I'm not what they call "a feminist". I cook for my family, I enjoy being a mom, I love the fact there are differences between men and women. I am not on a mission to make the universe gender blind. I am also a CEO and Founder of a demanding business, a former CEO of a public company, a lawyer and an investment banker. I've raised money, I've worked with diverse investors, executives and customers.
Today I'd like to share a few stunning facts that taken together make no sense:
Fact #1: Women compose over 50% of the population.
Fact #2: 50% of Crowd Investments are in female founder led companies.
Fact #3: 10% of Venture Capital Investment are in female founder led companies.
Fact #4: Women entrepreneurs are the fasting growing sector in the US
*Fact #5: Women CEOs often outperform male CEOs. *
(Take a look at 30 Surprising Facts About Female Founders, by Lisa Calhoun)
No one, no matter who you are, should feel comfortable about this state of affairs. It gets worse - recent studies show that the number of women partners in venture capital firms has declined to 6%, and that only 2.7% of venture capital-funded companies had a woman CEO. Yet businesses with a woman on the executive team are more likely to have higher valuations at both first and last funding, a whopping 64% higher and 49% higher, respectively.
Do VCs know something I don't? Have they figured out something all of us missed?
Silicon Valley's diversity problem is a hot topic of discussion. A sampling of good coverage can be found here, here, here and here. Business Insider has mapped the percentage of Female-Founded Startups in the big VCs active portfolios and the results aren't pretty:
The situation in Israel isn't different. Female Entrepreneurs are strange enough to be considered newsworthy. I experience it personally, as I quite often will go to a meeting where someone will express admiration and wonder that "you're both a founder and a mom!"
As a "Female Founder" (I hate that term!) I go to conferences. I meet VCs on a regular basis. I hear them explain their investment strategies. They are always well articulated and eloquent. They say the right things, they think the right way. When it's time for questions I invariably render them speechless with a single question:
"How many of the companies in your portfolio are led by women?"
Uh-oh! Ask them about the bubble, or about inflated valuations - no problem. Surprise them with a question about their selection criteria, their market focus or even just ask their advice on how to approach them - again, you'll get plenty of answers and they'll be happy to help. Female Founders? Women led companies? Suddenly it gets a bit awkward.
They do try to come up with something. Here's a select collection of random quotes I have managed to collect recently:
"We've done pretty well, 20% of companies have a woman in their management team"
"We're now looking at a few women led companies"
"I hear there is a good VC focused on female entrepreneurs"
"Funding women is definitely aligned with our values, together with investing in minorities and army veterans" (I know, I swear, a real quote)
And my favorite one:
"We love investing in Women, but we just don't meet as many female founders as we hope"
How can one tell when an industry is prime for disruption? When its so broken even a women can see it!
So why is it like that? Why do VCs not invest in women led companies? I can only offer my own thoughts and observations:
- Women do not approach VCs that often. A lot of women prefer other ways of funding their businesses, from traditional banking and self funding all the way to the good old fashioned approach of making a profit to support operations.
- The partners are men, the networking scheme is designed for men, the deal flow process is generated by men, for men.
- This whole "1 out of 1,000 companies will end up succeeding" narrative is, well, too similar to the primal struggle of male genes.
- When women do approach VCs, they are faced with thinly veiled sexism: "How will your kids react to the demanding work schedule of an entrepreneur?", "Can you handle the travel?", "Have you done this before?". These are questions that women typically face, but which wont be asked of a man.
Don't take me wrong. I do not think VCs are overtly sexist. I do think, however, that this entire industry still harbors woefully outdated attitudes. Women are not a minority and we don't need "Women Focused VCs". This is not the 1920s and we do not need affirmative action. The issue is simple: the VC process is flat out broken. VCs are missing out on 50% of their opportunities because they allow their biases (conscious or not) against women influence their investing decisions.
Now the crowd is telling all of us to listen. Women are just as successful as men. When they approach the crowd for funding or for buying their goods, they get more money and they deliver just as well as men. If the VCs don't adapt to this environmental change, it's not the women entrepreneurs who will be left stranded, but rather a bunch of men who are stuck in the last century.