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Kelsey Bishop

Disrupting the Old Boys’ Club

This report explores the representation of women in the venture capital industry through the interviews of 25 individuals within various VC firms, technology companies, and startups.

Introduction

“Homogeneity is bad for decision making.” I began to look around the room, confused by the statement made by one of Sequoia Capital’s partners. I had spent months becoming an expert on everything Sequoia Capital. I had waited eagerly for the moment when I would meet the masterminds of venture capital, and to say the least, I was quite underwhelmed.

“If homogeneity is bad for decision making, how does Sequoia Capital combat the fact that there are no women on the investment team and there are an increasing number of companies being founded to target women?”[i] How could Sequoia Capital regard their team as diverse if they didn’t have any female partners?

“Yes, that’s an area we’re weak.” Within about 30 seconds, my view of venture capital had done a complete 180. I wondered how of the best venture capital firm in the world could be aware of such a severe problem, and yet make no move to fix it.

Though I was directly exposed to Sequoia’s lack of female representation within their investment team, they are certainly not the only firm with the issue. Women make up as little as 6% of all deal decision makers in the United States, which is a statistic that has actually declined since 1999.[ii] Though the statistics surrounding women are discouraging, I felt that I couldn’t be dissuaded pursuing a career in VC or technology until I spoke with women within the industry.

The Structure of a Venture Capital Firm

The structure of a typical venture capital firm is divided between two branches: the investment team and the operational team. The investment team is comprised of the partners, who are at the top of the pyramid, followed by principals, associates, and analysts. Typically, partners have the ending say in investment decisions, while principals, associates, and analysts are responsible for sourcing deals, doing due diligence, and valuing deals. Partners also dictate the the culture of the firm.[iii] Since many partners retire later in life, the firm culture remains stagnant until new partners are promoted.

According to the National Venture Capital Association/Dow Jones VentureSource, 76% of venture capital partners are white males.[iv] Due to the lifespan of the job role and so few opportunities to hire new partners, this statistic is unlikely to change in the near future. While the partner roles are predominantly dominated by males, there are an increasing number of women occupying principal, associate, and analyst roles.[v]

The operational teams within venture capital firms usually provide support to the firm’s portfolio companies in marketing, talent, and other advisory efforts. Operational teams do not make investment decisions, but rather work closely with portfolio companies to ensure growth and success. Usually, operational teams are equally comprised of males and females. In some cases, operational teams have more women than men.[vi]

The Old Boys’ Club

Throughout the interviews of over 25 men and women in the industry, there were several trends within individuals’ thoughts and experiences (Exhibit 1). By far, the most common phrase used in reference to venture capital was “an old boys’ club”.[vii] The phrase hints at several aspects of the current environment of venture capital firms. First, with the exception of all female funds,[viii] most VC firms are comprised of all male partners. Since the partners usually retire late, many of them have been in their partner role for many years. This is the basis of exclusivity within the hierarchy of investment teams. Because the hiring turnover for partners is so low, there is small opportunity for new individuals to become partners, creating an exclusive group of older men at the firm, controlling the fund’s major investment activities.

The old boys club also refers to the ingrained bias within venture capital firms. Though not always intentional, it is evident that there is a lot of “men like me” bias.[ix] This subconscious bias has direct effects on hiring and making investments. The hiring process within a VC firm is exclusive from the start. One woman interviewed noted that her firm only considered candidates that could get an introduction to one of the partners, who were all male, making the process more exclusive and potentially biased to men who were closely connected with the partners.[x]

When interviewing the candidates, the “men like me” mindset is more prevalent. Several women described the interview process, noting that female candidates aren’t taken as seriously because, “we don’t take up as much space, speak as loudly…” and “we weren’t in the same frat as they were.”[xi] Women are perceived differently than men, which shouldn’t be a hindrance for a woman to be hired at a venture capital firm. Though the most senior partner might not be reminded of a young version of himself when sitting across from a female candidate, that woman could be an asset for any team and should be considered accordingly.

As one interviewee noted, “It’s hard for any woman in an industry where men are the gatekeepers.”[xii] This statement is true for women looking for jobs in venture capital, but also women looking for venture funding. One woman who was interviewed has been growing her company impressively for two years. When speaking about funding, she said that she doesn’t bother looking for funding in Boston, because when she sits down with investors, she “looks for another woman in the room.”[xiii] This impressive young founder also spoke about being coached on how to sit around a table with men — citing learned posture and manner. In order for her to be respected at a table of men, she was told to take up more space at the table and speak up, asserting her dominance. Though this woman is arguably one of the most impressive and determined founders, she needed to change her natural manners of being a woman in order to fit in with the old boys. The “men like me” mentality greatly deters the women wishing to enter VC or pursue venture funding, but it also hurts the men who alienate themselves from women who are innovating and disrupting sectors of business.

The old boys club touches the surface of an industry wide issue. Simply put, there are not enough women in venture capital. There are not enough women investing, and there are not enough women starting businesses and looking for funding. Females in venture and female founders are interdependent groups that rely on the support of each other to succeed.

This interdependence is both positive and negative. The growth of women venture capitalists will eventually foster the growth of women entrepreneurs, and vice versa, and both sides of the ecosystem will be continually strengthened.[xiv] However, this change can only occur if the incumbents of venture capital make a conscious effort to support the hiring of females in their firm, and funding of female led companies in their portfolio. Unfortunately, current venture capitalists speak the language of returns. Until current partners realize that they are at risk for missing valuable investments, they will not make a change. In order to validate the value of women in venture, the value of companies started by women must become obvious in the form of outstanding returns, which male VCs will need to get their hands on.

P for Pragmatic, not Political

When looking to hire women, venture capital firms should be wary of the contrast between hiring for diversity and hiring pragmatically. While every firm should have a woman on their team, it is absolutely not for the sake of diversity. Venture capital is historically an industry where people work extremely hard to generate outstanding returns. No firm will hire women if they feel they need to lower their standards — looking at you, Michael Moritz. However, firms shouldn’t be hiring women just because there is a pressure to do so. Rather, they should hire women because it would be beneficial to have a women’s perspective when making investment decisions.[xv] Also, firms would benefit from having a woman on their team because many women founders look for other women to invest in them (Exhibit 2).[xvi]

If firms are hiring women on their investment team because they do value their perspective, that woman should be put in a role with real decision making power. If a woman is merely brought on as an analyst, there isn’t added perspective to the investment team. However, it seems that many women being brought into VC are in lower roles. Though it’s unreasonable to expect a woman to be hired into a partner role without substantial experience, it is pragmatic to give the woman some ability to make decisions and investments. If the firm is hiring women into lower level roles, they are in the same position of having only 50% of the world’s perspective and might only be hiring women for the politically correct reason of “diversity.”

The Pipeline Issue: Myth or Reality?

Why aren’t more women in venture capital? Why isn’t anyone doing anything about it? The biggest question to interviewees was why. Individuals supported a wide range of hypotheses, citing their specific experiences and experiences of those in their network. The most discussed hypothesis was the “pipeline problem”. Many female interviewees attributed the lack of women VCs and entrepreneurs to the fact that women do not study engineering, science, or math.[xvii] However, when asked if they had a STEM background, or women they know in VC had a STEM background, the answer almost every time was no.[xviii]

The lack of women in venture capital is not a STEM related pipeline issue. An analysis of VCs on the Forbes Midas List (Exhibit 3) shows that the overwhelming majority of top VCs had one thing in common — they had been CEOs. They hadn’t all studied engineering or computer science. In “The First Comprehensive Study on Women in Venture Capital and Their Impact on Female Founders” the authors write, “The path from engineering school rarely leads directly to venture capital for both men and women”.[xix] By looking at the biggest players in the industry, there is no evidence that STEM is necessary for success in VC (Exhibit 4). Rather, operating experience appears to be the biggest indicator of a strong venture capitalists. This relates back to the issue of not having enough women entrepreneurs. As more women enter into VC, more women entrepreneurs will gain the support they need to succeed, and the cycle will continuously accelerate. At a Code Conference last year, Ellen Pao, who is famously known for suing Kleiner Perkins for discrimination,[xx] said she sees the pipeline problem as an excuse. “I hate the pipeline issue,” she told Kara Swisher. “It allows people to say, ‘I’m doing my best, it’s out of my hands. There’s a whole slew of things that can make it more fair.’”[xxi]

Though somewhat unrelated to women in VC, the pipeline issue does apply to female entrepreneurs. However, the pipeline for female entrepreneurs is not necessarily related to engineering. Though experience in STEM and technology does help founders succeed, there is a more prominent and ingrained difference between male and female founders. More than 40% of interviewees stated that women were held to different standards than men. In her TED talk, Reshma Saujani, the founder of Girls Who Code, attributes the gender gap in computer science to “women being socialized to perfection.”[xxii] Saujani describes that from a very young age, girls are taught to avoid risk and failure, while boys are taught to be brave and swing high, and if they fail to get back up again. She also speaks about a study done in which men are seen to apply for jobs if they meet 60% of the qualifications, and women will only apply to a job if she meets 100% of the qualifications.

These trends speak clearly to the difference between male and female founders. If females are held to higher standards, they will surely face deeper scrutiny during the process of building a company, and eventually while seeking venture funding. The largest issue to conquer in order to change the pipeline of women as founders and in venture capital firms is to stop habituating women to be perfect and holding them to a higher standard than men.[xxiii]

Different but Equal?

The idea of holding women to higher standards was explained through data by one interviewee. First Round Capital, an early stage venture capital firm, recently released a report documenting the top 10 trends of their portfolio companies over the last ten years.[xxiv] The number one trend? FRC teams with female founders perform 63% better than teams with only male founders.[xxv] At first thought, this statistic should boost morale for women entrepreneurs, as it insinuates that female founders are just extraordinarily better than male founders. However, as the interviewee pointed out, is there anything that makes women superior than men? Anything that sets our gender apart? Absolutely not. At the core, we are the same — we all have the same capabilities, struggles, and successes as entrepreneurs. Why then, did the women in FRC’s portfolio perform 63% better than the men?

This particular interviewee attributed that success to the aforementioned “higher standard” that women are held to.[xxvi] If the teams with a female founder were held to the same standard as the all male teams, wouldn’t they have performed the same? The companies with the female founders had to be better in order to funded by FRC. If the team was merely just as strong as the all male teams, they wouldn’t have been good enough to receive funding. Intrinsically, male and female founders possess the same capability to succeed in their startups. However, FRC’s study shows that VCs hold female founders to a higher standard to succeed, and are only funded if success of the company is undeniable.

Conclusion

“Venture capitalists are the ultimate change agents. They fund disruption. They overturn industries. They spit at the status quo. And yet, when it comes to gender diversity in this industry, very little is changing.”[xxvii] Interviewees attributed the lack of women in venture capital to several different factors, but at the end of the day they could all agree that a female perspective is valuable at on any team, at any table, and in any decision. Females are proving to be some of the biggest movers and shakers in society, and if individuals in the venture capital and technology industries refuse to take notice, disruption of the old boys’ club will be inevitable.

Exhibit 1: Interviewees

I interviewed 23 professionals within the venture capital industry, and 21 of the interviewees were women. In order to ensure honesty and candidness of my conversations, I have agreed not to release names of the men and women I have spoken with. I spoke with individuals from 21 different firms within both operational and investment teams. Interviewees had, on average, over 6 years of experience within the venture capital industry.

Firms Worked at:

  • QualComm Ventures
  • Samsung Accelerator
  • Empire Angels
  • Converge Ventures
  • Forerunner Ventures
  • Highland Capital
  • Cowboy Ventures
  • First Round Capital
  • OpenView Ventures
  • Dorm Room Fund
  • Bessemer Venture Partners
  • Rothenberg Ventures
  • Stripes Ventures
  • Metamorphic Ventures
  • Frontline Ventures
  • Pantegrion Capital
  • Breakaway
  • Knightsbridge Capital
  • Andreessen Horowitz
  • LearnLux

Roles of Interviewees

Investment Team (17)

  • Partner — 7
  • Associate — 5
  • Analyst — 5

Operational Team (6)

  • Talent Manager — 3
  • Advisory Manager — 1
  • Product Manager — 1
  • Platform Manager — 1

Exhibit 2: Correlation between Firms with Female VCs and Funded Female Entrepreneurs

Exhibit 3: Forbes Midas List — Background Experience

Exhibit 4: Ratio of Venture Capitalists with Engineering vs. Non-engineering Degrees[xxviii]

Exhibit 5: Quid Search of “Women + Venture Capital”[xxix]

Works Cited

[i] Lenten, David. “Why Are Venture Capitalists (76% White Men) Ignoring The Future?” Forbes. Forbes Magazine, 29 Apr. 2014. Web. 04 May 2016.

[ii] Brush, Candida. The Diana Project. Babson Diana Project. Babson College, Sept. 2014. Web. Apr. 2016.

[iii] Female Associate to Kelsey Bishop, April 27, 2016.

[iv] Leas, Monica, and Julie Oberweis. “Venture Capital’s Next Venture? Women.” TechCrunch. N.p., 03 June 2015. Web. 26 Apr. 2016.

[v] Female Talent Partner to Kelsey Bishop, March 30, 2016.

[vi] Female Advisory Manager to Kelsey Bishop, March 15, 2016.

[vii] Male Investment Professional to Kelsey Bishop, April 1, 2016; Female Founder to Kelsey Bishop, April 12, 2016; Female Head of Platform to Kelsey Bishop, April 27, 2016.

[viii] Miller, Claire Cain. “Female-Run Venture Capital Funds Alter the Status Quo.” The New York Times. The New York Times, 01 Apr. 2015. Web. 04 May 2016.

[ix] Female Partner, email to Kelsey Bishop, April 21, 2016.

[x] Female Head of Platform to Kelsey Bishop, April 27, 2016.

[xi] Female Managing Principal to Kelsey Bishop, April 6, 2016.

[xii] Female Principal, email to Kelsey Bishop, April 25, 2016.

[xiii] Female Founder to Kelsey Bishop, April 28, 2016.

[xiv] Teare, Gené, and Ned Desmond. “The First Comprehensive Study on Women in Venture Capital and Their Impact on Female Founders.” TechCrunch. N.p., 19 Apr. 2016. Web. 04 May 2016.

[xv] Kelly, Kathy. “Outside the Norm: Being a 25 Y/o Female Venture Capitalist.” LinkedIn. N.p., 19 Apr. 2016. Web. 1 May 2016.

[xvi] Schiller, Lauren. “A Female Venture Capitalist Shares Her Secrets For Getting Funded.” Fortune. N.p., 27 Jan. 2016. Web. 04 May 2016.

[xvii] Female Advisory Manager to Kelsey Bishop, March 15, 2016; Female Product Manager to Kelsey Bishop, March 9, 2016; Female Head of Platform to Kelsey Bishop, April 27, 2016; Female Senior Talent Manager to Kelsey Bishop, April 19, 2016; Female Partner, email to Kelsey Bishop, April 21, 2016.

[xviii] Female Senior Talent Manager to Kelsey Bishop, April 19, 2016.

[xix] Leas, Monica, and Julie Oberweis. (see 2)

[xx] Streitfeld, David. “Ellen Pao Loses Silicon Valley Bias Case Against Kleiner Perkins.” The New York Times. The New York Times, 27 Mar. 2015. Web. 01 May 2016.

[xxi] Leas, Monica, and Julie Oberweis. (see 2)

[xxii] Saujani, Reshma. “Teach Girls Bravery, Not Perfection.” TED Talk. Feb. 2016. TED Talks. Web. 04 May 2016.

[xxiii] Leas, Monica, and Julie Oberweis. (see 2)

[xxiv] Winkler, Rolfe. “First Round Capital Measures Its Startup Success, Minus Uber.” Wall Street Journal. N.p., 29 July 2015. Web. 27 Apr. 2016.

[xxv] “First Round 10 Year Project.” First Round 10 Year Project. First Round Capital, Jan. 2015. Web. 04 May 2016.

[xxvi] Female Founder to Kelsey Bishop, April 12, 2016.

[xxvii] Leas, Monica, and Julie Oberweis. (see 2)

[xxviii] Kerby, Richard. “Who Is A VC?” TechCrunch. N.p., 10 Feb. 2016. Web. 05 May 2016.

[xxix] Katie Chin, LinkedIn message to Kelsey Bishop, April 6, 2016.