The model in Silicon Valley is far removed from what venture capital is really about and that helps explain why unicorns, and not women or minorities, are getting funded, says Astia CEO Sharon Vosmek.
Ahead of her return to Inspirefest 2017, where she will take the stage as well as hold an Investor Masterclass, Sharon Vosmek, the CEO of Astia, discussed the topic du jour: the toxic work culture at Uber that ultimately led to the departure of its founder and CEO, Travis Kalanick.
Kalanick’s final throes as CEO were almost overshadowed by comments made by Silicon Valley venture capitalist David Bonderman of TPG, who also happens to be chairman of Ryanair.
‘If you don’t hear and don’t process or take the time to understand, all that happens is you become entrenched in your own beliefs, and that is what I see happening in Silicon Valley’
– SHARON VOSMEK
At a staff meeting to discuss the company’s culture, fellow board member and Huffington Post founder Arianna Huffington spoke about how one woman on a board often leads to more women joining a board.
“Actually, what it shows is that it’s much likely to be more talking,” Bonderman responded.
His comments prompted outrage, not only at Uber, but in the wider business community globally. Bonderman apologised for his remark and resigned from Uber.
Vosmek, who has passionately pointed to the reality that too few women-led start-ups receive venture capital investment, was not in the least bit surprised by the exchange.
“I think the comments made by the board member at a staff meeting at Uber epitomises what I see, which is a continued tone deafness to the issue.”
Astia and its investment arm Astia Angels are endeavouring to counter the general issue at the heart of the tech industry and in Silicon Valley, in particular: that very little investment goes into women or minorities. Instead, it is a white man’s world, where people invest in people who look like them. Uber, valued at $70bn, is a case in point.
Astia Angels is a global network of both female and male angel investors that invests in women-led, high-growth ventures. Vosmek asserts that the organisation holds firmly to the ethos of what venture capital is traditionally about, something that the bigger firms in the Valley have forgotten in their pursuit of the next unicorn.
Astia is enjoying some success. It has participated in a total of 67 investments in 46 companies and it recently announced its first exit with the acquisition of Ciel Medical by Vyaire. Astia Angels also credits Inspirefest with leading to its first investment in an Irish start-up, SoapBox Labs.
Astia’s early years
Astia’s origins extend back to 1999 when it was founded by Cate Muther as the Women’s Technology Cluster (WTC) in San Francisco.
“Cate was the chief marketing officer with Cisco Systems and when the company first went public, she looked around Silicon Valley and Cisco and asked: ‘Where are the women?’ Cisco itself was founded by a husband-and-wife team and there was a woman CEO when it was founded. But, when Cate looked at engineering and the women in seats of power in Silicon Valley, she felt it was too low. So she launched the Women’s Technology Cluster as an incubator.”
Vosmek joined the WTC in 2005 as chief operations officer. “We identified that space wasn’t the differentiator, it wasn’t what our companies needed; what they wanted was access to a global network and that’s how Astia was born.”
The years between 2005 and 2013 were spent growing the global network. “We identified that the challenge was that women had problems accessing the right networks, be they investor networks, sponsor networks, customer networks – men and women were still in separate business networks. Astia set about a redesign of this situation, creating business networks that included men and women who could do business with a mission of ensuring companies that had women leaders were part of that ecosystem. Cate really embedded those values in Astia.”
When Vosmek took a measure of the market in 2010, she discovered that in 2005, only 2pc of venture capital at the time was being invested in companies led by women.
“We embarked on a daring strategic exercise: we were going to create an angel investment group ourselves and so, in 2013, we launched Astia Angels.”
Moving the needle
Vosmek describes Astia as a community that fosters an inclusive ecosystem of advisers, customers and entrepreneurs who can really support and engage with women-led companies.
“This effort combines with Astia Angels, which invests directly in these companies. We are seeking to move the needle in relation to funding.”
Astia Angels has invested €15m of its own money, which has been leveraged up to $138m with other investors in 67 investments.
“Being able to leverage and attract other investors to the tune of almost $140m is quite exciting for a little organisation that is trying to move capital to women.”
Vosmek’s own background is as an economist working in public policy. “I think not being from an investment background actually makes me a better investor.”
She met Muther after she finished graduate studies into women’s participation in the economy. “I always had a passion for this subject, but I was actually very surprised to learn about the concerns in Silicon Valley. I call them concerns because some people would just say a dearth of women, or not many women, in Silicon Valley. I think these are substantial economic, social and political concerns for the US and for innovation broadly. I get very excited about the problem and solving it.”
Her economics background enshrined in her a belief that people should have equal access regardless of race, gender or creed. “I found Silicon Valley to be an inefficient market and one that I wanted to study. What were the impediments to the ecosystem becoming fully inclusive? What are the opportunities to correct this?”
Being married to an engineer at Netscape in the 1990s, Vosmek developed a curiosity about the ecosystem. “I approached the subject like a student and an academic looking for a solution, but always with my feminist public-policy hat on.
“I personally become interested when I noticed that Netscape was the exception, not the rule, because it had quite a number of women in leadership roles in the engineering group. But, outside of that company, I wanted to scream: ‘What the hell is going on?’”
Silicon Valley’s tone deafness is no accident
Returning to the subject of the sexism, Vosmek harbours some disdain for the Silicon Valley culture.
“I think the passion you are seeing from women is an increasing level of disgust. It is just so ridiculous that you can’t help but bang your hand off your head and say: ‘What is going on here?’ It has real consequences. We know the people, the technology and the innovation that don’t make it to market. Once you make that connection, it is very hard to sit still and not become passionate about it.”
Despite a chorus of support on the subject in recent years, Vosmek does not believe anything has really changed.
“Do I see a change? No, I actually see a retrenchment. I see venture capital becoming further entrenched.
“Of course, you can say a lot of words. But if you don’t hear and don’t process or take the time to understand, all that happens is you become entrenched in your own beliefs and that is what I see happening in Silicon Valley.”
She sees the situation outside of Silicon Valley, in markets such as New York, showing signs of improvement when it comes to investments in women-led businesses.
“Silicon Valley believes its own hype even when it says it doesn’t, even as it reprimands another company for its poor conduct. The heads of organisations in the Valley are lacking self-awareness, they are lacking self-reflection and an ability to really process what it would take to change the current situation.”
Vosmek believes the inability of Silicon Valley’s elite investors to invest in women and minorities has its origins in social science.
“It is not a conundrum. We’ve seen this act before and we haven’t tolerated it for long. It happens in clubs, in boardrooms. Social science tells us that we are attracted to people who are just like ourselves. At the extreme, this is a dangerous thing. It is the crazy stuff we see in the United States, it is happening around the world and at its extreme, it becomes manifest and leads to an absolution bifurcation of society.
“Silicon Valley is a microcosm playing out what we see happens in societies when one type of individual emerges as the preferred type.
“The most recent preferred model is the white male, Harvard or Stanford dropout.
“In Silicon Valley, we have a new type of venture capitalist who has chosen to believe in that mythology of the individual being the business model. At Uber, they believed Kalanick was the business model and therefore, at all costs, he had to be the CEO of that company and [they] were willing to compromise on every other core value because the persona and the business model were one and the same. Well, that’s just not true. It would be like saying Apple was only Steve Jobs, that Oracle was only Larry Ellison or that Microsoft was only Bill Gates. It’s a myth that works when you are a new-era venture capitalist who is in it for financial gain.”
Returning to the traditions of venture capital
Vosmek said that this new-era venture capitalist, who is only is interested in backing unicorns, is at odds with the real traditions of venture capital investment.
“The early VCs were entrepreneurial types who believed in innovation, and were investing in innovation for the sake of getting products to market. The new VC is interested in getting a return at all costs, leading to venture capital subsidising businesses that aren’t functioning as healthy businesses, but instead are highly subsidised, highly bloated, highly inefficient – but it sure can make people a lot of money if they get it right.”
Ultimately, Vosmek believes it will be the public markets that will end up clearing up the mess.
“We’ve seen it time and time again where these companies are propped up by private equity and sovereign wealth funds, and, when they exit, they can’t sustain earnings and the price drops. Who bears the loss? The public market bears the loss. The venture capital firms get their payout at the IPO. That bubble burst in 2000. Many venture capital firms get their unicorn exits at valuations that are highly distorted, and they have terms in their term sheets that ensure the public offering price protects their prior valuation. It is a highly corrupted market and it is highly inefficient.”
Swimming against the tide
Vosmek said that investment vehicles such as Astia Angels, as well as Aligned Partners led by Jodi Sherman Jahic, are focused on more realistic returns and growing all the businesses in their respective portfolios.
“Real entrepreneurs don’t give a hoot about funding when they start a business. It is only when they seek funding do they discover the anomalies. What we see is, women-led companies and minority-led companies and even companies led by men who aren’t in Silicon Valley [that] start their own businesses find alternative sources of funding.
“Our most recent exit, Ciel Medical, was primarily funded by angel investors [and] achieved its exit in under two years. It grew very efficiently and pursued a very lean model and was very thoughtful about every penny spent. The CEO will go into the acquiring company as head of product. We, as investors, saw a great return.
“Why does this matter? It matters because that’s what great entrepreneurs do; they find the alternative sources of funding and achieve great results for themselves, the innovation and their investors.
“It’s a different model than most VCs have chosen with their focus on unicorns and one-in-10 successes.
“Our portfolio has 46 companies and, since we started in 2013, we have seen no failures yet. We don’t shoot for unicorns, we shoot for our portfolio of successful companies and we believe in each company and founder we invest in. All of them.”
In conclusion, Vosmek is excited about Astia’s return to Dublin and, in particular, meeting new entrepreneurs and start-ups.
“We love coming to Inspirefest because we have shared values. We believe in the market and want to be there. We see Dublin as a great place where entrepreneurs can thrive and grow and do great things.”
Sharon Vosmek will be speaking at Inspirefest, Silicon Republic’s international event connecting sci-tech professionals passionate about the future of STEM. Book now to join us from 6 to 8 July in Dublin.