VC Needs to be Disrupted — by Women
By Rania Borgani
CW: mentions of sexual harassment
Happy Women’s History Month. Now, let’s get more women in VC.
Nearly all financial industries feature a lack of female representation, but the gap is particularly prevalent in venture capital. In the United States, only 11% of investing partners at VC firms are female with almost 75% of firms not having a single female investing partner. But increasing female presence within VC firms is a daunting task and would require many fundamental changes to the system itself and minimization of gender biases. Yeah, not so easy.
Homophily
Venture capital is a male-dominated industry plain and simple. This has long been the tradition and still remains true today. Given this ever-present majority of men within VC and their tendencies towards homogeneity (VC firms are all alike in terms of race, gender, education, and work experience), there is less impetus to interact with women and encourage their participation within a firm. Homophily, the tendency of individuals to seek out and interact with those similar to themselves, then becomes a ubiquitous phenomenon. Men continue to be hired or funded by a VC firm while women are left out on both sides of the equation.
Homophily also identifies itself as an issue within the networking arena. Networking is a principal feature of VC as it facilitates the meeting of contacts or finding jobs. But when most of the jobs in VC are filled by men and individuals tend to seek out others like them, then most of the networking exists between men who wish to socialize strictly with other men. Women are consistently put at disadvantage and do not benefit nearly as much from their networks as men do. Thus, not only do men promote the advancement of other men, they also ensure the predominant allocation of funds to male-owned startups.
Impact on Funding in a Male-Dominated Workplace
The past ten years have seen an immense increase in VC investments and the number of women-owned businesses has continued to skyrocket. However, the amount of capital invested in female-founded companies has barely increased since 2012. The lack of money does not speak to women’s inability to create a profitable company. In fact, in a study done by the Boston Consulting Group, researchers found that for every dollar of funding, startups founded and co-founded by women generated 78 cents, while startups founded by men generated only 31 cents. This study demonstrates that actually investing in women and promoting diversity is better for a VC’s bottom line. So, we must look at other factors for why disparities exist, such as gender biases. The intersection between race and gender must also be noted; of all funding raised from 2009 to 2020, Black women received only .06% while Latinx women received only .04%. Women of color are worse off than their white counterparts, emphasizing the importance of promoting gender and racial diversity.
Bro Culture and Women’s Perceptions
Gender biases play a large role in the lack of funding to women and lack of jobs. Another component are the interactions between men and women (both venture capitalists and those seeking investments) which quickly escalate into a hostile and predatory manner. This unsafe work environment in the field of VC and Silicon Valley is mostly due to this “bro culture”. Such displays of masculinity in a mostly male workforce can lead to sexual harassment which is a rampant problem within VC firms. Many firms look to sexual harassment training as a solution to the problem, which is a good step. But most of the harassment stems from the VC culture and homophily, both of which could be combatted by the increased presence of women.
Women also continue to be discredited while pitching. There is a consistent perception that women are less assertive and competitive than men and that they maintain mediocrity. However, women make up a significant portion of enrollment in top-ten business schools and despite the many barriers they face, there are actually significantly more women with the right background for a job in VC than there are female venture capitalists, according to the Women and Public Policy Program of Harvard Kennedy School.
Breaking Down Barriers
So how do we assure more female presence in VC and combat stereotypes and negative assumptions about women? There is no straight forward answer. But, one way is to promote women-owned companies, especially those owned by women of color. Another, is to increase visibility for female founders and investors as well as encourage women mentorship. The lack of female role models in VC creates damaging psychological and informational effects on women who wish to enter VC but don’t see a viable path. Highlighting these women and hearing them speak is one way to give women more access to venture capital. Joining organizations such as CWAVE that promote the advancement of women in VC, give traditionally underrepresented groups a leg up in the recruiting process, so they too can try to combat the existing gender biases. It is a hard battle to fight and one that is long from over, but even just bringing awareness to existing gender equity issues creates a new narrative full of women supporting women.