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Sheryl Sandberg’s new book Lean In is nothing short of therapeutic. It’s well researched, engaging, and funny. For those familiar with Sandberg’s TED Talk, Chapter Three discusses the disconnect between women’s likability and their success—and she uses the now infamous Heidi/Howard Roizen case to make her point.
Heidi v. Howard
In short: in 2003, two professors from Columbia and NYU ran an experiment. They took entrepreneur and venture capitalist Heidi Roizen and worked her story up into a case study for students to read. One group of students read Heidi’s story, while the other group got the same story, but with one change: Heidi’s name was changed to Howard. The results? The students who got “Howard” deemed him a likable person, but those who got “Heidi” believed her to be selfish and “not the type of person you would want to work for.”
The study just corroborates research that has shown that there is a “likability penalty” that successful women pay, while men enjoy positive correlations between their success and their likability. And as the Columbia/NYU study shows, even educated people can internalize these gender constructs without even realizing it.
The dearth of women in venture capital
Is that why there are so few female venture capitalists in the U.S.? Of the 25 most active VC firms in 2011, only 8% of their investment professionals were women. Nearly half of the firms had no women at all.
To get more clarity on the issue, I caught up with Heidi Roizen, now a partner at DFJ, and I asked her a very broad, general question: How do we get more female VCs?
“Do we need more female VCs?” she asked.
Somewhere, a jukebox record scratched really dramatically, making everyone in the diner freeze and look up in shock.
“You don’t think we do?” I asked.
“I know I’m going to be lanced for saying this, but I don’t necessarily think we do need more women in venture capital,” said Roizen. “I think the more important question is: are women entrepreneurs getting funded?”
Are women entrepreneurs getting funded?
It turns out: they’re not. At least, not at the same rates as male entrepreneurs. Currently, only 4-9% of all VC funding is going to women-led companies. But women are starting companies at 1.5 times the national average. While women-led businesses tend to employ fewer than five people, they accounted for 16% of all U.S. jobs in 2010, and by 2018, they’ll account for more than half of all small business jobs in the U.S.
So right there, I just gave away a big reason why VC firms tend to pass over women-led businesses: they’re small, which means they may not be the high-risk/high-growth opportunities that VC firms are looking for.
But there might also be basic structural reasons why women-led startups aren’t getting a larger portion of venture capital funds, such as the fact that most deals are the result of referrals from former portfolio executives and other people in a VC’s social network. Canaan investment analyst Lindsay Meyer writes that part of the problem is that oftentimes, networking events for VCs and entrepreneurs are subtly geared towards men with activities like skeet shooting and poker nights.
Another downside to having fewer women in venture capital is that you end up with fewer female board members. Currently, only 9% of board members in Silicon Valley are women. But studies have shown that boards that are comprised of at least 33% women consistently outperform market trends. Globally, boards that are more than 33% women have been found to generate significant positive financial returns.
And then there’s the basic reality that diversity brings a greater number of perspectives to the table. In Sheryl Sandberg’s book, she cites one critical example. While working at Google in 2004, she got pregnant with her daughter. She gained 70 pounds and had morning sickness her entire pregnancy. Every. Single. Day. If that alone doesn’t qualify her for a pat on the back, I don’t know what does. One day, on her way to a business meeting, she couldn’t find any parking spaces near the entrance of the building, so she was forced to park in the back of the parking lot—which meant she had to hustle her bustle to get to the meeting on time—with swollen feet and nausea. The next day, she marched (hobbled) into the office that Sergey Brin and Larry Page shared and demanded maternity parking.
They instantly agreed and said the thought had never occurred to them before. Sandberg admits that the thought never occurred to her either. And then she realized that all of the other pregnant women at Google had simply suffered in silence.
Women know what women want—this is why the venture capital community needs more women. A research paper from the Diana Project concluded that having more female VCs will naturally lead to more VC funds going to women-led startups. As the research paper notes, that’s not because female VCs are simply giving preferential treatment to female entrepreneurs. Rather, it’s because female VCs understand what female consumers want and need.
"Investors tend to invest in companies and products that they understand and want to use. The VC world is currently male dominated and we need more gender diversity to help more women's innovations see the light of day," said angel investor Deborah Jackson.
Heidi Roizen disagrees.
Gender blind investing?
“We fund quality people and we’re gender blind when we do that,” said Roizen, who agreed that there is definitely gender bias in some cases, but disagrees with the idea that male VCs cannot intuit female consumers’ needs. “Not everyone just invests in what they know. A good VC is someone who can put aside their own shopping habits to see promising startups. The way you fundamentally make money in venture capital is by investing in companies that are going to disrupt markets. Women control the majority of the consumer budget, it’s only natural that if you’re going to disrupt big markets and you need to invest in the products women want.”
The problem, she said, isn’t that we have too few women in venture capital, it’s that we have too few women in technology. As a member of the Board of Advisors of the National Center for Women in Information Technology, Roizen is looking to change that trend.
Too few women in technology
“It goes back to the supply chain. We don’t have more women in venture capital because women aren’t graduating with degrees in engineering and technology. If you want to be hired by a venture capital firm, you have to have a background in engineering or entrepreneurship.”
But then you have a chicken vs. egg situation. Do we have fewer female VCs and fewer female entrepreneurs getting funded because we don’t have enough women going into the STEM fields? Or do we have fewer women going into the STEM fields because there are fewer role models for them in venture capital and entrepreneurship?
Then again, maybe that’s why there are slightly more women in angel investing than venture capital. In 2011, some 12% of angel investors were women. That’s more than venture capital, but still a pitiful number.
In a recent post, 500 Startups founder and Silicon Valley loudmouth Dave McClure put the onus on women to start investing and create more gender diversity in the world of angel investing.
“STOP TALKING about what’s not working and start TAKING ACTION to create solutions — open up your checkbook, and write a check for your favorite startup,” wrote McClure.
Deborah Jackson took issue with the fundamental premise of McClure’s assumption that any woman can just dredge up a few grand to throw at a company.
“At the end of the day, women don’t own as much money as men. Women earn less than men, even women who went to the top business schools,” said angel investor Deborah Jackson. “So in order to be an angel investor, you need to be in a position to have enough financial security so that if you invest and the company goes under, you’ll be okay. Angel investing is something you should only do when you have your financial house in order. How many women are in a position to do that?”
Now the other chicken vs. egg situation: are women earning less than men because they’re more risk averse and don’t take chances on risky career moves, or are women voiding the risk of angel investing because they don’t make as much as men and can’t afford the risk?
Conclusions? Are there any?
We don’t need to assign blame to any one person or group, but there are very real consequences to not having female VCs, and if we don’t remedy the problem now, those consequences are going to bite us all in the ass.
So how did Heidi Roizen feel about finding out that her success makes her unlikable?
“It’s disappointing—it’s sad. But cases are two-dimensional representations of three-dimensional people. I would argue that the case might not be a perfect representation of me. I teach the case and students sometimes tell me, ‘oh, you’re much nicer than we thought you’d be.’”
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Joined Vator onOperating Partner at DFJ, board member TiVo and DMGT, teach entrepreneurship at Stanford. Co-founder/CEO T/Maker Company. Former VP WW Developer Relations at Apple. Stanford undergrad and MBA.
Joined Vator onFounder and CEO- PlumAlley.co, Founder- Women Innovate Mobile Accelerator (WIM), Angel Investor, Investor in Golden Seeds Fund 2, prior Investment Banker 20+ years including health care internet