Working Their Way Around Male VC DominanceMarch 6, 2015
By Jonathan Krim March 1, 2015 7:44 p.m. ET
It’s hard to believe, but the number of women at venture capital firms—the primary financial engines of Silicon Valley—is going from terrible to worse. Here’s what should not be a surprise: A handful of resourceful female investors and entrepreneurs are finding creative ways around the roadblocks.
During a recent lunch hour in a borrowed conference room in downtown San Francisco, a dozen women with the wherewithal to make early-stage investments listened to pitches from entrepreneurs (of both genders). Those seeking funding were given a rigid 20-minute time limit, which Sonja Hoel Perkins enforced with a large plastic timer borrowed from home, where she uses it to help manage her young childrens’ time.
Ms. Perkins is co-founder of Broadway Angels, a unique confederation of investors who, in Ms. Perkins’ words, “just happen to be women.” Unlike typical VC firms, funding syndicates or even investment clubs, Broadway Angels doesn’t raise investment funds nor invest as a group. Instead, it uses its collective networking power to attract entrepreneurs with interesting projects into the room. If any of the members likes what she hears, she can follow up individually with the entrepreneur to make a deal.
After they invest, the women play active advisory roles. The group’s members currently have early-stage investments in 35 companies, ranging from $25,000 to $1.2 million. Past investments have been acquired by companies such as Oracle Corp. and Equifax Inc.
Broadway’s 26 members are or have been venture capitalists, angel investors or tech executives. Ms. Perkins, for example, became the youngest general partner ever at Menlo Ventures in the late 1990s, at age 29. She remains affiliated with the firm. Other prominent members include co-founder Jennifer Scott Fonstad and Theresia Gouw, who recently split off from their respective VC firms to form a new one, Aspect Ventures.
In the complex language of gender politics in Silicon Valley, group members avoid harping on the overwhelmingly male dominance of Valley financing. (According to a Babson College study, the representation of women partners in 2014 was 6%, down from 10% in 1999. Perhaps more damning, only 2.7% of the companies that received venture funding between 2011 and 2013 had female CEOs). Instead, they prefer to let their individual résumés and their actions do the talking.
Occasionally, though, their shared experiences spill out. In an ironic moment, the group heard a pitch from a company using data-driven analytics to eliminate unconscious bias in recruiting, hiring and promotions of employees in the workplace.
“Can we give this to VC firms for free?” quipped Aileen Lee, a prominent venture capitalist who two years ago left her full time work at Kleiner Perkins to co-found her own VC firm, Cowboy Ventures.
Privately, the women talk about the opportunities that can be lost when a VC firm is all or nearly all male: If an entrepreneur’s target market is females, for example, no one in the room may instinctively appreciate the size of the business opportunity.
As VCs look to find great leaders, some men may have trouble believing that a female entrepreneur can make the kind of 24/7, full-on commitment as men. As a result, women are under pressure to be “quadrupally awesome,” said one Broadway member.
Another dynamic: Most VC firms require unanimity in their investment decisions; one dissenting voice kills potential funding. It’s easier to reach that consensus when everyone in the room has a similar perspective on life and technology.
In the words of Joanna Drake Earl, who advises entrepreneurs and is a partner in Core Ventures group, an early stage VC firm: “VCs are all about pattern recognition,” she said. They look for analogies, such as how a new company might be “like an Uber” for some new category. And they identify with certain founder personality traits. Without a diversity of views and experiences in the room, it is harder to break through the groupthink.
Mark Suster, a Los Angeles-based venture capitalist, basically agrees. “When you lack diversity as a decision making group,” opportunities are lost, he said. “There’s no doubt that there is a gender diversity problem in venture, and venture needs to fix it.”
Danielle Applestone, CEO of The Other Machine Co., which makes a 3-D milling machine, said that pitching to women investors “is a whole different atmosphere.” Having received money from Broadway Angels investors, she said she has found them “the most efficient, professional, and supportive group of investors I have ever met.”
Other women have found different paths. Joanna Weidenmiller is a former advertising, marketing and luxury retail executive with deep experience in China and even a stint at the FBI. She is now the founder and CEO of 1-Page Ltd. , which uses software to challenge job applicants to solve some of the company’s problems or achieve its objectives.
She raised some early rounds from VCs, but when it came time to seek larger funding she started getting a lot of rejections—complete with occasional doses of sexism—despite having several Fortune 500 companies pledged as clients. Finally, she made a bold move: She went public—on the Australian stock market.
It turns out that tech is in high demand Down Under. Stable and highly respected, the Australian financial markets proved the perfect way to raise money. She has used some of the proceeds to pay off her early investors. She has never looked back.
Regarding many VCs, she said: “They treat you a little bit like a girl wanting to play pro football.”
—The Upshot is a business column by WSJ bureau chiefs. Mr. Krim is the San Francisco bureau chief. Follow @jkrim