People can never land on a word to explain what is happening to women and minorities within venture. Are such founders overlooked or undersought? Underestimated and underrepresented? Marginalized? Discriminated against? Or just ignored?
The excuses used to justify these sobriquets are equally scattered. Women received just 1.9% of all venture capital funds last year because they are only building beauty and wellness companies; there is a lack of a proven track record; it’s too early, they are too risky, and there is a pipeline problem. Maybe she’ll get married, have a family and leave the business behind.
And Black founders raised 1% of venture funds because there aren’t enough of them pitching; they are a minority of the population and thus deserve a minority of the funds; their products and markets tap into something only their community can relate to; there isn’t enough traction, they aren’t qualified; or, as one Twitter user wrote, they aren’t “male, pale and from Yale.”
Ah, yes, this explains it all. Women are too emotional to run companies. One female founder told TechCrunch she heard an investor say he wouldn’t invest in a woman-founded company because “she was annoying.”
Men, on the other hand, are not annoying. They are competent and qualified, and, as we all well know, sexism and racial discrimination went poof after the civil rights and third-wave feminism movements. Since then, decisions toward people of color and women have been based purely on quantitative and provable facts. Obviously.
Indeed, investors’ fact-based due diligence often leaves out that women-founded companies have higher returns than male-founded ones. The rest of the data regarding bias in the venture industry is so nebulous that it’s hard to call much of it out. Without transparency, it’s difficult to determine exactly how many people of color and women are pitching, thus making it hard to assess how disproportionate funding to these groups truly is. There is a way, though, to pick apart some common misconceptions.
For one, women (especially Black women) are more likely to start a business than men (and continue to open companies in increasing amounts), meaning the idea that there aren’t enough women to invest in is simply untrue.
Many also believe women are starting companies mainly in consumer tech, beauty and wellness, but according to the 2017 and 2018 business surveys conducted by the U.S. Census Bureau, they are most likely to be concentrated in the healthcare and social assistance industries, followed by retail and food.
But last year, a sizable amount of the capital given to women-founded companies was to those that launched within the software industry, per PitchBook. In previous years, most funding to women oscillated between those in software and those launching in pharmaceuticals and biotechnology, where the number of female entrepreneurs is steadily increasing.
Another stereotype is that women launch “easy businesses,” not something “serious” like “deep tech” — as if any business is leisurely to start. Even then, though, is that enough? Lux Capital General Partner Deena Shakir noted that back in 1995, biochemist Katalin Karikó couldn’t raise money for her mRNA vaccine.
“Fast-forward to 2021, without her research, there would have been no hope for the COVID-19 vaccines,” Shakir told TechCrunch.
Even if women were only starting beauty companies, was Glossier not hailed as one of the most innovative direct-to-consumer businesses to spawn from the millennial generation? Recreating that billion-dollar success is what investors claim to look for when it comes to funding new founders, and that rush mentality led to a splash of capital in industries such as web3 and crypto. At least four Black women have been able to scale unicorns: Rihanna, makeup mogul Pat McGrath, physician Iman Abuzeid and Cityblock Health’s Toyin Ajayi. All of their businesses are within the sectors of either beauty or health.
Yet, women and people of color do not build products that “others” want, remember? Black founders, a group responsible for the invention of the potato chip, traffic signal, automatic elevator and folding chair, have not proven themselves as viable entrepreneurs, and neither have women, who created the fire escape, the dishwasher and Monopoly, for that matter.
Black founders have recalled pitching beauty products, for example, only to be told that the industry wasn’t big enough; when these founders pointed out that the sector has multibillion-dollar potential, investors suddenly said they didn’t understand the market well enough to be of help.
At the same time, women are also often told they are either riskier to bet on or that they are more risk averse than men. Research conducted by the Psychology of Women Quarterly found, at least in the workplace, women are not necessarily more risk avoidant than men, but that they are punished more for taking risks.
“Female-founded companies in the U.S. have increased by over five times in the last 15 years, so if anything, women are taking more risks when it comes to starting a business,” Emma Bates, the founder of Diem, told TechCrunch. “It’s worth noting that the way appetite for ‘risk’ is measured in previous workplace studies is often biased toward male-heavy risky activities, like ‘likelihood to go skydiving’ or [ … ] ‘would you ride a motorcycle without wearing a helmet?’”
Questions are another way investors subtly screen a candidate. Harvard Business Review found that women and men are indeed asked different questions by investors: Men are asked more questions about potential gains, while women are more often questioned about potential losses. Even the criteria by which investors judge women is a little skewed. DocSend found last year that when looking at the pitch decks of men, investors often spend more time analyzing the product. When it comes to women, they spend more time looking for who’s on the team.
Pointing to this, Christie Pitts, a general partner at Backstage Capital, said that many of the conclusions investors make about women and people of color are actually rooted in their own behavior rather than anything factual. Many investors also like to say that there aren’t enough women, for example, studying STEM or that they simply aren’t interested in technology. But more women are entering STEM fields, and though the industry is still dominated by men, the lack of women has more to do with barriers to entry rather than a lack of interest.
Nonetheless, there is always talent to pull from; for example, nearly 40% of Meta’s workforce is women. Saying that there are not enough women in STEM reveals an investor who hasn’t sought out the alleged pipeline before calling it a problem.
Then there exist strange loops. For one, women and people of color are ostracized for not raising family and friend rounds, even though the racial and gender wealth gap leaves these two groups at a disadvantage regarding access to substantial friends and family money. Or, investors claim they’re just nipping it in the bud. Heather Hopkins, who is building the dating app Hulah, said an investor once told her that they would love to invest in her company, but with her being a woman, they were “worried about the difficulties” she would face raising the next round.
Kerry Schrader, the Black female co-founder of the human resource company Mixtroz, said white male investors overlooked her two decades of experience in HR and told her that it would look better if she, then 52, stepped aside and let her 28-year-old daughter and co-founder helm the company. A 2018 study from Kellogg Insight found that the average tech founder is 41, and the average CEO of a Fortune 500 company is at least 57. Meanwhile, Eboni Jazzmine, a 25-year-old edtech founder, said investors tell her she is too young to start a company.
She recalled they once brought up that it’s almost time for her to get married and have a family; then, she’ll have no time to start or run a business. Never mind that Elon Musk has fathered 10 children or that Larry Page and Sergey Brin were 25 when they founded Google.
Actually, most entrepreneurs are married women. It is true that having children does change the trajectory of a woman’s career, though it could be argued that is because of abysmal parental leave policies in the U.S. If women were provided with the resources needed to care for a child at an affordable price, then the relationship between a woman and her career wouldn’t be so fraught after she becomes a mother.
Arguably, if an investor is so worried that a woman couldn’t run a business after starting a family, they would help her set up a company with proper parental leave and structure the business in such a way that it could function in her absence. It’s long been touted anyway that working mothers make for some of the best entrepreneurs because they have extensive experience in juggling responsibilities and managing egos.
Suelin Chen, the co-founder of Cake, said she has so many “war” stories of men telling her that mothers can’t start businesses or that being pregnant was “like kryptonite” to investors. “You can’t say you support women in tech without supporting moms,” Chen, who has raised nearly $9 million in funding and is the mother of two children, told TechCrunch.
On that note, investors also like to compare women to their own wives and mothers, usually as a way to insult them. Janice Taylor, the founder of Ahava Healing, said an investor once told her that if “my mom doesn’t understand web3, I’m not convinced you could know it either.”
“All last year, I was raising money for my crypto music company,” she told TechCrunch. “It was like 1950, and the misogyny and bias were the worst in web3.”
This goes into the conscious and unconscious bias part of an investor analyzing an individual and their company. A good excuse is always to say that a founder doesn’t have enough traction without exactly identifying what type of traction is sought or that a product is too niche, as if those markets aren’t scaleable; as if more than 50 million Squishmallows haven’t been sold for at least $19.99 a pop.
Investors know that by excluding women and people of color, they are leaving money on the table and, in a way, stifling entrepreneurship for generations to come. In a perfect world, as venture becomes more mainstream, the structures holding it in place must configure themselves to let in those long excluded. Realistically, one investor broke it down to Servane Mouazan clear as day: “Because Me Too was four years ago, and BLM two years ago, we’re looking for something else now.”
Looks like marginalized founders just have to wait for their plight to be trendy again.
This piece was updated to reflect the title of Lux Capital General Partner Deena Shakir.
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