The Sex Question

Emily and I were at the theater last night watching Spring Awakening (just so so, not recommending it). The lead actress was being dragged by her mom to some shady doctor who would "fix her baby problem" and ultimately kill her in the process. And I am thinking, "why do women get such a raw deal in this world".

Maybe that was a freudian reaction to reading this comment on one of my Age Question posts during intermission:

I am a first time entrepreneur, I am a mother in my 40s and I have four children. My business partner, whom I have known and worked with for 20 years is also a mother in her 40s. We are as young, and new and open to ideas as anyone, without ANYTHING holding us back. We came to be “founding mothers” of our internet company after years of a combination of high level corporate America and the motherhood place of infinite possibility where we are now. I feel like my business partner and I operate on an exciting, healthy, smart, fresh slate. There is nothing that will get in our way, except, maybe - from what it sounds like - the fact that we aren’t guys in our 20s and everyone thinks we should be.

That hit me hard. I've been talking about age a lot in the past couple weeks and this woman's reading sex into my posts. And why not? Every founder in our portfolio is a man. That was pretty much the case with the Flatiron portfolio too (although I think there may have been one or two women founders in that one).

Here's my feeling on this one. Age may be a factor in the trajectory of an entrepreneur's business. I think, after posting, thinking, and reading on this topic for the past week, that young entrepreneurs may have a higher likliehood of home runs and older entrepreneurs have a higher batting average. It makes sense when you think about it.

But sex has nothing to do with how good an entrepreneur is, what kind of entrepreneur they'll be, and whether they'll get funded. The sad fact is that less than 5% of all entrepreneurs who walk in our door are women. With the kind of numbers we operate on, that's going to lead to very few getting funded. We'd have to do at least 20 deals, on average, to generate on funded woman entrepreneur.

I don't know exactly why that is. But it was the same with my class at MIT. Women were the minority at MIT in 1979 when I showed up on campus. But they were far more than 5% and I've heard they are close to 50% of the class now.

So it can't just be a technology thing. It certainly also has to do with the life decisions women are forced to make. Stop working and raise a family versus give it all to the career and find another way to raise a family, or possibly don't raise a family at all. These are agonizing choices and I've watched the Gotham Gal go through them, a number of times. She's going through this family and lifestyle versus career thing again right now. I think it's just one of many burdens a woman must bear. It's frankly a lot easier to be a man in the business world.

But that doesn't mean that women can't be great entrepreneurs. I can think of quite a few that have been. But there should be more. I'd like to fund a woman before we get to twenty companies and are done with this fund. But we are not going to compromise anything to achieve that. We are capitalists and we invest in the very best opportunities we can find. Let's hope one of them has a woman behind it before too long.

Comments

[Tom]

I actually feel like women may have an advantage in the tech industry and engineering schools in some cases, simply BECAUSE there are fewer of them, and companies / universities are looking for more diversity.

Perhaps not so much on the business side though, I don't know.

[Chris Saxman]

Fred, are you aware of Golden Seeds? This is an angel group, founded by a member of New York Angels, that invests only in companies with female CEOs and/or companies with substantial female ownership. Check them out at www.goldenseeds.com. They now have branches in Boston, CT and NYC and are working on one in Philadelphia. Perhaps some companies coming out of these portfolios will be appropriate for USV down the road. Cheers, Chris

[Karen E]

You go, sister! I love your reader's attitude. I would like to add something to the story. A year ago I joined a professional networking group in my field. I went to the schmoozy drinking events, but more importantly I joined committees and worked alongside other members, 90% of whom are women. The rewards came thick and fast. Unbelievable comraderie, sharing of strategy, learning lots of new stuff, and soon, of course, great opportunities. I was at a business meeting with all men yesterday, and realized that nowadays, in such a setting, I feel stronger and more confident by a mile. It's due to the support system I built with my own two hands - in the context of a loosely-structured, nurturing organization. But the other part of the story is that in the last decade, or less, companies in our industry *prefer* to come to the table with mixed-gender teams. It can be tokenism at times; but businesses know that customers come in all races, religions, and genders and that they're wise to show that they come that way too. It's a great time to be a woman in business. VC, I think your industry will catch up. (Of course, coding is always going to be geeky - and women are just inherently a little bit cooler, wink wink.)

PS - And don't you just love that Sue Shellenbarger? I'll link my name to her archive just in case anyone needs to catch up.

[rick]

Are women more risk averse?

[Leigh]

oh crap...you're kidding right? I see another NY Times article coming....

There are many many many articles, studies blah de blah that talk about the barriers to women in technology from birth onward (and i am sure there are some in there about difficulties starting tech companies and raising money as women vs. men - i'm just guessing)

And to suggest that women would have an advantage bc of this is like saying Barack Obama has an advantage going for the Presidency because there never has been an African American in the white house before.

Anyway, most recent study found here:
http://www.eweek.com/article2/0,1759,2129913,00.asp

[Greg]

After reading the comment you highlighted and ricks comment on risk aversion, it seems to me that you can have born-again entrepreneurs. People who hit a turning point in their life that makes them more willing to accept risk, that changes their priorities. Maybe it's not as obvious in terms of tech companies looking for VC funding, but I've certainly seen plenty of small businesses started by people in their 40s and 50s, empty-nesters, new moms who feel the business world isn't working for their new lives. More power to 'em all.

[Beth]

I don't think the problem is that women are more risk adverse. Quite the contrary, the number of women entrepreneurs has been growing at a much higher rate than their male counterparts (source: Catalyst), albeit from a smaller base.

I suspect we will see a lot more female led companies soon.

[Dave Hyndman]

"young entrepreneurs may have a higher likliehood of home runs and older entrepreneurs have a higher batting average." Love it. As a 41 year old entrepreneur that's a summary of the age issue that I can agree with.

[candice]

Umm, top comment dude.

I would say that -some- departments will love to have you in schools, others are pure and absolute hell to deal with as a woman. It's a culture thing. Having super-smart women professors is a good start. (RIT's now retired Margaret Reek was one of my best.)

But as for out in the business world? There is room for exactly one woman in any given group, and she has to make her own room. Not even two. And that needs to change.

(And while I'm on this rant) people need to stop assuming pretty girl = secretary, too. We can be programmers and engineers and entrepreneurs just like anyone else.

[Lloyd Fassett]

I too have been ruminating on the age issue since it hatched and started running around on this blog.

I think the data set is going to become an anomoly because it's from the last 15 years, not 150 years and it's from the rise of the internet as an industry. The Internet's impact is going to be much greater when it's more ingrained into other industries. I bet the evolution of new businesses becomes more like Andrew Carnegie's experience.

He had a deep understanding of the economics of railroads and new what steel meant over iron. There are going to be people with deep industry knowledge in their 40's and 50's who are better equipped to understand the impacts of the internet on industries. I think the older guys are going to come raging back with deep industry understanding and be enabled by cheaper software development and the young guys may not be more equally represented in the results.

Experience is going to count for more when the customer is better understood and served better from industry experience.

[proales]

It maybe 50% women at MIT but nation wide its more like 57% female -

http://www.usatoday.com/news/education/2005-10-19-male-college-cover_x.htm

[jim]

the praise for Spring Awakenings completely mystified me, too. i've never been more surprised by a standing ovation.

[Alex Bellinger]

Women's access to capital whether debt or equity-based is a topic I've been interested in for years. I recently interviewed Gita Patel of London-based Stargate Capital which set up the Trapezia fund (backed by major UK financial institutions) aimed specifically at female entrepreneurs. Gita's a sharp cookie and would only devise a fund if she thought it would make her money. It'll be interesting to see how it turns out.

[Philip Baddeley]

In the 80s, Julie could raise VCs funds and her husband (that's me) could not. Very few people are good enough to be backed by VCs - I guess I got lucky in the marriage stakes! We were young, with kids, we made tough decisions but just got on with it. There are so many guys who would love to be VCs funded. It was fun being with someone who made it look so easy. The funniest thing I remember about the 80s; there was always a problem finding a ladies rest-room near the board room. But what the heck, lots of people have much bigger problems to handle every day.

[Nataly]

Fred,
I've been reading your blog for years when I was investing with an early-stage venture firm in New York - this is my first comment, so you've struck a nerve. I've just left my nicely-paid venture job to start a company - www.workitmom.com, an online community and resource for professional moms. I am the breadwinner in the family and by becoming an entrepreneur full time - and not making much money at all - I've changed our family's life in a major way. I think that's a fairly strong testament to not being risk averse.

I think your posts raises a really important issue - why aren't more women founding companies backed by vcs? It's not because women are not good entrepreneurs - in our portfolio, we had 5 women running early stage companies - 1 will be hugely successful, 3 very successful, and one will do just ok - better performance, on average, than the companies run by men. (Now some are CEOs, not entrepreneurs who founded the companies, so it's not an entirely fair comparison.)

But I have a thought - here I am, someone with lots of vc connections, starting an online media company, and we've decided to not raise venture capital, but go with just angels instead. There are lots of reasons for this, but one of them is that we don't want to be forced to grow faster than we'd like - I am a mom, and I need to go at this at a good, organic pace that also works with my life and trying to juggle it all. Could it be that some women are choosing to start different types of companies than those that VCs would finance?

Thanks for raising this issue, it's an important one.

[Sharon]

-i couldn't agree with Nataly more. Focusing at the intersection of age and gender, I think a lot depends on one's particular financial circumstances and support system. I would suggest that its easier to be an entrepreneur in ones 20's simply because at that stage of life you typically have loads of time and energy without competing priorities. You can focus on one thing without an emotional tug a war. When I was an entrepreneur in my 20's I loved it, it was freeing and exhilarating, I could travel at a moments notice. I could pull all-nighters for deadlines and last minute presentation preps. There were few downsides to the risks I was taking -- there was just me to take care of and I was feeding my soul.

I am now an entrepreneur in my 40's and while work still feeds my soul, there are differences:

To start with, I have a family to support and nurture. So, like Cooper, while I am open to new ideas and opportunities --- I am also much more cautious about risk. I take calculated risks but don't "bet the farm" . I don't wish to live with so much uncertainty. On a practical level, I also need my sleep. I know that there is nothing to stop me in terms of opportunity, ability, ... what does stop me is the "time" factor. Available time is my scarcest resource. For example, my kids' school had a Mothers' Day tea for the Moms. I got a 2 week notice to attend. On that same day, at that very same time, i had a pitch scheduled that I had worked long and hard to organize. What do I do? Do I cancel the pitch or disappoint my kids? Or do I keep my kids home from school that day because if I couldn't attend, they would be the only kids (I have twins) whose Mom didn't come for tea. What I first attempted to do was approach the school and ask if they could reschedule the time. They said they could not. Finally a win/win solution was found where they scheduled a private tea for me to attend earlier in the same day, where the class sang me a song, I read a story, my kids gave me my gift they had made... and then I sprinted out the door to do my pitch! This is but one example of the myriad of juggling acts that working moms do every day. And then of course, kids get sick and your best laid plans have to be rescheduled at the last minute --- I have heard some mothers remark that its a full time job just organizing the family' s schedule, let alone get to work. Many women, if they have the financial freedom to do so, opt out--at least while the kids are younger. (And Yes, the New York Times did recently do a story on this subject! "After Baby, Boss Comes Calling" NYT, May 17, 2007)

Nataly, glad you posted and glad to "meet" you here on a VC Blog. Fred, thanks for opening up this line of discussion.... Sharon

[lucinda]

i'm an old (by fred's standard) serial vc-backed entrepreneur. i'm also a woman. so i know something about this topic from experience.
i posted in response at http://lucindaholt.com/Cereal%20Ceo/Blog/Blog.html, and thought i'd summarize briefly for this crowd. i think that the reasons include
- trust - it's hard for the men who are vcs to trust women, who aren't like them.
- culture - the vc game is very competitive with an in-your-face style that most women don't do well with.

[Kylie Sachs]

Another interesting stat related to the gender issue you bring up, Fred, is how few women control venture capital dollars. I am one of the few, and frankly can only point to two instances where I share the room with other women investors. It's really quite shocking to me. I think the figure is now 8% of VC partners/principals are women. I would love to think that there is no correlation between this statistic, and the number of women that get funded, but I think that would be naive. And I cannot tell you how many times I have gone to conferences, say where I work and get asked "Oh, do you do marketing or back office ops for them?" It's nice to say "Nope, I invest."

[Christy]

Women start businesses at two times the rate of men -- so it's not risk aversion. I think part of what it is is that most entrepreneurs have some experience in the field in which they're starting their businesses. Since VCs tend to fund biotech and IT, and since women are under-represented in science, women funnel their entrepreneurial energy into ventures that wouldn't put them in front of a VC. Med schools are now 50/50 and have been for a decade; other advanced degrees in the sciences are also making gains.

[Leigh]

everyone should go read lucinda's post.
she is dead on.

[Eric]

I am curious whether the entrepreneur pool is filtered a little by the time they hit their 40s. ie successful starts, good careers in other ventures, intranpreneurial business starts within existing established businesses etc.

How does your assessment compare on a per capita basis of available entrepreneurs/age and home runs?

[barry]

The point that needs to be made is that sex and age are definitely not a pre-requisite for successful ideas + commercialisation.

That recent NYT article, which I found somewhat annoying (+ perhaps that was its purpose) only passingly mentioned mindset. It was all about age - how young people were.

It appears that VCs generally are about financing the salt + pepper shaker not the table it sits on (metaphorically speaking), because its simpler, easier to control, and requires a different attention span - oh the same characteristics of youth!

How many of these individuals with spectacular successes (with the expectation of Bill Gates) outrank traditional business?

Why are there still significantly more people transacting off line than on line, in this not so youthful world?

Why have these young things not captivated the baby boomers on the same basis as their immediate contemporaries?

Maybe we older people prefer the table because you can do a lot more with it!

[Scott E]

Here is some data on the subject that you may find interesting:
- 5% of European Venture backed companies are led by women, but they generate higher revenue with less committed capital
- Looking at 8500 senior managers in high tech companies there is a steady increase in women among in each of the younger age ranges.

The visualization of this is here:
http://www.libraryhouse.net/blog/2007/05/16/younger-women-close-gender-gap/

[Simon Olson]

A few random thoughts.

It seems to me that the data set is skewed.

Software and Internet companies are what political scientists would refer to as a "vocal minority" in the sense that they tend to garner the most attention, but there are plenty of other kinds of companies.

In terms of the age issue, it may be that software and Internet companies are simply more accessible.

There are not many 18 year olds creating synthetic biology or regenerative medicine companies in their garages (and if there are and you are reading this, please send me an executive summary!).

As a venture capitalist, part of my job is to generate the highest returns possible for my investors.

I could care less what an entrepreneur's gender, race, religion, age, ethnicity, or sexual preference is.

Quite frankly, the pool of top entrepreneurs is so small that one would be remiss to limit the odds by discriminating (though I do not doubt that it happens).

Although it is definitely imperfect, the best thing about our capitalist system is the corrective effect of competition: if a venture capitalist is unwilling to back an otherwise qualified entrepreneur, there will always be someone ready to take his or her place.

[Jim Butz]

A few years ago, my partner was the President of the San Diego Chapter of the Forum for Women Entrepreneurs, an organization founded in Silicon Valley by women who thought that 3% of Venture Capital going to women was terrible. After a number of years, the number got to 7%, which is still pretty low.

During a networking event one evening, a woman asked a panel of investors why there were so few women funded. There was a long pause, and finally one one brave VC said that he sees hundreds of deals per year, but couldn't remember the last time a woman CEO presented.

Maybe things have gotten better over the last few years, but i still see few women presenting their opportunities. Clearly, it is not about lack of entrepreneurship. Just look at the "Entrepreneurial Thought Leaders Sessions" from Stanford (Now available on iTunesU). Roughly one-third of the presenters are women and they certainly have some great stories about their entrepreneurial experiences.

Maybe they are finding other ways of funding their startups?