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Peggy Johnson, executive vice president of business development at Microsoft. (Photo by Dan DeLong for GeekWire)

Women-led startups get only a drop of the pool of investment dollars out there, and Microsoft wants to change that.

The company’s venture capital arm, M12, unveiled a new startup competition today that will award a total of $4 million to two women-led startups. The Female Founders Competition will be open for applications until Sept. 30 for startups in North America, Europe and Israel. M12 and fellow VC partners in the event EQT Ventures and SVB Financial Group will pick 10 finalists to pitch their ideas.

Peggy Johnson, Microsoft’s executive vice president of business development, oversees strategic investments for M12. She told GeekWire in an interview that the competition aims to narrow a huge gap in investment in startups founded by women. Recent data shows that less than 3 percent of venture capital dollars went to all-women founding teams last year.

Johnson says M12 has a very diverse make up, but that trend doesn’t translate to M12’s own portfolio, with startups founded by women representing only 7.5 percent of investments. Johnson hopes the competition puts more of a spotlight on female founders and also helps M12 invest in more diverse companies as well.

“When we came across the idea to do this, it was because we put into place a diverse team, hoping that would increase our female founders, and we were disappointed with the results, and we want to change those results,” Johnson said.

Johnson argues that there’s a business case for investing in women-led companies. She pointed to a statistic from San Francisco VC firm First Round Capital that found the women-led startups in its portfolio outperformed companies founded by all men.

M12’s push to recognize female founders comes as Microsoft is dealing with an ongoing gender discrimination lawsuit brought by current and former female technical employees. Overall, Microsoft’s headcount is about 25 percent women, and the divide increases when looking at technical and leadership positions.

Johnson says the competition is personal for her. Before joining Microsoft in 2014, she worked at Qualcomm for 25 years, rising to the level of executive vice president of global marketing development. She’s also a recent investor in Flying Fish Partners, a VC fund that counts longtime Seattle-area tech veteran Heather Redman as a general partner, saying it has done a good job focusing on companies founded by women.

“I’ve listened to hours and hours and hours of pitches, and when I see a woman walk in room, I just have to smile a little to myself because I think ‘that’s me,'” Johnson said. “I came up through this very male dominated industry. I was an engineer; I was almost always the only woman in the room. I know what it takes to walk in the door and to walk in their shoes, and it can be challenging, so this is a very personal project for me.”

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