Gender bias in venture capital is ‘conscious’ and getting worse

1 Jul 2016

Pictured from left: Victoria Pettibone, Sharon Vosmek, Victoria Ianazzo, Adam Quinton and panel chair Kara Swisher

“The women are still missing,” lamented Adam Quinton, speaking on a charged panel of top investors, including Sharon Vosmek, Claudia Iannazzo and Victoria Pettibone, at Inspirefest, which was chaired by eminent Silicon Valley journalist Kara Swisher.

The first two things about the Investors segment of Inspirefest this afternoon (1 July) that struck like a lightning bolt were the stark revelation by Quinton that only 6pc of venture capitalists in the US are women, followed by Iannazzo, who pointed out that the problem is getting worse because the number of women investors in Silicon Valley is actually declining.

If you accept that there is a correlation between the percentage of women investors and the percentage of women-led businesses that attract funding, as pointed out by Astia’s Vosmek, this is stark. No, it is actually devastating.

‘Nothing has changed. Dialogue is a bit louder and some people who didn’t know the statistics do, but nothing has changed’

There were even more dire realities pointed out by Quinton: there are only 15 companies in the US that have been founded by black women that have ever raised more than $1m.

As usual, Swisher pulled no punches and got straight to the point by asking, what has changed in the year since the panel last year agreed that Silicon Valley is a “mirror-ocracy” and not the meritocracy it thinks it is?

“Nothing has changed. Dialogue is a bit louder and some people who didn’t know the statistics do, but nothing has changed,” said Vosmek.

“There’s more talk but not much action,” agreed Quinton, who is CEO of Lucas Point Ventures. “The Ellen Pao verdict created a lot of noise but didn’t clarify anything.”

Conscious or unconscious bias in the ranks of the top venture capital investors

The question of unconscious bias arose and Swisher interjected immediately: “It is conscious!”

She pointed to former Twitter CEO Dick Costolo who, in an article, she took to task over the fact that Twitter’s then board consisted of 10 “same-looking” white men. “It had three Peters and a Dick.”

She continued: “He called me and said it was unfair. It was a fascinating conversation because he believed it was unconscious.

“But it didn’t just happen by accident. In Silicon Valley, there are a lot of sensitive new age flowers who say ‘I can’t believe you think I’m a sexist’.”

‘It is a homogeneous group that thinks it is objective and is a meritocracy. It’s actually not’

Iannazzo, a partner with Pereg Ventures, suggested that, as well as women self-selecting themselves out of potentially rewarding careers in tech and science, the venture capital sector is responsible for its own failings.

“Today, if you don’t have women partners, it’s a conscious bias. There’s no excuse. The guys who are partners but have no women partners in their firm, that is just bias, it’s not unconscious; it’s just bias.”

Vosmek said that the venture capital industry is broken in a lot of ways. “Why would you invite women to be your partners? They ask tough questions. They don’t like strippers and don’t have martinis before 4pm but may be after 6pm. The venture capital industry has a lot of structural issues and most LPs will say there are serious misalignments.”

Quinton used the analogy of how miners used to take canaries down the mines to detect a poisonous atmosphere. “In a company, the atmosphere is the culture of the company. But if you are not inclusive to groups, those canaries will die, they won’t just self-select out but they will be poisoned out of the atmosphere.”

The panellists agreed that the overall problem with venture capital is not just gender representation but race

“It is a homogeneous group that thinks it is objective and is a meritocracy. It’s actually not,” said Quinton. “For a person at the table, however, it is hard to internalise, difficult to get their head around that.”

He said that, if talent was equally distributed, how is it that if white men make up 31pc of the population of the US they make up more than two-thirds of leadership at venture capital firms.

“The data shows that [businesses with] women on founding teams and in portfolios outperform those that don’t,” said Vosmek. “We’ve had this data for 15 years that businesses led by women outperform, but no one in a position of power or money has been bothered to check.”

Are there silver linings?

A possible silver lining pointed out by Quinton is the growing peer-group pressure emerging across the tech ecosystem. “Kudos to Pinterest by publishing its 2016 goals in terms of women and people of colour – those targets are out there and the company is making itself accountable.

“One of the benefits of Pao losing her case was she established Project Include, where organisations sign up to make commitments for diversity and put a spotlight on it.”

Another silver lining pointed out by Astia managing director Pettibone was an increasing number of investors, including women, looking to get into angel investing.

All panelists agreed the market for tech investment is cooling, with valuations starting to come down.

Quinton said that deals are down 30pc and situations like the falling valuation of unicorns like Zenefits are leading to more sensible terms being set.

“Good stuff comes with cooling. I’m spending more time looking at individual founders and what makes them special.”

It seems more venture investors need to take a leaf from Quinton’s book.

Inspirefest is Silicon Republic’s international event connecting sci-tech professionals passionate about the future of STEM.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years