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At Top VC Firms, More Women Partners Doesn’t Mean More Women Funded

A Bloomberg analysis shows firms with female senior investing partners were not more likely to invest in companies founded by women

Raising her first major funding round for her then three-year-old shipping and data company last year, Shippo Chief Executive Officer Laura Behrens Wu came to an uncomfortable realization: pitching any of Silicon Valley’s rare female venture capitalists gave her more anxiety than pitching men.

“They do harder due diligence, making sure they’re not going to embarrass themselves,” Behrens Wu recalled. “Maybe they have a chip on their shoulders?” she asked. “I empathize with women VCs, in an environment where they’re constantly trying to prove themselves.”

She ended up raising her $7 million round from investors like Albert Wenger at Union Square Ventures and Jeff Clavier at SoftTech VC. While she has some money from women investors, it was at the earlier “seed” stage, where people typically invest a few thousand dollars with minimal commitment.

Observers who lament the lack of women at Silicon Valley startups have placed much of the blame on male venture capitalists, who mostly back companies started by other men. If more women worked as venture capitalists, the logic goes, they would encourage and invest in more women-founded companies.

A new Bloomberg analysis shows this isn't necessarily true, at least at 17 top venture firms. Those with senior women partners backed companies founded or co-founded by women at roughly the same rate as firms with no senior women partners. (The group of 17 top-ranked venture firms is based on $1 billion-plus public offerings or acquisitions over the last five years for U.S.-based portfolio companies invested in at early stages, according to data provided by CB Insights. "Senior partner" was defined as a U.S.-based partner eligible to hold a board seat and take a portion of the profits known as carry; because that information is often confidential, Bloomberg had to rely on data provided by the firms.)

And a Bloomberg analysis of the top 10 private companies founded or co-founded by women, ranked by Pitchbook by funds raised, showed that none had raised money from a female venture capitalist as a young company, defined as the venture stages known as Series A or B. They include Kabbage, Boston-Power, the Honest Co. and 23andMe.

The issue matters because of fairness, and because the venture business, where white and Asian men dominate, could be missing opportunities to fund more types of outstanding companies. “Attracting and backing the best entrepreneurs and businesses is the main reason” to encourage good representation of women venture capitalists, said Dayna Grayson, an investing partner at NEA.

Her firm is one of the top seven with at least one senior woman investing partner based in the U.S. NEA has invested in the most female founded or co-founded U.S. startups, with 30. Founders Fund also had a strong showing, with 19, as did Kleiner Perkins Caufield & Byers, with 13. However, these firms also represent some of the world’s biggest venture funds, with the most partners overall. Many firms declined to give the number of  their active current investments, making a comparison of their total percentage of female-founded startups impossible.

Some of the most female-founder friendly firms have no senior female partners, or in some cases, no female partners at all. When adjusted to compare the numbers of women co-founders to the number of senior partners overall at any given firm, Felicis, Lowercase, Index Ventures and First Round Capital had the highest proportion of support for women founders. None of those have senior women investing partners, although Felicis Ventures employed one, Renata Quintini, until she left for Lux Capital earlier this year.

Unlike Grayson, most of the women partners at the top firms back just a few women-founded companies, if any. In many cases, that is because the women partners are relatively new, hired in the last 18 months, as the case at Benchmark, Founders Fund and Sequoia Capital.

CB Insights, data provided by firms, Bloomberg research

But in some cases, women may be so concerned about appearing biased that they forgo good investments. Some women investors said gender was often on their mind in pitch meetings. One, who declined to be identified because of the sensitivity of the issue, described a nagging assumption that a woman backing a woman-led firm would call outsized attention to gender. If it failed, she believed detractors could speculate on whether the VC had treated the company too softly out of responsibility to advance women.

She’s not an isolated case. A 2016 study by Ethan Mollick of the University of Pennsylvania’s Wharton School and Jason Greenberg of New York University’s Stern School on crowdfunding campaigns showed that potential male funders didn’t care whether a project was created by a man or women. Two-thirds of women thought a project was better when told it was created by a man than the project created by a woman, even when it was exactly the same project.  

Cheryl Cheng, the sole senior woman investing partner at Blue Run Ventures, said many women investors are aware that people might draw conclusions about gender based on one or two women partners' individual results, upping the pressure. “It could be possible that women ask more questions, because we’re super paranoid we have to do a good job,” Cheng said, regardless of whether male or female founders are involved. She has led investments in four companies, including one led by a woman.

Some, especially younger women venture capitalists, say they believe strongly that their gender could help them find more valuable companies.

“I consider it a competitive advantage,” said Jess Lee, who joined Sequoia last year after years leading Polyvore, an online collage-based fashion company bought by Yahoo two years ago. Compared to her male venture counterparts, “I have an advantage in understanding the female consumer.”

Some women founders said they were determined not to highlight their gender, leading them to keep a distance from public conversations around women in Silicon Valley.

“For a long time, I didn’t want to be a part of any of the female stories,” said Michelle Zatlyn, co-founder and head of user experience at Cloudflare, a cybersecurity company backed by NEA, Microsoft and others valued at well north of $1 billion. “I didn’t want to be labeled.”

But Zatlyn changed her mind as news emerged over how badly many women in the technology industry had been treated, including the Gamergate harassment campaign against female developers that came into the public eye in late 2014 and the ultimately unsuccessful gender discrimination case brought by former KPCB partner Ellen Pao that went to trial in 2015. Zatlyn recently spoke on a panel of female founders organized by one of Cloudflare’s backers, Union Square Ventures.

“It feels like there’s a point of view that’s missing,” she said later, in an interview. Still, the best thing she can do to help other women is to set an example by succeeding with her business, she said.

At the top firms, male partners hold the most board seats at companies with women founders. In part, that is because they tend to have worked at the firm for longer than the women, and often hold more board seats overall. And some of those male partners specialize in marketing and consumer companies, where more women start businesses compared to other areas.

Jon Sakoda at NEA is one of them; he sits on the boards of Datavisor, Hearsay Systems, The Players’ Tribune and ThirdLove.

Typically, those venture capitalists say they aren’t seeking out women-founded companies. “I have never considered gender as a relevant variable in any investment I have made,” says Sakoda.

Many venture firms feel pressure to do better. NEA and USV back Casetext, a legal software company, and both mentioned that startup on their lists of female-founded companies. They cited the business’s chief operating officer, Laura Safdie. But Safdie unequivocally declined to accept the co-founder title. When asked about it, she noted that she joined the company in 2014, the year after CEO Jake Heller founded it.

USV’s Wenger persisted. “We have certainly always treated her as a co-founder, even if she might not say that about herself,” he said.

And many see hope for the future. Among the more established firms in the analysis, more women are  employed at the rank just below general or senior partner compared to a few years ago. And many newer firms led by accomplished women venture capitalists who back large numbers of women have sprung up in recent years, including Aspect Ventures and Cowboy Ventures. Another study, the Diana Project from Babson College, examined the venture universe overall rather than just top firms, and showed evidence that women investors are more likely to back women founders.

Birchbox cofounder Hayley Barna joined First Round Capital as a venture partner—one tier below the senior partners—last year, and says she believes female founders feel comfortable reaching out to her. She has led four investments so far, two with female CEOs.

When she was hired, the other partners talked to her about bringing a fresh perspective to the portfolio, while keeping discussion of gender to a minimum, she said.

“If it was the only thing focused on it would have been frustrating,” she says now. “It would have felt like tokenism.”

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