Play a game of word association with anyone and say the words, “venture capital,” and I bet you would get answers like “sexual harassment,” “gender discrimination,” and “bro culture.” That’s because the dominating headlines of late have been about powerful men in venture who sexually harassed women at their firms or at startups looking for funding. In 2017 alone, we saw at least four high-profile male VCs leave their venture-capital firms in the wake of accusations of harassment or misconduct.
It’s appalling. And I commend the brave, unselfish women who are speaking up and challenging the offenders. Fighting back is hard and bruising. These women are affecting change in a 72-year old industry that sorely needs a work-culture and diversification overhaul. I also applaud the amazing group of female VCs who are spurring systematic change on all fronts with “All Raise” – as profiled in Tuesday’s Forbes Midas List cover story.
That said, I’m concerned that good men and a fundamentally vibrant industry is being painted en masse as broken and full of bad actors. This characterization has damaging unintended consequences for both the men and women who work in venture. I was motivated to write this piece for one simple reason: Acknowledge that venture, when done right, is at its core a meritocracy. We need more and more women to join our ranks and not be repelled by the industry’s “boys club” image.
The Venture Brand
Venture is not that big. In 2017, the total value of VC investments in the United States amounted to approximately $84 billion according to Pitchbook and the NVCA. The market cap of a single company, Apple, in comparison is roughly 10x larger at $860 billion.
Statistically, female representation in venture doesn’t look good. Gather 100 VCs from the industry’s top-100 firms and, on average, only 8 of us will be women. More specifically, of all the partners at the world’s top-100 venture firms who are decision-makers, lead investments, and serve on boards, only 8% of them will be female according to the latest figures from Crunchbase published in October 2017.
Venture has an outsized brand footprint. That’s because the industry powers cutting-edge innovation and finances some of the most exciting names in the world. VC-backed household names include: Amazon, Apple, Airnbnb, Facebook, Google, Tesla, and more.
A brand is simply a set of rational, visual, and visceral associations that are conjured up when you think of an entity. You think “safety” when you think of Volvo. “Family fun and Mickey Mouse” when you think of Disneyland. And now, sadly, many people think “sexual harassment” when they think of venture.
With that as backdrop, it’s important to pause and take stock of what venture does right.
A Decent Majority
I got lucky. I won the proverbial lottery when I stumbled onto an opportunity to join Morgenthaler Ventures in 2007 as a summer associate when I was still in grad school. I don’t have the exact number back then, but I can say sincerely that I only knew of seven female general partners who invested in tech startups at the time.
Morgenthaler Ventures will be celebrating its 50th anniversary this year. It was founded by David Morgenthaler, a World War II veteran, visionary, and gentleman who passed away at the age of 96 two years ago. The firm’s investing partners, including Gary Little, Gary Morgenthaler, Bob Pavey, Hank Plain and many others supported me as I learned the ropes in venture. As a testament to the firm’s culture, I was promoted from associate, to principal to a full partner on par with the longest-serving partners at the firm in 5 short years based on performance alone. It was a true meritocracy. The firm had set up clear metrics that needed to be met for promotion. And it delivered on its promise.
I currently work at Canvas Ventures, a boutique early-stage VC firm with my fellow general partners Paul Hsiao and Gary Little. As founding managing members of Canvas and currently investing out of our $300-million second fund, we are proud to say that we have deployed approximately 30% of our capital in companies that have female founders or CEOs since the inception of Canvas in 2013. That compares to just 15% of all venture-capital dollars going to female founders in 2017 industrywide, according to Pitchbook. Female founders and CEOs in the Canvas portfolio include: Stephanie Tilenius of Vida Health; Shan-lyn Ma of Zola; Kerrin Mitchell and Madeline Duva at Fluxx; Laura Safdie at Casetext; Ariana Huffington at Thrive Global; Kathryn Retzer at 11 Honore; and two female founders and CEOs at two yet-to-be-announced Canvas portfolio companies. [Update 4/10: one of the founders can now be named as Aneeqa Khan at eporta.]
By the way, investing in women pays off, quite literally. Our portfolio companies with female founders are among our top performers at Canvas, both in terms of aggregate returns and as a percentage of companies building value. That jives with industry research that says businesses perform better when they have greater gender and ethnic diversity.
Looking at the industry as a whole, I believe the majority of male investing partners are hardworking, upstanding people. There are so many who I admire -- not only in my places of employment, but also on the boards of portfolio companies, speaking panels, and at the NVCA (National Venture Capital Association). To name them all would take too long. Many men, and women, are working through the NVCA and its “VentureForward” Initiative. The team has done important work to frame the issue and produce tangible resources and recommendations to combat sexual harassment.
A Growing Cadre of Women VCs
In addition, sisters are doing it for themselves, as they say. Look at all the female-founded VC firms there are right now, including Trae Vassallo at Defy VC, Aileen Lee at Cowboy Ventures, Theresa Gouw and Jennifer Fonstad at Aspect Ventures, Ann Miura-Ko at Floodgate, Kirsten Green at Forerunner Ventures, Jennifer Carolan and Shauntel Poulson at Reach Capital, and many more.
And let’s not forget the growing cadre of female VCs at established firms, many of who are driving change through All Raise. Look at the numerous initiatives this group has launched in just six short months, including Female Founders Office Hours, Founders for Change, Women in VC Community Events, and more. [Full disclosure: I am a member of All Raise and friends with many of its cofounders, including Aileen Lee at Cowboy Ventures; Emily Melton at DFJ; Maha Ibrahim at Canaan Partners and others.] The founding members of All Raise include Jess Lee at Sequoia Capital, Sarah Tavel at Benchmark, Dayna Grayson of NEA, Rebecca Kaden at Union Square Ventures, and a long list of other women VCs.
Separately, a big thanks to Kate Mitchell of Scale who was one of the first to head up the NVCA’s Diversity Taskforce and has been seemingly everywhere in the press and at events putting a spotlight on the issue.
It also helps the venture and startup ecosystem to see more and more female investors on the Forbes Midas List. This annual list features the top-100 VCs based on their performance in the past five years.
Why It Matters
In my opinion, the pendulum has swung so far on one side of the issue that what’s right with venture is being overshadowed by what’s wrong. And that has unintended consequences: I know male VCs who are now afraid to invite female colleagues out to dinner to discuss work. Some are worried about hiring more women for fear of increasing the odds of their innocent gestures being misinterpreted as harassment. And what if LPs start to favor other asset classes that seem more “safe” from negative publicity?
I love that venture -- along with Hollywood, tech, manufacturing, government, the media, and other industries -- is being called out by the #metoo movement. We need to clean house. We need to force firms to be true meritocracies. We need to celebrate the women who have the courage to expose abhorrent behavior. And praise the women and men who are working on solutions to diversify, protect, and coach VCs and founders alike.
I’m also grateful to be a venture capitalist. I exalt at being in an industry that has long been an effective engine of growth, full of risk-taking, passionate individuals who love working with founders; who love having a small part in keeping the world innovating anew. And I’m eager for more women to join us in venture.
