Women on Cap Tables

In February, Jana Messerschmidt, Jessica Verrilli, Katie Stanton, Vijaya Gadde, April Underwood, and Chloe Sladden, also known as the #Angels, wrote an excellent piece called The Gap Table. Their thesis was that the salary gap — women are paid $0.80 on the dollar to men — is a rounding error in Silicon Valley math. Wealth, and therefore power, in Silicon Valley is driven by startup ownership rather than startup salaries. And women are significantly underrepresented in that equity ownership. They coined this inequality the Gap Table.

Gap data

We invited the #Angels to our office and offered to do a gender cap table study using our dataset. It’s pretty bad.

Women own 9% of employee and founder equity in Silicon Valley. Men own the other 91%. Women make up 35% of equity holding employees but own just 20% of equity. And it starts at the beginning — female founders are 13% of all founders but they hold 6% of founder equity.

The #Angels have written about this disparity better than I can. For my part, I’ll simply summarize that they were right. And this, silicon valley, is not our finest moment.

Looking in the mirror

Unfortunately, Carta is not an exception. Only 30% of our 400 employees are women. One member of our executive team is a woman. And zero of seven board members are women (more on this below). I am embarrassed that we are part of the problem.

But we want to be part of the solution. So far this year we’ve done the following:

  1. In 2018, 48% of our senior hires, defined as director-level and above, are women.
  2. In Q1, we completed a salary compensation review to identify and fix gender and other demographic biases, increasing payroll by $2M/year.
  3. In Q2, we completed a similar review and adjustment for cap table equity which added $8.3M of additional employee equity.

It is good that we are fixing things. It is bad that we have to. I reflect on how we got to this point as a company.

When I started Carta I didn’t focus on diversity because I was worrying about staying alive. Then we hit our growth phase and went from 20 employees to 400 in 48 months. I assumed diversity would happen on its own. Of course it didn’t. I didn’t realize how much deliberate focus it takes. I do now.

Boysrooms

As bad as employee ownership is, boardrooms are worse. Women fill less than 9% of board seats on Carta’s platform. Venture capital is male-dominated and investors take the majority of startup board seats. The lack of diversity in boardrooms is an outcome of the lack of women in venture. I’ve raised $80M of venture capital and have never received a term sheet from a woman.

California is on the verge of mandating that public companies have at least one female independent. We will add our first female independent director by the end of the year. I think other startups should follow suit. For any all-male board, with five or more directors, one board member should step down to make room for a female independent.

These are difficult conversations. And CEOs have to be the driver of these conversations. Nobody else will. The true test of our leadership is if we, tech CEOs, restructure our boards to bring more women in top roles.

For those that do, there are great resources like Boardlist for finding female independents. Or ask me. I am recruiting our first female independent director and have an amazing pipeline I’m happy to share.

More to come

There is more to study on gender inequality. But also other underrepresented groups including racial, ethnic, sexual orientation, and socioeconomic minorities. We haven’t started those studies yet, but we will.

These problems are core to our broader mission of tackling income inequality by creating more owners. Wealth is created by being on the equity stack (the cap table), not the debt stack (payroll). The power law of startup economics amplifies inequality on cap tables orders of magnitude more than inequality in salaries. “The rich get richer” holds true in Silicon Valley more than anywhere else. And so, gaps, and gap tables, are magnified.

Thank you to the #Angels for suggesting this study. It is the beginning of many more to come.