’s foremost thinkers on innovative and collaborative ways to approach investing. The former entrepreneur and CEO is the Founder of Loyal VC, a global fund that relies on process over chance to deliver returns and to minimize bias in its funding decisions. His “pitch-less” approach has tapped into emerging markets, female CEOs and the fund’s impressive returns prove his methodology works. Clarity’s approach to placing clients using proprietary technology that matches candidates based on skill set, experience and motivation echoes Hassan’s philosophy that diversification leads to success. Hassan spoke to Clarity Recruitment’s Andrew Seeley about Loyal VC’s investment strategy, the unconscious bias he sees in venture capitalism, funding on metrics and how men deceive themselves – and hence the VCs listening to them – during the funding process by over-inflating their worth in the pitch room. 

Andrew Seeley: Loyal VC is taking a very different approach to how you fund entrepreneurs in your portfolio by addressing unconscious bias in the funding process. This has led to the funding of more women and more racially diverse founders in your portfolio. Talk to us about your approach.

Hassan: When my partner Michael Kosic and I launched Loyal we were really building the fund we wished we had available to us when we were entrepreneurs. The nice thing about having spent 20 years as an entrepreneur is you’re able to see who gets funded and who doesn’t. You realize the funding process doesn’t make sense when you deeply know the companies involved. We’d been in the business for about six months when we started seeing industry data — only 3% of VC dollars go to companies with a woman CEO, which is completely irrational given my whole life experience. It seemed to us VCs weren’t funding the best companies. A lot of funding is based on the venture capitalist’s hopes and dreams of what that company is going to do rather than the demonstrated ability to follow a path towards success.

Seeley: Many people feel that if we had more women investors, more women entrepreneurs would be funded. You have argued that the largest problem is bias in the VC process (for example the pitching process) rather than the VCs themselves. Why do you say that? 

Hassan: I was judging a pitch competition once and there was a man and a woman on stage. The interviewer asked the woman, “Tell us about your business,” and she said, “I have this detailed plan for how I’m going to grow the business from where it is today to 100 employees.” The man stood up and said, “This is going to be a billion-dollar business.” And the audience sat back and said, “Oh well, the woman isn’t ambitious enough. He’s really convincing and she isn’t.” He said it with absolute certainty. He truly believed it was going to be a billion-dollar business. Well, I’m sorry, that’s a load of BS. Guess what — you need 100 employees before you’re a billion-dollar business and the woman who has the detailed plan to get to 100 employees has a viable business plan.

We’d been in the business for about six months when we started seeing industry data — only 3% of VC dollars go to companies with a woman CEO, which is completely irrational given my whole life experience.

I often hear this from women — men are self-deceptive. They believe their skills are much better than they actually are. Listening to pitches is biased because it allows self-delusional men to succeed. People don’t want to hear the bad side. They only want to hear the good — that’s what a pitch is about. The process of venture capital is listening to a pitch and using it as a way to decide who is going to succeed in the future. If men are self-delusional about their abilities, then all you hear is “this man believes in himself and this woman is uncertain about herself” because we don’t have the data to know which business is good and which one isn’t. All the promises, the dreams, the hopes — it’s immaterial. What matters in funding is performance. You’ve got to take one step to get to the next so let’s fund you and see if you can get to the next step. If you can, we’ll give you more money.

Seeley: What’s the solution? Does having more women working as venture capitalists intrinsically mean more women will get funded? 

Hassan: How is it that 11% of VC professionals are women and only 3% of the dollars go to a company with a woman in charge? The classic example I love is there was a fund launched by the Omidyar Foundation. Four of the five investment professionals on the team were women. The team was led by a woman. It was investing in social ventures, which classically women are more likely to be entrepreneurs in. When you looked at their portfolio, 16 of the first 17 companies they invested in had a man as a CEO. 

We are now in the third year of running our fund. If you look at our returns so far, 90% come from the top 5% of our companies, which is just like anybody else. However, unlike everybody else, we put 20% of our money into the top 5% of our companies. We have a portfolio of 150 companies and 32% of those are run by women. Our returns are tracking double what one would expect from a decent venture capital fund. My partner and I are almost embarrassed about our returns. We have seven winners — the biggest winner has given us twice as much money as the smallest. Look at who we are funding from that group: two of seven companies are run by women, so it’s pretty darn close to 30%. Give people a chance and fund them because they perform, not because of what we hope/dream/think they’re going to do.

I often hear this from women — men are self-deceptive. They believe their skills are much better than they actually are. Listening to pitches is biased because it allows self-delusional men to succeed. People don’t want to hear the bad side. They only want to hear the good — that’s what a pitch is about.

Seeley: You’ve worked as an entrepreneur and a senior business leader in many tech and entrepreneurial environments. What does the future look like for women in this space? 

Hassan: There are funders who are actively looking to get more women entrepreneurs. Some of them are purely funding women entrepreneurs in Canada — the BDC has such a fund called Women in Technology. There’s a group called Golden Seeds in the US which funds women entrepreneurs. There’s an organization called Beyond the Billion which Loyal, our firm, is the Canadian co-lead with Cycle Capital. The plan was originally to mobilize a billion dollars to be invested into women-led companies and it’s now moved beyond that to help venture capitalists address bias in their funding. Venture capitalists respond to what their investors tell them. If you’re giving out money to funds who don’t put the money back into women, you need to rethink what you’re doing. You can’t rely on the fund to tell you, “Oh, I couldn’t find any good women entrepreneurs.” Guess what, they’re out there! 

Seeley: What advice would you have for female entrepreneurs looking to get funded or work with VCs?

Hassan: The first piece of advice: find funds who target women. Find the fund managers who seek out women entrepreneurs. Go to beyondthebillion.com — any fund which is signed up has made a commitment to allocate a certain amount of their funding to a woman-led company. My second suggestion is always be true to yourself. Investors can see when you’re trying to fake it. In the pitch process, make sure you understand that the men you’re up against are taking the most positive view of their outcomes. Sit down and really get present with the idea that if everything goes right, this is what my company will do, because men are all saying that same thing. Be true to yourself, don’t lie, but have a rosy “if it all goes right attitude” that your company can be a billion-dollar company. The third thing: forget this nonsense of needing a man in the room to pitch with. He will not do the same job in your business that you will. I’ve heard from women entrepreneurs who say, “They ignore me in the room as the CEO and start talking to the CTO, because he’s a man.” Don’t tolerate that. You can fix that with your team. Train your team to funnel questions back to you. Own that CEO position. 

There’s an organization called Beyond the Billion which Loyal, our firm, is the Canadian co-lead with Cycle Capital. The plan was originally to mobilize a billion dollars to be invested into women-led companies and it’s now moved beyond that to help venture capitalists address bias in their funding.

Seeley: Do you believe companies like Clearbanc, that are using data-driven funding metrics and technology to remove bias from the funding decision making processes, are going to help influence change in the VC world? Why or why not? 

Hassan: Clearbanc is doing exactly what Loyal does — funding companies based on performance. The only difference is that we find companies earlier than they do. They fund based on metrics and guess what — they fund ten times more women than the average fund. If 3% of women are funded, that would mean about 35%, which sounds pretty similar to what we’re doing. There have been some very good studies that say an investment in a woman performs twice as well as an investment in a man. Marginal men get funded but nobody’s funding marginal women, only the best women. So if you only fund the best women, of course they’ll perform better — you’re comparing the best women to average men, and the best women will always outperform average men. I’m a big fan of anything which funds people based on what they do, not what they say.

Seeley: Should we abandon the pitch process all together then? 

Hassan: I’d love to say that’s the future but it’s a very conservative business. The people who decide which venture capital strategies get funded are managers of pension plan money. A pension plan does not want to take risks. We can go to governments and say, “I want to see the CPP money invested equally. I want to see a report every year that says what percent of that money was invested in companies led by women and what percent was invested in companies led by men. You owe it to us as voters to tell us that number.” It’s something everyone can do as individuals. The second they tell us that number you’ll go, “Oh, 11% of the pension assets of the country are invested in companies led by women and 89% led by men.” That will open up a whole bunch of conversations.

Marginal men get funded but nobody’s funding marginal women, only the best women. So if you only fund the best women, of course they’ll perform better — you’re comparing the best women to average men, and the best women will always outperform average men.


Kamal Hassan is an entrepreneur, angel investor, advisor, consultant and Founding Partner of Loyal VC. An INSEAD alumnus, he has pioneered a “pitch-less” approach to venture capital investing.

Andrew Seeley is Head of Client Services at Clarity Recruitment. He holds a Bachelor of Commerce in Behavioral Economics & Finance and a Bachelor of Science in Clinical Psychology from the University of Alberta.

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