The Ugly Truth About Silicon Valley's Diversity Problem

Tech companies like to say they are building the future. Do they think women won’t be there too?

The boys of Silicon Valley sure are busy these days: They've got secrets to disseminate on Secret, bitcoins to trade, and the very first season of their very own comedy, Silicon Valley, to stream! There's that whole digital revolution to seed, the thousands of jobs to create, the billions of dollars in market value to grow--all the stuff that enriches our lives in ways both trivial and profound. But while they've been changing the culture, they've been utterly blind to one change the culture has made all on its own: By 2043, the United States will be a majority-minority country. Meanwhile, women will be better educated than men, more likely to occupy professional jobs, and more responsible for an even greater share of consumer spending.

I bring this up because it seems strange that Silicon Valley would want to be increasingly divorced from our country's rapidly approaching future. Study after study has shown that startups with diverse teams fail less often and generate higher rates of return than companies managed by men alone. Companies that don't embrace diversity of race and gender, on the other hand, run the risk of becoming insular and stultified.

And yet men, and especially men who happen to be white and straight, continue to fill the vast majority of partnerships at top venture-capital firms and are the ones getting their startup ideas funded. "It's like an episode of Mad Men," says Jamie Wong, the founder of Vayable, a San Francisco-based travel website that she started in 2011. Wong notes that VCs she meets often talk about "pattern matching," or trying to invest in founders who remind them of other successful entrepreneurs. Her worry: "The pattern I fit is the receptionist."

Silicon Valley investors aren't supposed to think like midcentury Madison Avenue suits. They think about how we can move faster to a brighter tomorrow. They are people who spend a fair amount of time worrying about what my Internet service provider's failure to stream Netflix at the fastest rate possible might mean for the future of our democracy, or why my car can't drive itself yet, or why I have to put up with the inconvenience of pulling out a credit card to pay for something. Thanks for that, fellas. These questions matter a great deal to youngish, white, geeky guys like me--and even to minorities and women. Bravo! But when it comes to the diversity of your own teams and of the teams you back, you're falling behind.

Recently, the boys have been behaving their worst with women. Case in point: GitHub, a platform where people share and develop code, which has raised $100 million in seed capital while even garnering some press as "a great place for women to work." GitHub's founders even sponsored a speaker series for female engineers, Passion Projects, and installed a rug in the lobby that proclaimed, in giant letters, the united meritocracy of GitHub. The reality was, at best, more complicated; at worst, the slogan was simply a lie.

Starting around 6:30 p.m. on a Friday night in March, a GitHub developer named Julie Ann Horvath, the person behind Passion Projects, published a rapid-fire series of tweets alleging a pattern of harassment, intimidation, and gender discrimination at the company. "What I endured as an employee of GitHub was unacceptable and went unnoticed by most," Horvath wrote, adding that she hoped her decision to quit would serve as "a reminder that what looks good from the outside may be systematically fucked on the inside." It's not enough to just hire some female engineers, guys--it also helps to build an office culture that doesn't scorn them.

It's a sentiment worth contemplating, especially in light of comments made two months earlier by one of GitHub's earliest investors, Y Combinator partner Paul Graham. "We can't make these women look at the world through hacker eyes and start Facebook, because they haven't been hacking for the past 10 years," Graham said. This sounded sexist, but Graham defended himself by pointing out that 16 of the 68 companies in Y Combinator's most recent class have at least one female founder.

Sad to say, but including women 24% of the time makes Y Combinator a model investor. According to a study by Dow Jones, just 6.5% of venture-backed companies are led by a woman. And these numbers, embarrassing as they should be, don't even begin to tell the story of what it's like to be a female entrepreneur in Silicon Valley. "I know women who have been grabbed on the butt during pitch meetings, or who have had VCs profess sexual attraction and then pull out of the [investment] round when it's unreciprocated," says Kathryn Minshew, founder of the Muse, a careers website. Minshew is quick to add that most investors she knows, including Graham, behave professionally. She calls the bad eggs "a small but impactful minority."

Even the gentlemen tend to be kind of lazy: According to a study published earlier this year, researchers at Wharton, Harvard, and MIT played investors a recording of either a male or a female actor reading presentations from a business-plan competition. Study participants preferred the men's pitches over the women's by a margin of two to one--even though the scripts themselves were identical.

You'll find glaring disparities like this all over Silicon Valley once you start looking for them. This past February, two startups successfully raised funds for websites that offer formal-wear rentals. One has a female CEO and is called Little Borrowed Dress; the other is fronted by two dudes and is called Black Tux. Guess which one raised $2.6 million and which one raised half that?

I suppose it is possible that Black Tux is twice as awesome as Little Borrowed Dress. After all, it is guys who buy all those clothes, right?

Here's the good news: This failure is also an opportunity. "When people ask why I invest in diverse teams, I tell them it's because I'm going to make more money," says Adam Quinton of Lucas Point Ventures. He sees investing in women-led companies as an arbitrage play to get an edge over standard VCs. "If investing in diverse teams improves the probability of success and lowers the risk of failure, why wouldn't I?" he asks. Quinton has backed eight companies over the past two years, including the Muse, Minshew's startup. All have female CEOs.

Go ahead and point to all the big successes founded by white men, if you like. But given the inevitable demographics, do you really want to bet the future on them alone? In February, two top VCs--Jennifer Fonstad of DFJ and Theresia Gouw of Accel--quit their jobs and launched Aspect Ventures. They plan to use gender diversity as a selling point, investing in companies that target the hundreds of millions of female Internet users. Fonstad tells me the story of an all-male development team that built an app for finding babysitters but inadvertently designed it so that it was almost unusable for women with long fingernails.

That may help explain why, in the wake of Horvath's resignation, GitHub behaved almost admirably. The company's CEO apologized publicly to Horvath--no small thing in these litigious times--and promised to do better. For his part, Graham, the Y Combinator founder, published an essay acknowledging Silicon Valley's problem and organized a successful conference for female founders--with his wife (and fellow YC partner), Jessica Livingston. "Things are moving in the right direction," Minshew says. "I love the fact that we're having this conversation out in the open."

When Minshew pitches VCs, she generally begins by cautioning them to keep in mind that her product is for men and women who are often simply trying to find jobs, not big-score investments. "Most of you in this room haven't looked for a job in over a decade," she'll say, adding, "but you're not like most Americans." Indeed.

[Illustration by Brian Stauffer]

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  • Real change will happen once we stop using a language that puts men in a decision-maker/at fault position and keep talking about women as an underprivileged group that needs help. I don't want to be hired by a company because I'm a woman and they want to diversify. I want to be hired because I'm the best at what I do.

  • Mike Peinovich

    OK, so women are totally equal, but then the entire office and culture has to be restructured to accommodate them. Which is it?

  • It's that the context should be equal. If currently, the office culture is so completely skewed towards one side in the first place, what harm does it do to move towards a more balanced office space and mentality?

  • i agree with nick. doesnt matter if your woman or man, if you play your cards right people will respect and admire you regardless naturally because your on a higher intellectual level. and that's just how natural selection works.

    Progress is NEVER made through equality, its made through ambitious individuals who deserve what they worked hard for. A shit coder is still a shit coder regardless of age gender or race. Each person has his own abilities and his own spot in the pyramid that corresponds with those abilities.

  • women can be in business, too! Yeah- we know that.

    I'd be more interested in hearing about motives. Are there any scientific studies that show a psychological resistance to funding start-ups led by women?

    Further - diversity is just a fact of life. I am for equal OPPORTUNITY. Not equality, which seems to be one of society's greatest misconceptions: the idea that everyone should be treated equally; no, certainly not. Rather, everyone should be given a fair chance to succeed. We are all individuals and no two people are the same. Sure, we're all human, but we are all unique.

    Work your ass off and play the cards you were dealt, everyone! I wish men and women the best in business.

  • I'd think it would be a more social resistance rather than a psychological one...esp with the study where the actors read from the same sheet that Chafkin pointed out

    Agreed about the equal opportunity bit--the grounds should be fertile for everyone to do their thing.

  • Kathy McEwen

    I will add one more comment. I think the use of the word hacking is derogatory within the context of high tech businesses. Hacking implies a lack of system development, software engineering, network engineering and overall higher standards of solution development. Just writing the bits of code to make something work are never enough. Being able to write those bits of code, and do all the other bits too...well, that is, perhaps, what creates the difference between Hackers and Engineers. We engineering ladies are many, and capable of enormous engineering feats that may benefit all of society as well as our personal selves... and still be able to birth our babies, care for them, and our families, while pursuing the rat-race of industry. Men do the caring and family bit too...and they are very capable at the rat-race of industry. Perhaps we just need to change the race.

  • Paul Graham loves to use the term "hackers" because this is a specific culture among software developers and engineers. "Hackers" are the Zuckerbergs of the world. These are what Silicon Valley investors look for -- guys who tinker with things and break things like the law or accepted social conventions they think are more likely to disrupt a market. I don't think it's necessarily a bad word. "Hackers" may become criminals or successful CEO's, but they are most certainly less employable than "engineers." I think that someone like Sophia Amoruso from NastyGal has a "hacker" mentality, and she's not an engineer.

  • Kathy McEwen

    How many women have started high tech businesses to compete head on with the largest of corporations in the internet, mobile and cable/broadcast domains? How many have succeed in having those industries to follow standards based on their patented innovations? How many of those still have actually been as hugely financially successful as her male peers of the industries?
    Not many... is there even one?

  • The thing that annoys me about comments like "We can't make these women look at the world through hacker eyes and start Facebook, because they haven't been hacking for the past 10 years," is that most of the engineers funded by YC and other VCs have not been hacking for 10 years.

    Many of them have been hacking for maybe several years, but they know how to sell themselves as someone who looks like or talks like a hacker, then when they actually get funded they start learning on the job- while on a VC's dime. It is so easy to declare yourself to be an "expert" in something technical when you have only superficial knowledge or experience. The business people you are pitching your idea to arent technical enough to know the difference. It's a problem that competent women and minorities are overlooked, but also a problem that too many under-qualified and often incompetent men who "fit the profile" are let in.