The “people like us” syndrome that underscores the predominant hiring of men by other men in the venture capital business, fuelling the problem of low funding levels for female founders, can only be solved as more successful women become serial entrepreneurs and investors, says IBM venture capitalist Deborah Magid.
Magid is director of software strategy and represents IBM’s $25bn software business in IBM’s 12-year-old Venture Capital Group.
She was in Dublin as a keynote speaker at the recent Silicon Valley Open Door (SVOD) event at Google’s Foundry, where Irish start-up Ourobotics triumphed in a competition against start-ups from all over Europe.
Magid is chairman of the Board of SVForum, the Silicon Valley emerging technology network; sits on the advisory board of White Bull, serving the European entrepreneurial and venture communities, and on the Steering Committee of the California Sustainability Alliance. Prior to her role at IBM, she held senior positions at AT&T, General Electric Information Services and Taligent, the short-lived joint venture between Apple and IBM in the 1990s.
‘You have to start by busting your own stereotypes. The founder of one of the most successful software companies in the world, VMware, is Diane Greene’
– DEBORAH MAGID, IBM VENTURE CAPITAL
Magid considers herself more of a technology scout than a traditional venture capitalist, and spends more time scoping new technologies and meeting entrepreneurs than examining term sheets and conducting due diligence.
“It’s partly the terrain but it’s mostly about specific business opportunities in terms of how start-ups and privately-held companies can contribute to IBM’s strategy, be it as partners, an alliance or as companies we might buy.
“I am the scout, I am at the coal face of finding and discovering new technologies and, if I see something that is exciting to me, I will introduce it to our business.
“It’s my job to discover things that are new and exciting and good for IBM; sometimes we have to walk away from things too.”
The cognitive age of computing
Before entering the world of tech investment, Magid was a cognitive psychologist who found a niche in technology through design and would have been focused on areas like user experience (UX) and usability engineering.
“After many years out east with AT&T and General Electric, I came out to Silicon Valley for a job with Taligent, which was this weird Apple/IBM joint venture that lasted only about four or five months.
“It’s interesting that today we have a very real partnership with Apple in terms of where the enterprise is going.”
In terms of areas that are hot for technology investment, Magid says investors are razor-focused on projects coming out of universities such as UCD, Trinity, MIT, Edinburgh, Stanford and Berkeley.
“Data scientists in these universities are inventing things that just couldn’t be done before.
“People are taking areas like cloud, mobile and social as a given, but if you think about data and analytics and the ability to use this to predict things that are going to happen, that is very exciting.
“Add cognitive computing into the mix, how the human mind processes natural languages and context changes and how the brain deals with that, now computers can do that. Because of this, any business, non-profit or university can do things they couldn’t do before.”
She name-checks Ireland’s Movidius, which has just won a major contract with Google to provide chips with machine vision capabilities: “Now that’s a really cool company.”
Magid says that combining cognitive computing and analytics with new areas of machines like drones is revolutionary. “These can be applied to industries in ways that can be transformative and that would never have happened before. One of my favourite examples of this is agriculture, where you can use drones to monitor things from the sky, interact with sensors in the soil that can measure nitrogen, water, weather and accurately predict crop yields.”
Bursting the unicorns’ bubble
Magid believes the long-expected correction of insane tech company valuations will arrive, but not in the way we might think.
“A company like Uber probably deserves the value it has because its market is incredible, it has all this inventory all over the world, it is loved by its users. That is a company that has a high value for a reason.
“There are lots of other companies that are overhyped and that are starting to see their value come down.
“This does not mean that the role of innovation and the role of technology in society are going to diminish, it just means it is all going to be more realistic.
“There is more access to capital today than there ever was. There are more accelerators than there ever were and if you can conserve capital by joining an accelerator, do it. Crowdfunding is a good source of cash for early-stage companies.
“Corporate venture has exploded too and there are over 1,000 corporations today that have an innovation or venture group. They are trying to do the same thing I do, but in a different manner, by scouting for companies and entrepreneurs and learning the trends. Some do this by putting money into companies, placing bets and seeing what happens.”
The Silicon Valley gender divide
Magid nods in recognition when I mention the Elephant in the Valley study that indicated the glass ceilings and attitudes females executives in Silicon Valley have had to put up with, including the shocking fact that 60pc had experienced some form of harassment.
“It was all over the papers in Silicon Valley when it came out. Part of the problem for many years was that women just wouldn’t, or couldn’t, talk about it.”
She believes the origin of the problem of low numbers of female leaders in Silicon Valley and across the STEM industries is in school. “It partly starts in school. It partly starts with how girls are pegged. Certain classes they are expected to take, certain teachers’ expectations.
“I was actually good at math and science, I studied psychology, calculus and statistics, it was how my brain worked and I liked that stuff. But a lot of young women are steered away from things like that and it is down to biases people have. The industry has a bias against women in certain jobs and women have their own biases too.”
‘We need more women to be successful founders. That would create more women venture capitalists. If more women were venture capitalists they would be more blind to gender, more accepting of women and more women would get funded’
– DEBORAH MAGID, IBM VENTURE CAPITAL
Recalling a talk she gave to women entrepreneurs in Cape Town where she showed slides from the #iLookLikeAnEngineer campaign started by Isis Anchalee, Magid also showed photos that included all the women engineers who work at Tesla, Snapchat and NASA and joked about her own attire: “I look like a corporate executive.
“But I ended it by saying, you don’t have to start a fashion company if you are an entrepreneur – some of the highest-paid billionaire women founders run construction companies and technology companies.
“You have to start by busting your own stereotypes. The founder of one of the most successful software companies in the world, VMware, is Diane Greene.”
I point out that one of the lamentable facts about tech investment is how little venture capital goes towards companies led by female founders. According to Astia CEO Sharon Vosmek, less than 5pc of funding in Silicon Valley goes to female founders.
“That is true. But it is also true that there aren’t enough female venture capitalists, mainly because there aren’t enough female founders. It goes in circles.
“Where do venture capitalists come from? They used to come from McKinsey and investment banks, but not so much anymore.
“Now they are people who built a company and became serial entrepreneurs. And those investors tend not to be women. This is what needs to change. We need more women to be successful founders. That would create more women venture capitalists. If more women were venture capitalists they would be more blind to gender, more accepting of women and more women would get funded. It is very circular.”
She said this is already happening, pointing to the #Angels fund established by existing and former Twitter employees, including April Underwood and Jana Messerschmidt.
“Women need role models and they need mentors. Women who are successful should coach other women.
“When you have people like that as a good example to other women, change happens. This is just like how a good start-up CEO of any kind is a good example to an entrepreneur in Kenya trying to create a new company.
“There’s a phrase that people use – PLU, people like us – and people tend to hire people like themselves and they need to stop that.”
This brings to mind comments made during last year’s Inspirefest 2015 when Adam Quinton of Lucas Point Ventures said that Silicon Valley is a place that talks about meritocracy but doesn’t practice what it preaches. “The fundamental problem, especially in Silicon Valley, is that it loves to think it’s a meritocracy, which is bull. It’s not. It’s a mirror-ocracy,” Quinton said.
Nodding in recognition, Magid said that there is a trend in Silicon Valley to make the gender and race details on CVs neutral. “And the trend is no longer to put a photograph on your CV because there is a bias against age too.”
Cross-talk, IBM and the European tech scene
Magid said she spends an increasing amount of time in Europe visiting the various hubs of innovation, including Berlin, Munich, Stockholm and Paris.
“There are commonalities in terms of schools that turn out good business people and good start-ups. There is a very good mix of talented young business people and engineers perfectly in tune with the culture and mindset of taking risks.
“Europe needs to remember that it needs to play to its strengths in terms of science and the fact that it’s a good place to live. But elements need to come together, such as tax laws and numbers of patents being filed, but ultimately it has a good business climate.
“In Europe, there is a good climate for innovation in certain countries and Ireland is one of them.
“If you look at the statistics on venture investment and start-ups created, Ireland is always on the list.
“The tech market is maturing in Ireland, whereas it isn’t as mature in a lot of other places. The key is to create more co-working spaces, accelerators and venture capitalists.”
Another aspect of Magid’s focus is fostering the culture of intrapreneurs – entrepreneurs within IBM and engineers are encouraged to pitch and propose new projects to win funding.
“You have to do that in big companies to encourage employees to act and think different.”
She cited the IBM Innovation Centre in Damastown, Dublin, where executives are tasked to work solely with start-ups and entrepreneurs.
“They manage the ecosystem but they also bring other people into it. If someone wants to talk big data or analytics or Watson with us, we can pull the experts from the various units, get them out of house to talk to entrepreneurs and make connections.
“It’s all about cross-talk,” Magid concludes with a smile before plunging into a room full of venture capitalists and entrepreneurs from all over Europe at the Google Foundry.
Women Invent is Silicon Republic’s campaign to champion the role of women in science, technology, engineering and maths. It has been running since March 2013, and is kindly supported by Intel, Open Eir (formerly Eircom Wholesale), Fidelity Investments, Accenture and CoderDojo.