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On Women, VC & Startups….

A few months ago on PEHub, I engaged in a lively debate about the state of entrepreneurship and venture capital, here and here. One of the issues I addressed, the absence of women in the venture capital, technology and startup worlds, was revisited last week at the TEDx Global Woman’s Entrepreneur event. At minute 11, speaker Vivek Wadhwa, featured a slide with a quote from my first PEHub post, where I questioned if he confused an anecdote with research, about women’s perception of venture capitalists. In his voiceover however, he suggests that not only do VCs generally insult women entrepreneurs but we also are trying to ignore a gender problem.

Unfortunately, he left out the part of my PEHub post where I respond to gender issues head on. Here is exactly what I said in August:

“The gender issue sparked some strong opinions. Rather than have me go on, you’d probably prefer to hear from a woman – respected VCs in the industry like Deborah Farrington at StarVest and Scale Venture Partners’ Kate Mitchell. But I will say this, yes in my personal defense: every firm has its own culture and operates differently. At our firm, we are looking to build businesses and make money for our LPs. We don’t care where you came from, or about your gender or ethnicity. We want to back the best and the brightest. Of the 19 companies we funded since January 2008, seven were funded by women, foreign-born entrepreneurs or minorities. Two of the ventures started by women-only teams – Fashion Playtes and Moda Operandi – are performing quite well. Those same women founders are still running their companies and have closed B rounds at up-round valuations with Fairhaven and NEA respectively. A few might wonder if there is demand or a need for a group with a laser-like focus on helping women entrepreneurs. There is and it is called Springboard.”

The topic of women in the startup and venture business continues to be heated. Just look at the reaction to Penelope Trunk’s piece in TechCrunch this week. This isn’t an issue VCs in general brush under the rug, as Mr. Wadhwa would imply. The issue hits home for me. My wife is a former entrepreneur and in addition to two teenage boys, we are also raising our young daughter.

Aside from Mr. Wadhwa calling the late Steve Jobs a “sexist” – stating it as “fact” (minute seven) – and using politically incorrect terms to describe communities in America, the trouble with his TED talk is his premise that “girls now match boys in mathematical achievement; 140 women enroll in higher education for every 100 men; and women earn more than 50 percent of all bachelor’s and master’s degrees and nearly 50 percent of all doctorates” and that THEREFORE they should have equal outcomes in the technology-centric business community. He observes that since “only 3 percent of Silicon Valley’s tech firms are women [led]” that there is a problem. And he concludes, through interviews with women, that VCs are a big part of the problem (based on a few anecdotes of VCs behaving badly) where he says they suggest, women “should cut your hair, dress a bit more manly if you want to be CEO” and ask “when are you planning to have kids.” What a way to fire up a crowd!

He therefore leaves the reader with a misrepresented view of VCs, lecturing us as being primarily responsible for the underrepresentation of women because we don’t fund or hire enough of them.

His problem is one of causality and faulty logic. Going to college does not mean that you will start a technology business. Sadly, only five percent of college graduates receive STEM degrees. And according to research supported by the National Science Foundation, men outnumbered women in STEM bachelor’s degrees by more than 50,000 (a 2.5:1 ratio). So the playing field for leading or working in a technology based company startups does not start level out of college.

That could change. The same report notes that in only five years, the percentage of Carnegie Mellon’s School of Computer Science graduates that were women increased from 7 percent to 42 percent. This means while men 25-60 may vastly outnumber women in the technology world, that gap could shrink quickly.

But this is a good topic for real, quantitative research – not just a collection of anecdotes. The data is out there. I would encourage Mr. Wadhwa to do some fact-based research on the issue.

Some questions he might consider in his role of a researcher: Are women-started businesses on the rise? How many women-led businesses actually required venture capital to get off the ground versus other financing avenues that might be more strategic? In 2010, according to The Center for Venture Research at the University of New Hampshire, a total of 61,900 technology businesses received angel funding. How many of those were started by men and how many were started by women? In 2010 there were 3,496 venture funded companies. What was the percentage started by women? Was there a change in the number of companies led by women between the angel-funded companies and the venture-funded companies? What is the funded-to-pitch rate for male-led companies versus female led companies? This is data that exists out there.

I took the time to compile our information. This data is from every company that had at least one meeting with us in our office across three years. It ignores unsolicited business plans or people we talked to on the phone but did not meet with in person. Sample size is 340. Here is what we saw from 2009 – 2011:

• 11.5 percent of companies that pitched us had a woman Founder/CEO. Many more had women founders or women on the management team but for the purposes of this study, we’re just focused on those with a woman Founder/CEO.
• We funded 5.4% of companies where a woman Founder/CEO pitched us
• We funded 5.2% of companies where a male Founder/CEO pitched us

So lets not simply conclude that male VCs intentionally discriminate against female entrepreneurs, as was implied by Mr. Wadhwa. Rather than stereotype, perhaps it is time to let the numbers do the talking. I shared ours. Will other VCs share theirs?

First published on PEHub December 15, 2011