Private companies have their work cut out for them with Goldman Sachs’s new ruling that will require companies to have a female board member if they want to IPO with the firm.
In the 2019 Study of Gender Diversity in Private Company Boardrooms, which Crunchbase coauthored with Him For Her and the Kellogg School of Management, of the 200 highly funded private companies studied, only 7% of board seats were held by women. Sixty percent of the companies had no female board members at all.
Further, only 4% of executive directors and just 5% of investor directors were women. Female board directors are more likely to hold an independent seat. Nineteen percent of all independent directors were women, and 29% of companies had yet to add an independent director. The path for women who seek board membership is often not the CEO/founder or investor track, but rather the seasoned finance executive or go-to-market executive who can bring operational experience to the board.
To better understand this topic, I spoke with Kelly Wright, an independent board director who has joined four private company’s boards in the last couple of years. Wright exited her executive sales role at Tableau in December 2016 after close to 12 years growing sales revenue from zero to $850 million. Her experience is instructive for women seeking out private-company board seats.
Wright’s board director roles didn’t come from placement firms. Recruiters said she wasn’t marketable. One reason for this is the first two people sought out for an independent board seat are often a current or former CEO, for the CEO coach role, or a current or former CFO to chair the audit committee. The role Wright fills is the go-to-market strategic executive, a growing but often not the most immediate need for a company looking to fill out its board.
Despite Wright’s role as a public-company executive at a multi-billion-dollar company with $850 million in revenue, placement firms sought a go-to-market person that had carried a multi-billion-dollar P&L. Even though some of the unicorn companies interviewing Wright for board roles had $100 million in revenue and were scaling to $1 billion, Wright claimed, “They wanted board directors who had directly managed upwards of $2 billion in revenue, which would scale them five years beyond where these companies are when they go public.” Wright went through the whole placement process, to find the board would select someone the board or the executive team already knew.
Wright decided it would be better to get to know CEOs and board directors directly. “My job is just to get the word out there to let people know that this is what I want to do in the next phase of my career.” Wright offered free advice and guidance. She reached out to VCs who were also calling, wanting to place Wright in operational roles. “In that first year, I probably talked to about 25 to 30 different venture capitalists,” she said. “The venture capital firms host CEO summits, CFO summits, go-to-market forums. They’re trying to help their portfolio companies. What’s the best way to scale? What’s the best way to build culture? What’s the best way to think about sales in different go-to-market situations?,” she explained. “And so I basically said, I’m happy to be on any forum. I’ll do any speaking.”
Wright spent close to a year marketing herself before joining her first board. She spoke to more than 50 private-company CEOs that first year. She has since joined four private-company boards, including Amperity, Even Responsible Finance, Lucid, and Fastly, which has since gone public. “Given how many companies I’ve spoken with, I’m pretty confident I have the highest failure rate of anyone in this board process,” said Wright of her experience in putting herself forward for private-company board seats.
According to the same study of private-company boards, 7% of board seats are held by women. Given the lack of female representation at the investor and CEO level, this is not surprising to Wright. Very few companies she spoke to had female board directors. Wright was the first female board director at all four of the companies she joined. One of the companies has since added its third independent board director, who is also a woman.
Wright declares the concern that there are no women is just not true. She could easily create a list of 100 names. They might not be CEOs and they might not have previous board experience. These pools for women are very small. A very high percentage of female board directors are first-time board directors, especially for private companies, because there’s just not enough of a pool of existing board members.
Her very first board service was as CEO of her first company. Her private-company board roles as an investor include Memphis Meats, Planet, and Zoox. Roizen is also on one public-company board as an independent for the U.K. newspaper group the Daily Mail and General Trust (DMGT). As an investor you wear two hats, one as a shareholder and one as a director, according to Roizen. The core role is what can you do to move this company forward. It can involve recruiting, fundraising, founder conflict, and more.
“For early-stage companies the key questions are how do I raise money, how do I get customers, and how do I hire and retain the best people,” said Roizen. Her advice to women who want to join boards is reflecting on how you can be additive to the governance and to the chance the company will become successful. “Are you able to help this company recruit key employees, or can you open your Rolodex and help them land customers, or is there channel development or other components of what the company needs to do that you have expertise in?”
Judging from Roizen’s experience, even when there’s a desire to bring diverse candidates onto boards, the people that end up getting put on are only one to two degrees of separation away—they’re already connected to one of the founders, or one of the investors.
With the California ruling requiring all California-based public companies to have at least one woman on their board by the end of 2019, and now Goldman Sachs weighing in for public companies, the question is will private companies follow suit?
Gené Teare is a data evangelist at Crunchbase where she conducts strategic research to uncover and explore trends within private company data.