Investor Gender Bias - Fact Or Fiction?
A version of this article previously appeared on The Wall Street Journal.
The empirical evidence highlights the lack of women and minority founders in the startup world.
A 2012 Dow Jones' report entitled Women At The Wheel encompassed 15-years of data on venture-backed startups. During the period studied, only "1.3% of privately held companies had a female founder, 6.5% have a female CEO, and 20% had one or more female C-level executives."
In a similar vein, a 2012 study by the Kauffman Foundation noted that women account for only 10% of all the founders of high-tech startups.
I recently asked Tracy why she believes that women are so under-represented across the startup landscape. Her theory is that, "Perhaps it's because investors are (consciously or subconsciously) pattern-matching: betting on the people who look and behave like those they've seen succeed before, who are mostly male. As more female CEOs build successful companies with great outcomes, this should change. Making access to capital easier for women founders is part of what inspires and motivates me to win big with Tradesy."
Not only does the relatively paltry number of successful startup women impact investors' ability to pattern match, it also limits the number of inspirational role models for young women to emulate. This problem is exacerbated by the media's incessant focus on the same a handful of success stories (e.g., Sara Blakely of Spanx, Oprah, etc.), which serves to further diminish the perceived number of accomplished women entrepreneurs.
Thus, we not only need more female startup heroes, we need those women who have enjoyed success to proactively seek media attention. In too many instances, women are reticent to share their stories for fear of appearing to be a self-promoter. These women must overcome their reluctance so the next generation of female entrepreneurs can benefit from their mistakes and accomplishments.
Bias Beyond Women
To gain an additional perspective regarding the inherent biases within the tech world, I reached out to Don Charlton, an African American who rose from a childhood of poverty to become the founder and CEO of The Resumator. If you are interested in his compelling story, you can watch him tell it in this brief video.
Don noted that, "I always believed that metrics and accomplishments can outrun bigotry, sexism, racism or any 'ism' that might otherwise hold you back. But I do feel that it is sometimes harder for women and other 'atypical' entrepreneurs with no proven track record to be 'believed' at the critical startup phase."
Don encourages investors to consider the following questions when working with female entrepreneurs: "Do you believe a woman who tells you she can build a $100 million business even if she only generates $10,000 today? Are you more likely to believe that claim from a man?"
According to Don, "These are questions VCs need to honestly consider when searching for any bias in their thinking. We have heard the phrase 'glass ceiling' in the past related to women advancing in the workforce. I do feel there could be a particular type of 'glass ceiling' in the startup world – namely, VCs' belief in how large an unproven woman can grow a business because women don't pattern match with the typical startup leader."
Bring On The Female Investors
In addition to a lack of entrepreneurial women to fuel investors' propensity to pattern match, there is also a deficit of female investors. According to the Kauffman Foundation's Gatekeepers Of Venture Growth study, women account for, "less than 10 percent of high-level venture capitalists, and they have been leaving the industry at twice the rate of men."
If you assume investors are rational and their ultimate goal is to maximize their returns, it is fair to also assume they will seek the most promising investments, irrespective of the founder's race or gender. Thus, I do not believe there isovert or conscious gender bias in the startup world.
I asked Tracy if she has experienced overt bias and I found her response characteristically positive and hopeful, "I believe the startup community is mostly a meritocracy. It's not perfect, of course. Any growing sector is bound to attract some people with unfortunate biases. But the data-driven nature of startups neutralizes much of the gender bias that might prevent women from rising to senior positions in other fields. If you build a great product that customers love, and have the metrics to back it up, the startup community will celebrate and support you on the merit of that alone, regardless of gender."
Thus, women entrepreneurs (just like their male counterparts) can level the playing field by solving their customers' problems within the bounds of the resources available to them. When this is done efficiently and economically, investors will take notice and knock down your door, frantically hoping you will take their money, irrespective of your gender, race or age.
Follow my startup-oriented Twitter feed here: @johngreathouse. I promise I will only Tweet about startup stuff, not that killer burrito I just ate. You can also check out my blog for emerging entrepreneurs HERE.