Chenxi Wang: 5 Things We Need To Do To Close The VC Gender and Racial Gap
With Jilea Hemmings
Established venture capitalists should actively mentor and sponsor women investors. Promoting the brand of women VCs, exposing them to opportunities that otherwise may be difficult to access is a great way to equal the playing field.
As part of my series about “the five things we need to do to close the VC gender and racial gap” I had the pleasure of interviewing Chenxi Wang.
A leading venture capitalist in the Bay Area, Chenxi Wang is the founder and managing general partner of Rain Capital, a Silicon Valley-based venture fund. She previously held leadership positions at top companies including Twistlock, Intel and Forrester, and currently serves on the Board of Directors for MDU Resources, a Fortune 500 company. Wang is also a Forbes contributor and writes a column for Dark Reading.
Thank you so much for joining us! Can you tell us the “backstory” that brought you to this career path?
I had a long career in technology. A computer scientist by training, I did academic research, followed by industry research, and a few operator and executive roles later, I found myself wanting a change. I started doing some consulting work with a few VC firms around the valley, helping out with tech due diligence and a few other things. I remember that I would go to the partner meetings to present my due diligence findings, and it would be me in a room full of men around the board room table. There were women going in and out of the room, but their responsibilities were taking everyone’s lunch orders and bringing coffee and drinks. The difference between the gender roles was so very stark, and it was not just with one firm. In Silicon Valley, when you go to technology companies like Google or Facebook, you would see women engineers or women executives. Even though they are in the minority, they are around and doing the same work as male engineers and executives. But in the VC industry, that was not the case — things have changed a bit since then, but back in 2017, 2018 it was quite bleak.
That got me thinking — I was not going to sit around and wait for someone to offer me a role that only existed once in a blue moon. I wanted to control my own destiny. So I raised a fund on my own and became a General Partner of Rain Capital. Today has been nearly 5 years since I started on this journey. I have learned a tremendous amount, and have enjoyed working with entrepreneurs and fellow investors. Rain Capital Fund I had 10 investments and two are unicorns. The rest is history.
Can you share a story of your most successful Angel or VC investment? In your opinion, what was its main lesson?
Many years ago, before I started my fund, I made a small investment in a company called Twistlock, one of the first “container” security companies — “container” as in, the modern virtualization technology. That was a bet on the market momentum behind containers, and on a team that, at the time, was largely unknown in the startup space. But I liked the team’s potential and their passion, and I felt it was the right time to make a play in container security, as all the development teams I know were adopting containers. Not only did I invest money, I also joined the operation and led the company’s go-to-market efforts in the first few years. That eventually led to a successful acquisition by Palo Alto Networks (Nasdaq: PANW). My investment returned more than 50x, one of the most successful investments I have made. The takeaway, or the lesson from this is that investors really need to pay attention to the timing of technology shifts in the broader market. The ability to catch the cutting-edge growth of a new technology and seize the opportunity right then and there made all the difference.
Can you share a story of an Angel or VC funding “failure” of yours? Is there a lesson or take away that you took out of that that our readers can learn from?
I’m not going to name any names, but a few years ago, I invested in a privacy tech company. It was a very interesting technology that aimed to help companies understand where their data goes in order to establish privacy policies. I was very interested in the implications of the technology, given that privacy regulations were tightening up around the world. Unfortunately, the company started in late 2019 and its initial momentum was stalled due to COVID. Their beta customers and would-be early adopters put the initiatives on a back burner to deal with more urgent matters like securing working-from-home. The founding team had trouble weathering the storm and decided to exit the company. We were able to secure an acquirer for their technology and intellectual property, which meant it was not a total loss. But that was a company that had a high potential but was hampered by the market timing and by the team’s inability to weather storms. Obviously no one was able to predict the pandemic, but the tenacity of the team and whether they have what it takes to sustain through a “down market” is a lesson learned.
Was there a company you turned down, but now regret?
Soon after I started Rain Capital, I ran into Interos, a company in the space of supply chain risk management. The company had a very interesting offering, providing supplier intelligence from direct suppliers to nth degrees of indirection. They also have a strong woman CEO, all things that I like. However, the company was going through a transition at that time. They were transforming from a federal service provider to a product company, and were also acquiring another company at the same time. As a new investor, I was a bit intimidated by all that complexity and decided to pass on the company. The company has since done very well under the CEO’s leadership. That is one project that I regretted not taking on.
Ok let’s jump to the main focus of our interview. According to this article in Fortune, only 2.2% of VC dollars went to women in 2018. A similar number went to minority owned companies. Can you share with our readers what your firm is doing to help close the VC gender and racial gap?
Rain Capital is a woman founded and woman managed venture fund. In our first fund (Rain Capital I)I, nearly 40% of the portfolio companies have women or diverse founders. Even though we did not have a mandate for diverse founders, we ended up with a fairly diverse population. A key strategy we follow is being intentional about removing biases and also proactively extending our reach beyond traditional deal channels. If we can do 40%, surely the entire industry can do better than 2.2%.
Can you recommend 5 things that need to be done on a broader societal level to close the VC gender and racial gap. Please share a story or example for each.
The video is here:
1. Institutional investors should allocate more dollars toward emergent fund managers. A greater percentage of emergent managers are women and racially diverse managers. These emergent managers are starting their journey in Venture Capital and can use the most help.
2. Established funds should hire more women and diverse employees, from interns, analysts, to partners. By getting more diverse individuals in that pipeline, we could one day hope to have more women sitting at the helm of more funds and investment firms. Seema Hingorani’s Girls Who Invest is one such program that help to place more women into Venture and PE firms, but we need more.
3. Established venture capitalists should actively mentor and sponsor women investors. Promoting the brand of women VCs, exposing them to opportunities that otherwise may be difficult to access is a great way to equal the playing field.
4. There should be more support for women and diverse General Partners. General Partners are the ones who control a fund’s investment strategy, interface with investors, and also the ones who decide how you grow the team. Empowering diverse General Partners is the most effective way to erase gender and racial discrimination in venture investments.
5. Venture capital firms should change their hiring model — instead of bringing in analysts or junior partners almost exclusively from investment banking, we should source talent from a wider range of backgrounds including technology, research, operations, and the arts. This will yield a broader and more diverse talent pool, and in turn bring fresh ideas and ultimately new strategies in investing.
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)
I would love for the little girls in this country to grow up without the stigma of “smart” vs. “beautiful”. I have seen so many little girls who are forced to NOT show how smart they are because of social pressure and the fear of being ostracized from her peers. I want the parents, aunts, friends to let little girls be who they choose to be — a math geek or a beauty queen. I want teachers and authority figures to tell girls that they can be “smart”, “bossy”, and that they can be a leader when they grow up.. Changing cultural biases does not happen overnight, but we have to start somewhere. The right place to start is how we raise the next generation of women leaders.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
Many years ago, one of my colleagues, a wise older gentleman, told me this: “Don’t wait for people to give you permission to do what you want, if you want it, go and get it yourself.” This quote still remains fresh in my mind today. As an immigrant, as a woman, founding Rain Capital was my way of not asking for permission, but crafting a path for myself, and I am grateful for the experience and learning thus far.
Some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US whom you would love to have a private breakfast or lunch with, and why? He or she might see this, especially if we tag them. :-)
I am a big fan of Mary Meeker. I love how she went from a researcher to an investor, and how her growth fund outperformed Kleiner’s core fund. Now she also founded her own fund, I just admire her keen insights and her guts. She is a kick-ass woman investor that I would love to meet.
This was really meaningful! Thank you so much for your time.
