Alexandra Lebenthal, third-generation Wall Streeter, invests in first-generation women business owners

Alexandra Lebenthal grew up in finance, taking the reins from her parents of the municipal bond trading firm founded in 1925 by her grandparents. Now, she's senior advisor with Houlihan Lokey and heads its initiative to invest in women-led companies. She and InvestmentNews diversity, equity and inclusion editor Joanne Cleaver had a free-flowing conversation this fall. Listen in below, and hear Lebenthal’s conversation with InvestmentNews’ Gregg Greenberg in the accompanying video. (Comments have been edited for clarity and length.)

InvestmentNews: You and I both remember when the case for advancing women at both companies and on Wall Street was the 'right thing to do' — very moralizing. Then it was the 'bright thing to do,' when research started to validate the differential in performance delivered by gender-balanced and women-led teams. What’s the next cutesy reason to advance women?

Alexandra Lebenthal: Going way, way back when Oppenheimer Funds was the first mutual fund company to have a focus on women, female investors. And it was pink and purple brochures. Over the years there has always been the, I call it 'Pantone marketing' — pink and purple will be the sure way that women will pay attention. And I'm all for having things designed well and looking great and attracting people to read it, but it's not about the color.

IN: Do you think that there's been a sea change in truly making the most of what women bring, in terms of how women see opportunities and execute on those opportunities? Are we at a tipping point or are we still just waiting for gravity to be our friend?

AL: More toward the tipping point than gravity being our friend. And maybe we're in the arc of the tip. When Blackstone bought Spanx, that was ...

IN: I just want to say, 100% on the basis of my purchases.

AL: Listen, you're collectively one of millions. That was a huge deal for two reasons. One was, wow, if Blackstone is doing this, it must be profitable and an area we should be focusing on.

But the other was that because they had an all-female deal team, an all-female banking team, other women, attorneys and other all-female representations, it showed that it's important to have talent in every area. But it also showed for women on the business side that they have permission to ask for what they want. And I saw in the weeks after, women saying, I want a female banker, I want a female team. So, that was this big moment ... Still, if you ask the average investor, tell me, do they [women] outperform? Is it the same? It is less? They would not know. So, it's still about getting those hard facts out. The people that do realize it, the Blackstones, are going to end up making more.

IN: The average investor thinks of women-led businesses as cute and small? Puppies and cupcakes? 

AL: For consumer products, women see businesses that VCs don’t understand, like the whole female health, wellness, sexual health categories. We sold Thinx underwear last year — they’re one of the period underwear companies. If you are a bunch of male VCs and a woman comes in to talk about her company like that, you can't even speak. Let alone say, 'Hey, this is a great business.'

IN: It seems that the business case for having women-led and gender-balanced executives teams, boards and fund management is locked down.

AL: Right.

IN: So who still needs persuading, or is it just a matter of getting the word out?

AL: I would say on the private equity side, there's a greater appreciation of and understanding for how successful women-led businesses are. And it makes sense because by the time private equity funds are talking to those women, they are at the size where they've grown, they're profitable and they have proved out the premise on their success.

When it's earlier stage and you have a guy who looks like you and comes in and is pitching some big tech business, that's where it's harder. But if we don't get more and more women who are funded at an earlier stage, then you're not going to have enough of a pipeline so that you can get those businesses to the private equity stage.

I talk to private equity funds, big, small, medium, all the time. And they all want women-led businesses. They want female board members, operating partners. They love female investing partners. That's a harder area because of the experience growing up in that industry. And they all recognize that women-led businesses provide real returns for them. That's exciting to see.

IN: Are we at the point where this recognition is translating into action and dollars? Is that becoming a fiduciary responsibility where boards and others are just saying, 'Hey look, this is no longer a value-added, this is core now'?

AL: I don't know that we're at the point where people recognize that it's a fiduciary responsibility and maybe it's within the whole ESG world of still trying to figure out how committed are we to this. But I do think, given just the number of conversations I have with private equity funds and these are funds that the rest of our group is talking to day in and day out, it is a constant conversation. So, that's great.

IN: And these expectations are from men?

AL: What has been really interesting is how what I am doing resonates so well with both the private equity funds that we speak to as well as internally. Our bankers, they get it. They get that they can't walk into a room, whether it's Zoom or in person, when it's a female CEO, CFO, COO, and not have a single woman on the team. Not even the analyst. They've lost business because that's happened before. So, it's in their economic interest. They see that. That if I'm going to get this business because there's a focus on women, great, then I want to work with you all day long.

IN: You changed the ecosystem internally.

AL: I don't know that it's been a change, but it's been this meaningful addition. And especially because we're the only bank doing it.

IN: Will it be a differentiator for long though?

AL: If every bank, fund, unit, commercial bank, private equity fund, investment bank, has their approach to how they're going to address the economic opportunity and revenue opportunity within diversity and women, then ultimately you want to have a bunch of different approaches to it. Because now that makes for a landscape that has been fully designed and planted and is growing and grows over time.

IN: It normalizes it.

AL: Yes. What I said before about Spanx and Blackstone, Blackstone has also invested in Supergoop and Hello Sunshine and Bumble and others. Then you have Goldman Sachs and its 10,000 Women. JPMorgan has Winning Women. Everyone has their own thing and it all looks different. So, rather than having every bank do the same thing where you're just not really advancing the cause in a diverse way, it's really exciting to see how everybody approaches it.

IN: I agree with you. At the same time, it would be nice to have a few common pillars of what really works, horizontally across different sectors. Does this diversity of effort almost work against that?

AL: I haven't really thought about it from that perspective because I do get so focused on this filling the landscape out. Perhaps. But then at the same time, if there are all these different needs and everybody's doing something differently, then you don't necessarily want to have the pillars. There needs to be a sort of creativity to it.

IN: Would there be greater impact for women to have a greater proportion of funding and track record in one sector, say consumer goods? Or, instead, for women to be well placed across most sectors?

AL: Definitely across.

IN: Really?

AL: [Women are distributed across] a lot more than people realize. Health care obviously, but there are so many different aspects of health care, whether it's telehealth, mental health, employer-sponsored health plans. Business services. The Mom Project has raised a huge amount of money and has really created a whole new niche which addresses the problem of women returning to work both for the employer side, as well as obviously for those women. So, would a man have thought that up? Probably not.

IN: Probably not.

AL: We now track the number of female-led deals that we've done. We do it every quarter and then we did it for the last two years. And what we saw was that in 2021, the sector where our bankers did the most number of women-led deals was technology.

IN: Really?

AL: Now, you can't necessarily apply that to the bigger world, but the fact that we did more deals with women running technology companies, that shows that there are actually enough that there's meaningful investment banking opportunity.

IN: Like, hardcore engineering?

AL: The stuff you and I might not be able have a meaningful discussion about. There are businesses in every single sector and I do try to monitor every woman-led business I see getting funding or if there's an article or it's a top CEO list in a certain sector. And this goes also to my whole premise that there's a huge market out there.

IN: What do the financial advisory industry and then the people who serve them need to understand about women-owned businesses as a potential investment and in their role as advisers, what their clients need to understand about investing in women?

AL: This is another area of frustration I've had over the years. Every once in a while a big firm will say 'We're going to create a whole program focused on female investors.' And then they don't really have a real plan. You can't manifest into universe about having more female clients. You have to have an actual plan.

And so then by not having a plan with goals and metrics and all that, then your chance of success is significantly less. So then what happens is a year or so later or two years later, there's an announcement that they're pulling back or they're merging that into something else. And then the next thing they do is they come out with a white paper showing how much money women are going to inherit or already are inheriting.

IN: Aren't you tired of that number?

AL: Yes.

IN: It's so predatory. 'The men are going to die, the women are going to get it all and we're going to help the ladies then.'

AL: Maybe instead of doing a white paper on how much money women are going to inherit, do your own report and have your own statistics on the performance of female-led companies versus male-led companies. Then bring that into your approved investing platform funds that are focused on female-led companies, whether it's on the venture side or on the private equity side. Figure out, OK, how are we going to tell people that there's greater opportunity here? And then after we do that, how are we going to give them the investment options that will allow them then to have that greater return?

IN: That’s a really good point. Just quit talking about how much money women will likely have to invest knowing that women do, generally speaking, want to support other women, if the returns and everything else is equal. And start giving them actual tools for doing that.

AC: My approach has always been that it's not just about facts and figures and numbers and deals. It's really about listening to that woman. Just like being a good financial adviser and wealth manager. Listening, asking questions and listening so that woman really feels like, OK, she understands. She gets it.