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Closing the gender gap in venture capital deserves our immediate and sustained attention

I asked investors Kathryn Minshew, Theresia Gouw, Jennifer Fonstad and Reid Hoffman about steps that companies, VCs and decision makers can take to be a part of the solution.

Bill & Melinda Gates Foundation co-chair Melinda Gates participates onstage in a panel discussion during the World Bank Group and International Monetary Fund Spring Meetings in Washington, D.C.
Melinda Gates
Chip Somodevilla / Getty

Like a lot of people who follow tech news, I’ve spent the past few weeks glued to my various screens. The wave of stories about entrenched sexism at Uber, alleged “biological differences” at Google, and rampant sexual misconduct in venture capital has left me both outraged and — though it might sound strange — a little bit optimistic.

Outraged, because women across tech are still enduring some staggeringly backward attitudes and behaviors. And yet optimistic, because while these attitudes and behaviors are nothing new, what is new is that they’re making the front page. Now, at least, we’re outraged together. And that gives me hope that this might be the moment when things begin to change.

In the spirit of organizing outrage into a force for progress, I reached out to four leaders in tech about something that I think deserves immediate and sustained attention: Closing the gender gap in venture capital.

We like to think that venture capital is driven by the power of good ideas. But by the numbers, it’s men who have the keys. Last year, female founders received about 2 percent of venture capital funding — and the numbers are moving in the wrong direction. While the average investment in companies led by men jumped 12 percent, to $10.9 million, the average investment in companies led by women dropped 26 percent, to $4.5 million. Statistics tell us that funders award women founders just a quarter of the funding they ask for. Male founders, meanwhile, are getting half.

The gender gap in VC isn’t just a gap in who is receiving funding — it’s also a gap in who’s doing the investing. One report found that only 7 percent of partners at the top 100 venture firms are women. Fewer than two in five firms had even a single female partner.

In other words, VC remains very much an old boy’s club, one that can be difficult for women to break into. Women founders are at a disadvantage when it comes to networking, and they often have less access to the informal networks that are passing on information and resources to their male colleagues.

Now, let’s be very clear: The people who are running these VC funds aren’t necessarily setting out to be exclusive or discriminatory. But even so, there is a lot of evidence that unconscious biases are impacting the way female founders are received. Consider, for example, the finding that investors tend to describe young male entrepreneurs as “promising,” and young female entrepreneurs as “inexperienced.” Or that the managing partner of one of Silicon Valley’s leading VC firms admitted that one of the things he looks for when deciding whether to invest is an entrepreneur who fits the Gates, Bezos, Andreessen or Google model — which is to say, “white male nerds who’ve dropped out of Harvard or Stanford.”

Well, with all due respect to nerdy white guys (including the one I married), I think that archetype has a lot more to do with historical inequalities than it does with innate ability.

So where do we go from here? The change we need will require bold leadership from the industry’s power brokers. Venture partners and limited partners, I’m looking at you.

We also need to encourage better measurement and data on diversity in the venture and startup ecosystem. Project Include has designed some helpful frameworks and recommendations — and funds like Reach Capital and First Round Capital are ably demonstrating what these efforts look like in action. Limited partners can help by stepping up to pilot approaches to track diversity across their own portfolios.

Most importantly, we need more funding for women-led VC funds and early-stage companies. I’m putting my money where my mouth is on this one. Earlier this year, I began looking to make returns-focused investments in women-led VC funds. Not because it’s a nice thing to do, but because there are smart investments to be made and big returns to be had. I hope that other investors will follow suit.

I asked Kathryn Minshew, Theresia Gouw, Jennifer Fonstad and Reid Hoffman about other steps that companies, VCs and decision makers can take to be a part of the solution. Here’s what they suggest.

Kathryn Minshew, founder and CEO, The Muse

Kathryn Minshew
The Muse

I’m glad we’re talking about this issue, but we can’t just focus on the headline-grabbing stories. A true commitment to equal opportunity in tech involves addressing the more subtle forms of discrimination: The cumulative impact of the minimizing, patronizing or ignoring that many women and other minorities experience daily. As I wrote to an investor recently, if I could choose between erasing my three worst investor sexual harassment interactions or reducing by 50 percent the number of people who assumed I am worthless to speak to because I'm female, I'd take the latter in a heartbeat. Not that anyone should have to choose.

A few of the solutions I’ve found valuable:

At the VC level, funds should commit to treating harassment and discrimination against female founders with the same legal protections as harassment and discrimination against employees. Commit to a clear code of conduct, share it openly with your team and portfolio, and outline how people can report incidents and how you’ll handle violations. Don’t make one-off decisions, which will increase the temptation to overlook poor conduct by high performers. In addition, I support the work being done to create a central reporting function in the industry, so that someone who has been sexually harassed has another option besides reporting it to a colleague (and potentially close friend) of that individual.

For companies, it’s key to take a look at your hiring practices. Insist on seeing a diverse slate of candidates, particularly for senior or specialized roles. If you’re working with a search firm, specify it in the contract. In the meantime, put all of your interviewers through unconscious bias training (and make sure there’s diversity among that group, too). If your company screens for “culture fit,” look closely at how that operates: Is it thoughtfully assessed based on company values, or has it become an excuse for people to prefer those “like them”? Anything involving “I would get a beer with this person” is a sign that unconscious bias is alive and well. There are a number of organizations, such as Project Include, that have a tremendous number of resources for companies looking to be better.

Theresia Gouw and Jennifer Fonstad, founding partners, Aspect Ventures

Theresia Gouw
Aspect Ventures
Jennifer Fonstad
Aspect Ventures

To Increase diversity in tech: Invest, measure, iterate.

It has been well documented how diversity in teams — at the board level and across management — leads to better decisions and superior performance of the organization. The challenge many companies face, though, is how to bring diversity into the organization and how to bring those diverse perspectives forward into decision-making discussions. We believe there are several practical approaches to break this challenge down and uncover solutions.

One particularly powerful anecdote comes from how the Harvard Business School handled its own challenges with these issues in the classroom. For many years, women in the MBA program at Harvard failed to achieve honors status (known as Baker Scholars) to the same degree as their male counterparts. In other words, if the average class at HBS was 40 percent women, perhaps only 20 percent of Baker Scholars were female. As the dean and his leadership team looked at this data, they could have made several different conclusions.

Like James Damore, the Google engineer who was recently fired because of his memo that said women are biologically incapable of performing engineering successfully, the dean could have looked at this historical data and concluded women were not smart enough or capable of intellectual success like their male counterparts. Instead, the dean and his team suspected that something was not working in the classroom and begin experimenting with hypotheses as to what may be at issue.

Since 50 percent of each class grade depended on class participation, the dean put a scribe in each class to ensure proper attribution of students’ comments. As it turned out, this was ultimately the source of the problem. Teachers — both male and female — had been misallocating comments more frequently to the men in the classroom. By requiring a scribe in every classroom, class participation was properly recorded, and the number of women Baker Scholars increased to the same statistical percentage as was represented by women in the class overall.

We find this type of challenge happens daily in businesses, board rooms and venture meetings. Every day, people use their own narratives to interpret comments, behaviors and data. And while the story is about gender because that is the easiest to measure, it applies equally for different types of diversity. While gathering statistics is a critical part of identifying shortcomings, it is no longer enough. Actively hypothesizing, testing those hypotheses and reanalyzing data on a continuous loop will need to be a regular part of the process to drive change.

What often gets lost when you have a persistency in underclass representation — be it women, minorities, introverts, etc. — is that the persistency in and of itself becomes justification for the outcome. In other words, if 7 percent of the venture industry is women and has been for decades, it must be something inherent to women in tech, not conditions or other factors. Only by examining that narrative and challenging it with experimentation, initiatives and constantly evaluating results can we drive systemic change in our industry. And it touches every aspect of the tech community — how and who we recruit, how we apprentice, how we conduct meetings — who talks the most; who talks the least? How do we compensate, based on negotiation skills, fairness, consistency? All of these factors influence outcomes and require experimentation to find a better path.

Ultimately, though, it still comes down to investment — investment in data gathering, data interpretation, experimentation and follow-up analysis. It depends on broadening beyond what has been typical in the past. The data is clear: Diversity leads to better decisions and better performance. How we get there continues to challenge and provoke us to be more thoughtful, more proactive and more creative. We believe this is an opportunity, and as one of the largest women-founded venture firms in the world, we are working daily to demonstrate that in our culture, our decisions and in our performance.

Reid Hoffman, partner, Greylock Partners

Reid Hoffman

When asked to explain why there are so few women partners at venture capital firms, people in the industry often say it’s a “pipeline problem.” That is, there aren’t enough female founders or technologists to choose from, so that’s why partners remain overwhelmingly male.

Of course, referring to “the pipeline problem” is really just a way of saying, “It’s not my problem.”

And, frankly, anyone who says this is also saying, “I'm okay with sexism. I'm okay with inequity.”

Because the numbers are unacceptable. According to a 2016 survey produced by the National Venture Capital Association and Deloitte Consulting, women make up just 11 percent of partners at venture investment firms. And of the $60 billion in funding the industry disbursed in 2015, female founders received just 7 percent.

Changing these numbers will take hard work. But it starts with a simple shift of perspective and priorities. Instead of saying, “It’s a pipeline problem,” say, “What can I do to diversify my network?”

One way to help jump-start this new perspective is to make sure all investors and operations people at your firm get unconscious bias training.

Another is to invoke what the NFL calls the Rooney Rule — its policy that requires teams to interview minority candidates for head coaching and other high-level operations jobs. While this policy does not incorporate explicit hiring quotas or mandates, it does ensure that organizations broaden their candidate pools. Whenever you are recruiting new partners, associates, principals or EIRs to your firm, make diversity an active part of that conversation.

Similarly, when your firm produces content, hosts conferences and other events, set internal diversity goals for both speakers and attendees. I’m personally proud of the 50/50 gender balance commitment for the podcast I host, Masters of Scale.

Find meaningful ways to support third-party organizations that are focused on increasing the connection between investors and underrepresented entrepreneurs. This could be through sponsorships and event collaboration, or longer-term engagements.

And don’t just confine your efforts to your own firm. Work with your portfolio companies to foster more diversity, too. For example, encourage portfolio companies to commit to recruiting women or other underrepresented minorities as an independent board members within two years of funding.

These are just some of the things we’re doing at Greylock to address the imbalances that keep our industry from being more equitable and productive. True parity won’t come overnight, and it won’t come without sustained effort. But as we continue to expand and improve on our tactics for diversifying our firm, we know that we will achieve the inclusiveness we aspire to. And we know that our investment in this effort will ultimately bring great returns.

Melinda Gates is a businesswoman and philanthropist. She is co-chair of the Bill & Melinda Gates Foundation. Reach her @melindagates.

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