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November 4, 2016

Diversity flattens the playing field

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I get asked all the time about why I chose to make women founders one of the centerpiece of my investment thesis. The answer is pretty simple. Nobody else could see what I saw that these women were building solid businesses and by investing in what nobody else could see is a win. I also make a concerted effort to invest in minorities who are building businesses that many of the investors on the other side of the table might not see as big possibilities. The downside is the businesses have to be super strong to get the next round of funding but now everyone has to be strong.

The important of diversity at any level is the key to changing the playing field. I am not convinced that the majority of investors who happen to be white men see a woman or a minority on the other side of the table decide not to invest because of that. Although when women end up being one of the partners in an investment firm the firm ends up investing in more female -led companies. In essence, there is obviously a comfort level of who the person is on the other side of the table.

I believe it is important to make a mental decision that as an investor I am going to try as hard as I can to invest in minorities and women. If I did not make that decision then my portfolio would probably look different. It might not be as good either.

Linkedin surveyed people who worked in venture capital firms as well as founders of start-ups with less than 100 people and there was one piece of information that I was surprised by. I know that the majority of firms don’t have women investors. I know that most female founders feel like the men on the other side of the table don’t understand their businesses and can’t connect to them. I know that there are almost zero initiatives inside firms to increase diversity in their own portfolio companies or their own offices. It is unfortunate because I believe it is important to push portfolio companies to work on diversity.

What was interesting to me is that when investors projected out what the next ten years would look like they estimated that 31% of their portfolio companies will have female founders and 34% of their portfolio companies will consist of racially diverse teams. It is too bad that they think it will take another ten years but what it is telling me is that the last ten years has made an impact. More women, more minorities on both sides of the tables. We will see a lot of the success of those seeds start to bloom in the next few years. That will be a big win for the next generation of women and minorities who it appears will be taking up about 35% of the table in the start-up community if you believe the stats.

I believe in those stats because I began working on that thesis a decade ago. Here are a few of those investments that are founded by women and/or minorities. Some are growing, employing people and are making changes in the vertical that they sit in and of course some have sold or haven’t made it or are not scaling as quickly but I made a concentrated effort to invest in all of these women below. I made that decision so that the next generation of girls and minorities can look to these founders and say I can do it because she did it. That’s how we build a new generation of diverse companies…we make a conscious effort.

 

 

 

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Comments (Archived):

  1. awaldstein

    Good on you.Walking the walk rather than just talking the talk.Change takes intent. That is an undeniable truth.

    1. Gotham Gal

      Put the money where the mouth is

  2. pointsnfigures

    Depends on your focus. For example, in our new fund, we are only doing B2B FinTech. When there are a lot of women in fin tech, the probability that more B2B Fin Tech companies led by women get started will go up. Until then, my expectation is we will see a parade of males. U of I Engineering enrolled a record amount of women in the last couple of classes. It will be 5-10 yrs before they have the chance to start a company. I actually think the amount of venture funded women led companies will be higher than 35%.For me, it’s never ever been about anything except the idea and if I felt like people could execute. Period.At the same time, you have to have a good idea-and an investor that buys it. If a person gets rejected the first thing I wouldn’t look at is my gender or race. I’d look at how I was selling my idea.

    1. Twain Twain

      That is IF those U of I Engineering women don’t fall through the leaky pipeline during those 5-10 years.* http://www.latimes.com/busi…* http://fortune.com/2014/10/…And it’s BRUTAL at the coal-face of engineering for young women. Go to any mixed gender hackathon(*) and we experience one of the following:(1.) The woman in the team has the idea. The guys take credit for it and run with it.(2.) The woman gets tasked with design and marketing — even if she’s a coder. Meanwhile, the guys pair-program and build up new coding skills which they may not have even had in the first place and which may not even be as good as her code.(3.) The women is relegated to a support role during pitch presentations because the guys want the glory. If they lose, they say it was the design or messaging (see 2). If they win, they say it was their coding.Any woman who’s still a coder in her 30s, 40s, 50s … is nothing short of a MIRACLE and one of those outliers that Malcolm Gladwell talks about.The outliers who become female founders of tech startups. The outliers with potential to deliver exceptional ROI.———(*) I did 8 major hackathons and my team placed Top 3 in 7 of them. I was the sole common factor.My character and product experience meant guys generally aligned with my leadership of the build. Nonetheless, I’ve seen young female CS and HCI graduates reduced to tears because guys (who were supposed to be their friends) ostracized them during the hackathon.

      1. daryn

        The good news, as far as hackathons, conferences, and similar events, is that inclusion is much more in the foreground than before. Things like you’ve mentioned in 1, 2, and 3 get called out. And I, at least, have noticed the impact. In industry, there’s still a lot of ignorance, but high-school & college hackathons I’ve attended are much better – which bodes well for our future.And, for what it’s worth, my own engineering team is the best I’ve ever worked with, and it is nearly 50% women – a few you’d call MIRACLES.

        1. Twain Twain

          Great, so please can your team help the industry re-engineer these examples of systemic bias: https://uploads.disquscdn.c…The industry doesn’t help itself when even Google falls into the trap of using Implicit Assumptions Tests that results in men and women being classified according to these binaries: https://uploads.disquscdn.c… https://uploads.disquscdn.c…Binary classifications are why we end up with sexist Natural Language results like Word2Vec. It’s all interconnected in the UX design and the code stack.

          1. daryn

            Working on it! My company helps provide training data for AI/ML including computer vision and natural language systems like the one you reference, and reducing biases, whether gender-based or other, is certainly one of the things we help our customers with.

    2. Twain Twain

      In fintech, how many women in finance are transaction-side and defined as “revenue” (e.g. rainmakers, traders, portfolio managers) rather than costs (HR, marketing, legal, other admin support function)?That affects the core skills base those women can build up to create B2B FinTech and what tools they sell as their idea.A transaction-side revenue generator (that was me as a banker) would know to build tech tools and data sets that banks and their clients would pay lots of $$$ to use.A fintech woman who’d been Global Head of HR would build something completely different that might be considered by investors as “resourcing agency services” (lower ROI) rather than “data and algorithms with syndication potential” (higher ROI).

    3. awaldstein

      Agree completely.Focus and intent and goals are everything in management.

    4. Donna Brewington White

      The last paragraph is great advice.In my area the dominant recruiters for the startup ecosystem are males with all male recruitment teams. I have had a hard time breaking in but making good headway.I learned the hard way that even startups are a boys club because their boys club investors influence decisions such as which search firms to work with.Yet I can’t use that as the primary reason I lose out to these firms. They actually do great work.But the investor influence and the “boys club” element are something I can’t ignore even though I’m a “no excuses” person.It did occur to me that I probably don’t present my services as well and I accept this as a reason. But this does stem from confidence which is even harder to muster when you know what you are up against out the gate.

      1. pointsnfigures

        I think if you are doing everything right, and you notice a pattern, then it’s probably happening. Hard thing is it’s really a dependent variable with zero transparency. How many people like you went in, gave a good presentation and were rejected for someone that was in the boys club? The data is so messy.I have no doubt that bias exists. First step, recognize the bias. That helps you change. My wife is doing a non-profit startup targeting women. I went to a gathering where a lot of her associates and “customers” were. (In other words, I was the third wheel; can’t call myself arm candy) As I was talking with them, I noticed my own biases come out. Was enlightening for me. Behavior we take as natural looks a lot different when we recognize it.

        1. Donna Brewington White

          So insightful, Jeff. Thank you.I am confident that most males in my realm would never even realize that the bias exists or that they participate in it. They are generally a good bunch.One of my new clients complained that they were having a hard time hiring women and within a couple of months the ratio changed– not because I intentionally recruited women but I’m sure that I helped break down the barrier. Yet, diversity works both ways; I recently helped an all-female marketing team bring on a couple of guys because the CMO had a safe confidante with whom to explore her biases.

          1. pointsnfigures

            Agree. I haven’t thought about it a lot yet-I am trying to keep my head above water and that is job number one-but in B2B Fin Tech, it’s going to be very tough for me to actively “create” diversity. Once we get our fund raised, we could hire a diverse person provided they were qualified. To be qualified for us, you have to be conversant in the topics. The pool is mostly white males, or Indian or Asian males.One of these days the pool will look radically different. That’s a good thing!

          2. Gotham Gal

            It’s so great that you broke that barrier

          3. Gotham Gal

            It’s so great that you broke that barrier

          4. Donna Brewington White

            Thanks! Barriers have layers. It’s one layer at at time.

  4. cz

    Bravissima!!!!With all the mayhem in the news this election, it is refreshing to read something inspiring that has a concrete positive impact. Words and action, both greatly appreciated.

  5. Erin

    Thanks for daring to go against the grain.

  6. Donna Brewington White

    A friend (Rachael King) recently co-founded a PR/Communications firm targeting tech startups with women and ethnic minority founders/CEOs. Ellephant Partners in LA. Brilliant at what she does.

  7. Donna Brewington White

    That’s a great list!Must be wonderful to know you helped make this happen– and in some instances where it may not have if not for your investment thesis.

  8. Jill Stern

    Love your List!