Silicon Valley’s club of elite investors is getting more diverse. That’s unquestionably a good thing. The release of new data from All Raise, an advocacy group trying to recruit more women into the venture capital industry, suggested that more women are joining the senior ranks of venture capital firms at a steady clip.
Digging into the numbers, I worry that despite the friendly headlines, the true decision-making power at venture capital firms isn’t changing quickly enough.
First, the data. All Raise said that major US firms added 52 women “partners” or “general partners” in 2019, the biggest influx of women to the industry since All Raise began tracking. Firms added about 38 women to these roles in 2018.
But 65 percent of venture capital firms still have zero female partners. That number was slightly higher last year, at 71 percent, a reminder that while progress might be steady, it can be painstakingly slow in an industry where turnover is rare and excuses are common.
Partners at venture capital firms make decisions about the startups they will back and on whose boards they will sit. For a long time, the concern has been that this cloistered corner of finance would not only remain an all-boys club, but also that the products we use in the real world — the cars we drive, the media outlets we read, the food we eat — would reflect the biases of these men at the table.
That’s why understanding the power dynamics inside these firms is so crucial. There’s a profound worry among some of the women leaders I spoke with for this story that these stats are overstating the progress. Because it’s not just that the 65 percent number is, in the year 2020, high. It’s that even the 35 percent of firms that do have a woman partner might not actually be at this table.
Understanding this requires a little inside baseball on how venture capital firms work. The people who run a venture capital firm are legally called its “general partners,” who have legal responsibility for a fund and serve as fiduciary responsibility for the funds’ investors, or limited partners.
When you crunch the numbers, All Raise told me that only 19 of the 52 new investors added in 2019 were ranked as a “general” or more senior partner.
Again, that’s good. But the other 33 are merely ranked as a “partner,” a term that is widely known in startup circles as being not the same as a general partner. The increase in the number of “partners” is actually the consequence of the much-bemoaned title inflation in tech investing.
That’s not specific to women investors. Many firms have gone to lengths to christen all of their more junior investors as “partners” — rather than more traditional terms, such as “associate,” “principal,” or “vice president” — in order to connote seniority when these investors try to hustle for meetings with in-demand startup founders, for instance.
now that many VC firms call everyone a partner, it's become much harder for entrepreneurs to figure out who can make a funding decision.— Sam Altman (@sama) July 13, 2014
Some firms have gone so far as to name every investment professional on their staff — including the real “general partners” — as a plain old partner. That means some of the 33 additions may indeed be real “general partners.” But like so much of the opaque, public-relations-motivated venture capital industry, it’s impossible to tell what is real and what is not.
All Raise says it has taken pains to identify “female decision-makers” and that it analyzed the data to see who could “write checks, lead deals, and sit on boards.” But firms have an incentive to misrepresent this data to people and organizations like All Raise, too. These decision-makers on individual deals may not, in practice, control firm-wide decision-making, serve as spokespeople for their firm’s points of view, and, crucially, inherit the firm’s investment profits, or “carry.”
Titles have, in short, become meaningless. And that’s a threat to any real efforts to track, celebrate, or criticize Silicon Valley’s real progress.
“I would love to get to a place where there was a standard for reporting and [where] funds self-reported honest data so we didn’t have to eyeball,” Aileen Lee, founder of All Raise, told me.
Startup veterans I spoke with had different ideas for how to root out the non-partner partners that inflate Silicon Valley’s accomplishments. One possibility would be to track merely the general partners that all firms are required to report to the SEC when it raises a new fund, a strict legal requirement that would be a lagging indicator but would also eliminate wiggle room. Another would be to try to obtain data about how a firm shares its “carry” among its partners, although institutions treat that as a trade secret.
Having more women investors, no matter their rank, is certainly good for the industry in the long term. Today’s fake “partner” may be tomorrow’s real “partner.” But in the short term, I worry that title inflation does a disservice to the broader project of measuring the diversity in one of the world’s most important industries — and holding all of us accountable for our own track records.
Another unintended positive? Well, it should make you look even more askance on the 65 percent of firms that report zero women partners, of any stripe.
As one female entrepreneur put it to me: “You can’t get your shit together enough to even fake it?”