Plenty of buzz has been tossed around recently about the lack of female entrepreneurs and technologists in the startup world. Although women own 41% of privately held companies in the US, only a mere 3-5% successfully obtain venture capital. While we’ve heard many of these shocking statistics about entrepreneurs, less has been written about the equally pathetic gender ratio on the investor side of the table. As Fred Wilson recently declared at a Change the Ratio event in New York City, “the VC industry is not just dominated by white males, but arrogant and obnoxious white males”.
According to The Diana Project
, only 10% of VCs are female. Even the ones who successfully break into the industry are three times more likely than their male counterparts to be employed in entry and mid-level positions. Few are able to rise to a position where they make a material impact on investment decisions. These inequalities persist despite the fact that females make up the majority of the US population and drive the bulk of consumer decisions. Even in the internet world, female internet users already outnumber male users and will make up 51.9% of the total online population by 2011
. Fred Wilson noted
that many male VCs lack the domain expertise to evaluate the business potential of companies that cater to female interests, such as fashion or beauty. Given these unique and growing opportunities, why are there so few women investors?
As everyone knows, breaking into the VC industry is tough. Positions open rarely and the ones that do are usually filled through close personal networks. Behavioral research has shown that we tend to favor people who are similar to us. Those making hiring decisions are likely to bring on interviewees with similar characteristics as themselves, thus perpetuating the old boy’s club. Additionally, VCs hiring for junior roles typically look for two types of candidates: those that have successfully founded a VC-backed startup in the past or those coming from comparable analyst positions in VC, investment banking, or private equity. Since finance is a male-dominated field and few female entrepreneurs successfully raise VC funding, the supply of females who fit these two templates is small. In technology sectors, the percentages can be worse due to the dearth of female engineers who launch high-tech startups.
Another factor hindering the entry of women into venture capital is a scarcity of role models in the field. We rarely catch a female name when we’re told about the heroes of the startup and VC worlds. What women need are models of success, such as entrepreneur-turned-VC Cindy Padnos
who launched Illuminate Ventures last year with the message that more women in the VC business means more capital for female-owned businesses. Padnos analyzed the performance of women-led startups and discovered that women use less capital in running their companies and are more likely to succeed, yet they capture just a sliver of the venture capital pie.
With this in mind, Girls in Tech
, a multinational non-profit dedicated to promoting women in technology, is hosting a panel in NYC featuring women who have successfully broken into the VC industry and can serve as role models for those looking to do the same. While no panel can single-handedly solve a persistent gender gap, we hope to start educating ambitious young women about the possibilities of a career in venture capital. Featured speakers include Peggy Wallace of Golden Seeds, Sarah Tavel of Bessemer Venture Partners, Melody Koh of Time Warner Investments, Christina Cacioppo of Union Square Ventures, and Sylvia Kuyel of Starvest Partners.
Girls in Tech – Entrepreneurship and Venture Series
Women in VC Panel, 11/10/10, 6:30 PM
- A Peek Inside the NYC Venture Capital Ecosystem
- Creating a Business Plan that Successfully Raises Capital
- The Co-Founder Myth: Why You Might Not Need One, Especially in NYC