This week, I attended a workshop convened by the National Academy of Engineering Committee on Women in Science, Engineering, and Medecine. The CWSEM Committee focused its efforts this year on entrepreneurial careers for women engineers and scientists.
Why are there so few women technology entrepreneurs? How can we encourage and support more women to start companies? Why is high-tech lagging behind other industries in gender equity in entrepreneurship?
One of the most startling datapoints that came out of the workshop, in my opinion, is a research finding by the Diana Project showing that a paltry 5% of all venture capital investments in high-growth ventures went to women owned firms from 1953 to 2001. The Kauffman Firm Survey, which performed a detailed analysis of 570 high-tech firms, found that 18% of those firms had a primary owner that was female. The data, however, found extremely few occurrences of women-owned firms with outside equity. In this universe of firms, male high tech entrepreneurs get 11% of total financing in formal equity, whereas women only get 1.6%. Ouch.
Why do women high-tech entrepreneurs receive so few venture capital dollars? The reasons reviewed at the workshop, which all have some support from various studies, are as follows:
– Women entrepreneurs tend to have smaller social networks, and their networks often lack the kind of breadth and diversity that yields most benefits.
– Women entrepreneurs have different motivations for starting companies than their male peers, including a need for flexibility that can lead them to choose to found lower-growth companies and therefore not seek venture capital.
– Women entrepreneurs experience bias and stereotyping and are less likely to receive funding for equal competence. Research presented at the workshop by my co-panelist Candy Ku of the Clayman Institute for Gender Research at Stanford showed that high tech entrepreneurship is construed in a masculine lens and that women are less likely to get funded for equivalent proposals.
All of these reasons are valid. I find that the bias one is the hardest to tackle, because it is often unconscious. One way to mitigate this bias, the same research suggests, is to have more women venture capitalists, ensuring a diversity of perspectives in funding decisions. Unfortunately, women venture capitalists are even rarer than women high-tech entrepreneurs.
Meanwhile, a male view of tech entrepreneurship is so ingrained that eminent venture capitalist John Doerr, in a public address in 2008, provided the following advice to would-be investors: “invest in white male nerds who’ve dropped out of Harvard or Stanford.” Not exactly a prescription for the diversity of ideas.
Are venture capitalists active in fixing the problem? Jeff Nolan, a former VC and well-known Silicon Valley blogger, put the issue squarely on the table recently, saying: “If our solution is that a bunch of white men, young and middle aged predominately, are going to solve the bulk of problems from here on out, then we will neither be very good at it on a global scale nor efficient as a society in lifting earning power and real economic growth across the board.” In other words, this isn’t just a women’s issue. It’s an issue that Venture Capitalists should care about, if they are truly looking for the best ideas and investments.
Can you name technology firms that have a woman founder and are backed by venture capital? Let’s ask these women entrepreneurs how they did it and what they learned. And let’s get VCs engaged in a conversation of change.