Women in Venture Capital

I do my best to promote female venture capitalists both to entrepreneurs and technology event organizers in Silicon Valley. There remains a real gender imbalance in this seminal financial services cottage industry that acts as the catalyst for so many industry changing business ideas. Women Venture Capitalists add to the diversity of decision making that enrich the entrepreneurial ecosystem however I would argue that this is probably not a career that most mentors, teachers, guidance counselors or careers offices at educational organisations may be equipped to talk to or shine a spotlight on. Consequently few women either ‘stumble into’ this career after a few years of working on related areas or are ‘discovered’.

After a year of intense investigation of the gender imbalance of female entrepreneurs raising venture capital, I noted how much value female Venture Capitalists were adding to the startup ecosystem. At first glance the statistics seem to point to a co-relationship between the growth in number of women VCs and a greater number of women entrepreneurs being funded. Apparently this is not because female vcs favor women entrepreneurs, in fact in some cases it can be the opposite. Due to their small numbers in the industry, they often will put female startups under greater scrutiny to ensure they are not criticized for bias. The National Venture Capital Association in the United States estimates that approximately only 11% of managing partners in venture firms are women. As venture capital firms need to minimize risk to establish significant returns for their Limited Partners (LPs), venture capitalists can be very conservative. Some Venture Capital funds also follow pattern matching rules both in how they view deals, entrepreneurs to try to achieve the greatest success in their investments. In the US most venture partners come from an engineering, bio-technology & physics background. The unfortunate lack of women in the ‘resource’ funnel contributes to the lack of female partners. Although in the last couple of years there has been a big push to educate and attract young female students to technical subjects, there remains a significant gender imbalance approx 19% females in US. Female vcs often say they have to be comfortable being the only women in the room at meetings. They often have better relating skills and report that many entrepreneurs (both male & female) will disclose things that they have not discussed with male partners. Some male VCs also acknowledge that their female partners often spot issues or potential in deals that the men around the table miss. This can be referred to as ‘female intuition’ or sensitivity which obviously serves them well in assessing risk and potential success.

Personally I find that female venture capitalists are incredibly smart but possibly not as ego driven as some male partners. As a result they often perceive and share incredibly interesting aspects of the venture process and the ‘conversation’ around the investment process can then be much more balanced. Women entrepreneurs often report that they feel much more comfortable pitching to female VCs and are therefore more authentic with them. Authenticity and integrity are values that most VCs look for in entrepreneurs who are pitching due to the long relationship that will ensue if they invest. There are clearly numerous reasons why some women do not feel as comfortable and confident pitching to male VCs, the main one being and is often not spoken about, despite being the most obvious, is quite simply that they are the opposite sex. All the issues related to this dynamic are therefore present in the room, whether acknowledged or not. The venture capital industry is a cottage industry and therefore is not like other financial industries. One successful VC in the valley said to me that when filling in forms he can’t relate to putting Financial Services as the industry in which he works. Venture capitalists not only provide capital to startups but also domain experience, knowledge, networks & support. In fact creativity, courage and perceptivity are qualities that not only entrepreneurs need, but also venture capitalists. This helps them achieve real success with their investments. Female venture capitalists often have these qualities in spades and lack of ego can ensure that their investments can often be more successful.