Why VCs don’t invest in women led startups – my perspective

I just noticed lots of tweets citing me as an example of VCs investing in women led startups, and felt that I had to speak up about the issue. First of all, some VCs do invest in women led startups and don’t distinguish between women and men leaders. The VCs who funded SlideShare for example. Venrock has a history of funding women. Specifically, for David Siminoff and Dev Khare who funded SlideShare – a woman leading the company was never an issue. David Siminoff has funded other women as well, e.g., Lisa Stone from Blogher (I knew about that when I met him, and it did influence my going with Venrock). All our angel investors, Dave McClure, Hal Varian, Ariel Poler, Saul Klein, Mark Cuban – none of them cared one way or the other that SlideShare CEO is a woman.

So note to women entrepreneurs – there are VCs out there who will fund you. My biggest takeaway – look for a history of funding women. If someone has been a VC for 10 years and has never funded a woman, chances are they will not fund you. If a VC firm cannot speak of women entrepreneurs they have supported, take that as a sign and move on. If you find out that they have replaced their women founders as CEO’s, take that as a sign and move on.

In looking for funding for SlideShare, there were a few VCs who I knew after one meeting – that they would never fund a woman. In looking back, what was common to these VCs? I don’t think they understood the leadership style of women. Women can have a different leadership style and if you don’t understand that style, it can be a blocker in funding women. I felt this time and again – they don’t how I operate, how I lead. I think they felt I was weak, when it was just a different style. I don’t think they were against women CEOs, rather it was the particular leadership style they did not want to fund.

This is something I know through my psychology background as well – men and women can have different leadership styles. Culturally, we are sensitized to identifying a male style as a leadership style. And VCs in particular, seem to most understand leadership styles of 22 year old, male Stanford students (yes, I am stereotyping here :-)).

Having said that, I want to emphasize that overall I don’t feel discriminated against. I know that statistically speaking women have a lesser chance of getting funded. But I also have lots of male entrepreneurs friends – it can be hard for them as well. And some of the stylistic biases can operate against them as well.

Women Entrepreneurs: there are VCs out there who do fund women. Look for them. Look for a history of funding women. The best way to predict the future, is to look at the past. Ask them for a list of women entrepreneurs they have funded.

45 thoughts on “Why VCs don’t invest in women led startups – my perspective

  1. Great perspective Rashmi – and thanks for bringing up the organizational and cultural psychology; that’s integral to understanding the reasoning behind some of the decision making.

  2. Why not make a public wiki, where this particular behavior of VCs is logged?

    It would encourage more VCs to fund women entrepreneurs.

    Could also link it up with CrunchBase.

  3. I concur entirely. In my experience, they also don’t understand “women’s markets” except in the context in which they have encountered women (typically mothers and wives; occasionally powerful community leaders and executives).

    You say you don’t feel discriminated against, although you do detect an aversion to the leadership style because it’s not that of a “22 year old, male Stanford student.” I can understand that.

    My experience was less about discrimination and more about what felt like a lazy way or just undeveloped ability to manage risk. If they were going to lose on a deal, who could fault them for investing in a blue-shirted khaki-pantsed Stanford or Harvard grad? It was simply a bizarre way to manage reputation risk associated with losing deals.

    I agree, for me, it didn’t feel discriminatory so much as just plain old frustrating. “Are you dense?” I wanted to say. Or, “Here, let ME make the investments; you seem incapable of understanding any business model that hasn’t already been understood by someone else.” Yes, it’s true; that’s neither protective nor nurturing, and certainly it’s not kind. But it’s an honest description of my frustration level!

    I’m glad you point out the heuristic of “if it’s not in the cards, move along, but don’t give up.”

    • To echo Jessica Margolin –

      I wonder if women entrepreneurs are more likely to be mature with industry experience ceiling effect) and therefore more aware of the vulnerabilities of the established business model.

      I’ve certainly had my “alice in wonderland” moments when a VC tells me that if I changed the plan to focus on traditional rev streams (which they understand better) when they are a)decreasing and b)are vigorously defended by market leaders (to the point of being willing to lose money to knock out small competitors).

      You really wonder why they keep banging their heads against the same brick wall instead of investing in the door hidden to most but visible to an experienced industry player.

      Maybe they just feel more comfortable with a guy who can write code but has no business experience, since they can lead him by the nose across the bridge to nowhere.

      Katherine Warman Kern

  4. @jessiac, Yes, it is a lazy style. Though its partly informed by the victories they have had themselves, or have seen other VCs have. Its also self-perpetuating. You see some victories, so you try to do same thing and cycle is perpetuated.

    I think being an entrepreneur is hard in many different ways. And this is just another of those obstacles you have to across. There were lots of other advantages we had in fund raising (e.g., SlideShare already had traction).

    @gubbi I do think past funding behavior of VCs is one of the big things you should evaluate when talking to them. I don’t personally have time to track this. Maybe you should speak to someone like Adeo Rossi of TheFunded?

  5. If you put the question of whether VC’s are or are not funding women founders in their efforts to build startup companies and ask how many women are out there founding startups then compared the backgrounds of the founders who get funded then some interesting patterns might emerge. The startup community as a whole would certainly benefit from having more women founders AND more women founders who get funding. As it is though, the larger problem seems to be that there is a long line of male founders and very few of the female variety. I would love to hear your thoughts on what could be done in this area too.

  6. Candid post, but I disagree.

    VC’s look for people who dont see themselves as victims. It is possible that the sentiments expressed above made you come off as such.

    Broadly speaking, 90% of the VC’s just sit on their hands sounding wise, hoping they wont be fired before they get a big carry distribution. The remaining 10% make the investments and dont care about the color, sex or stripe of the enterpreneur. It is easy to tell the first lot, they are the ones who ask for meetings and more meeetings with nothing achieved.

  7. @bob I would agree that there are few women entrepreneurs. There are many reasons for that.

    Events / organizations such as Women 2.0, Women Who tech and several others are doing a good thing in giving highlighting women techies and entrepreneurs and encouraging more to join.

  8. @femalevc: I disagree with your disagree ;)

    but then again, since I’m an investor in Rashmi I’ve already stated my belief in her perspective & leadeship style (& I do NOT think she’s a victim).

    altho not all VCs act/think the way Rashmi suggests, I do believe many of them do (hopefully not most, but we are indeed the sheep that people say we are ;)

    I think it isn’t explicitly bias or sexism, just more likely people trying to pattern-match with what they think works best — and as noted, most well-known examples are nerdy white male geeks, or at least male geeks. again we are stereotyping a bit, but that’s only because it’s true ;)

    personally, as the son of a single mom & entrepreneur, I’m pretty comfortable with women as business leaders/owners, so for me it’s a familiar pattern that actually makes me feel more confident in the startup. I’ve only invested in 4-5 women entrrpepreneurs out of perhaps 40-50 tho, just because the population of women startups starts out much smaller. hopefully over time that changes.

  9. @davecclure

    Yes, I absolutely believe its pattern matching. VCs have experienced a particular pattern of success, and then tend to look for those.

    Its really not a woman specific thing. Its more about being familiar with certain patterns.

    And yes, there are lots of VCs who are open-minded and I have been lucky to work with many such ones (yourself included!).

  10. I have never met Rashmi, but I would bet money that @ female VC is neither female nor a successful VC. There was nothing in her articulate post that sounded victim-y. And half the idiots posting on The Funded are males who blame VCs for their lack of fundability; victim mentality is not limited to women.

    VCs like to bet on people with previous successes. Fewer women have successfully founded companies, so fewer of us get funded.

  11. This is a great issue and your advice to find investors that have invested in women before is spot on.

    However, if an entrepreneur walked into a room of VCs and asked them for their list of females they had invested in, that would probably be the end of the discussion.

  12. Victim thinking is believing in a prevalent structural reason for failure e.g, don’t call on a VC if he or she has not funded women before. By such reasoning, the Williams sisters should not have entered Wimbledon since it had no history of black women winning.

  13. Great post. I also think that the cultural identification with male leadership styles is a problem for both men and women. In other words, women can also have that same unconscious bias toward a ‘male’ style. That is something I have tried to watch in my own thinking.

    Also – @ female vc
    Not to downplay the Williams sisters’ achievements but.. Althea Gibson 1957

  14. Strongly disagree with female VC when she instantly branded the writer as having a victim mentality. Surely she’s only pointing out a well documented truth. I wonder (but don’t know) if it might be a function of age, as well. Like the old wingnuts who can’t figure out how we got a black president, or are appalled by gay marriage. Maybe the old VC’s will die off and a newer more enlightened brand will replace them.

  15. @colleen post – Agree, you cannot walk into a room and ask for list of women entrepreneurs. However, you can look at their portfolio CEO’s and make inferences.

    It can be a part of the background check for a VC.

    @female vc
    I get your point.

    However, from an entrepreneurs perspective, you want to go to as few VCs as possible (and only ones that are a good fit and likely to fund you). This is part of the “good fit” calculation IMO.

  16. @mcormick- touche re Gibson, I should have writ “scant history.”

    From an entrepreneur’s perspective, you *really* dont want to go to as few VC’s as possible. Your business plan crispens vastly as you pitch it. Getting financed by the first ones you pitch is a curse since you could both be way wrong.

    Raising capital is the beginning of the journey, not the end.

  17. i’ve been a VC since 1986. i’ve worked in three partnerships starting with men who were in their 50s and then in two other firms with different partners in each. in one firm, i had a woman partner but in the two others, the partners were all men.

    i’ve funded women led startups, hired women to run our companies when they needed new management, and i’ve also asked women to step away in several situations.

    in those 23 years, i have never once heard anyone mention the sex of the person as a reason to invest or hire or not to invest or not to hire.

    yes, there aren’t enough women in VC and startups. that is without question.

    but i do not believe it is because VCs are biased against women. i think it is because we need more women showing up at our door.

    for whatever reason, there just aren’t enough women in the VC business, starting companies, and working in startup companies.

    we ought to change that, but pointing the finger at VCs is not likely to be the solution.

  18. @Fred: seriously? you’re stretching my credulity there…

    I agree with you it’s mostly a [lack of] numbers game, and I also can believe that you and your partners aren’t biased, but to suggest the *entire* VC biz doesn’t have some amount of negative bias towards women entrepreneurs isn’t credible.

    I’ve been in the investing biz far shorter than u, but I see evidence quite regularly. not so much that it’s overwhelming, but certainly enough to be noticeable.

    agreed that blaming VCs isn’t the answer, but neither is denying it exists. I think Rashmi’s suggestion of historical diligence is quite reasonable.

  19. @fred wilson – was looking for gender stats on deals funded as a percentage of deals pitched. Perhaps you have such?

    @CB – re black president: If Obama had taken the advice on this blog (a) he would have concluded that the United States had no history of electing black presidents and (b) moved to a country that did. As it turned out, he stayed, contested and won even states that looked impossible.

    A key quality of successful enterpreneurs is to listen to everyone but think for yourself. You never know what you might learn where, but at the end of the day be prepared to make an independent decision. Shutting off options and following the herd as suggested here is a recipe for lost opportunity.

  20. @femaleVC your Obama & tennis analogies are way off base — in this case there ARE plenty of VC investors who fund women, but there are also many that have no such track record.

    while it’s arguable that the primary issue is a lack of very many women entrepreneurs in the biz, it’s also quite reasonable to suggest that you’re pissing into the wind trying to get capital from a group that has never funded women.

    on the contrary rashmi’s suggestion isn’t defeatist, it’s practical. I also wouldn’t waste time asking for seed-stage money from VCs who mostly do late-stage deals… track record diligence is just smart way to evaluate your options.

    seriously stop ripping on rashmi for very basic rational approach here. you’re the one being overly negative.

  21. (I tried to leave this comment a couple of days ago but the system doesn’t seem to have put it through, even though I’m now getting the updated comments sent in email).

    I had the experience of going to meet the partners in a VC firm. The one partner I met with before the partner meeting was very enthusiastic about what I was presenting. One of the other partners spent our 1.5 hours asking my male colleague questions, after which he would turn to me, and I would answer (most were technical and I was the technical person and builder of the product) while looking at the partner who asked the question. His eyes would remain, as I talked, on my male colleague. After doing this for the whole time, we left. I think the partner I was dealing with was really embarrassed. And my male colleague expressed shock. I was not shocked, and well.. welcome to being a woman in silicon valley. Most firms are not into games like this but it does happen regularly enough across lots of different kind of things including VC meetings that you know it’s there. In fact that particular firm hasn’t funded any women founders.

    What I learned across the board with VCs is that they work to some degree from their guts, and so feeling comfortable is key. If you talk like women are socialized to talk, you will make them uncomfortable .. like Rashmi says, it’s weak. So I changed my style to a male style and had much better results.

    I don’t really care about changing that world or getting people to accept other (typically feminine?) styles of interaction when it comes to funding. I’d rather just get the funding.

    Good for you Rashmi for getting funding. That’s the real change.. just building a company and being successful.


  22. I agree with Rashmi and I routinely see evidence of how and why. I do think it is largely a matter of investors self-selecting into certain leadership styles, and by extension, certain personality profiles; sometimes with damn good reason, but almost always because we are each able to appreciate what we are able to appreciate.

    Empathy is my thing, so I spot this stuff in the wild on a regular basis. Dave would too given what little I know of him. Female VC has a great point, but is missing the larger point. And Fred is a role model, but isn’t empathetic and I wouldn’t expect him to naturally scan others for such feelings (in fact I incorrectly thought he was an ass in a deal; sorry)

    This isn’t so much about time in the game; it is much more about paying attention, however it is that you choose to do so.

    Thinking about an investor’s investment patterns is never conclusive, but always smart: and the more you differ from whatever the prevailing norms… the smarter it is.

  23. Rashmi, you hit the nail on the head with this post. The VC industry is plagued with a predominantly male boys club attitude to leadership. This won’t change until we have more women VCs. And this means not just having 1 token female in a VC firm. You need at least 2 or 3 at a minimum, otherwise the lone female fights an uphill battle and often is unable to bring the different perspective to the firm because she is fitting into the male club. I’ve seen this in banking, in political office and in VC. When there is just 1 VC female on board, very often she has been selected because she fits in (ie.., acts like a male). If VCs truly want to broaden their skill base they need women on board who represent a female approach to business rather than selecting a female who represents the time-honoured male approach. Time for more Women VCs I say!!!!

    all the best

  24. To echo Jessica Margolin –
    I wonder if women entrepreneurs are more likely to be mature with industry experience (think: glass-ceiling effect) and therefore more aware of the vulnerabilities of the established business model.
    I’ve certainly had my “alice in wonderland” moments when a VC tells me that if I changed the plan to focus on traditional rev streams (which they understand better) when they are a)decreasing and b)are vigorously defended by market leaders (to the point of being willing to lose money to knock out small competitors).
    You really wonder why they keep banging their heads against the same brick wall instead of investing in the door hidden to most but visible to an experienced industry player.
    Maybe they just feel more comfortable with a guy who can write code but has no business experience, since they can lead him by the nose across the bridge to nowhere.
    Katherine Warman Kern

  25. We at thenextwomen.com regularly describe women founders who have received funding from angel investors or VC’s. A greater visibility of these women make it easier for the next generation of female founders to attract funding. We also publish research on the difference between women & men looking for funding. One of the reasons that women attract less funding is a lack of network; as soon as they are able to access this network, the chances of an ambitious woman to get funding are as high as the chances of a men getting funding.
    Last year we published a paper on women funding: http://thenextwomen.com/2009/02/20/report-women-led-businesses-and-venture-capital/ and we are interviewing a lot of women entrepreneurs how they have received funding
    In order to allow women entrepreneurs to become more familiar with funding, we organize investor panels, calles Funding & Pitching where female Pitch-preneurs can practice their pitches and gain an investor and referral network.
    Women also need to increase their aspirations of starting businesses and go for the route of funding; there are a lot of women who will bootstrap a business without outside capital much longer than is needed based on their business plan.

  26. The LearnVest presentation at TechCrunch50 just prove Rashmi’s point. Watch the part where the judges provide feedback. They completely don’t care about the product, the market and their feedback is useless. These dudes are probably the ones who will never invest in a female entrepreneur because they simply don’t care.

  27. I left a comment yesterday on this discussion, why don’t you approve it? I am on the board of AStia.org, founder of thenextwomen and really try to do something about your issue.

  28. Simone, i tried to leave a comment at the beginning of this discussion and thought it had gone into moderation.

    In fact.. for some weird reason the system lost it. Just recreate it. Would love to know what you think.


  29. Pingback: Labnotes » Rounded Corners 242 — Slow web

    • Whether we should or should not judge someone on gender – this is exactly what is being done. I recall when Obama said that all business loans granted to people are granted 98% to male applicants. Women were only granted 8% of all loans.
      Women are the real blacks of society no matter how society wants to deny that. I think men are not aware how much they automatically deny or denounce someone just for being a woman. They’re just used to it.

  30. Just food for thought:
    In research by Myra Hart, Harvard University, “Gatekeepers of Venture Growth: The Role of Women in the Venture Capital Industry” it was shown that VC firms with at least one woman in the partnership (not associate level) were 70% more likely to have a woman in the portfolio.

  31. Adding my 2 cents worth. I am a female entrepreneur in Asia, partnering with a male programmer. I have applied to 4 places for funding, and by the looks of it, I did manage to score some meetings (one in Italy) and a “polite decline.” I have not experienced the gender bias yet, but maybe it’s because I have avoided American incubators thus far?
    I believe that there are going to be a lot more female entrepreneurs out there (I am in the circle of one- but they might not necessarily set out to try to conquer the world), e.g. Indinero’s Jessica.

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