Why Venture Capital Firms Need More Women Partners

Posted by: Nick Leiber on June 9, 2010

I moderated a panel yesterday at the inaugural We Own It Summit in downtown Manhattan. The daylong event, hatched through many meetings of the minds at 24 organizations including Astia, the Kauffman Foundation, and Springboard Enterprises, was meant to drum up practical ideas on boosting women’s participation in high-growth entrepreneurship.

My panel was about venture capital. To set the scene, I cited data from the Center for Women’s Business Research that show that while about 41 percent of private companies in the U.S. are owned by women, only 3 percent to 5 percent of them get venture capital. Then the panelists, experienced entrepreneurs and equity investors Heidi Messer (World Evolved), Diane Mulcahy (Babson College), Divya Gugnani (Behind the Burner), and Anu Shukla (KM), candidly described their experiences on both sides of the funding table to an audience of about 45 women and a handful of men. One of the big (if obvious) takeaways: venture money is available but there are still plenty of gender-related obstacles. After that, the discussion began, with panelists and folks in the audience kicking around prescriptions for improving the odds.

Cindy Padnos, managing director of Illuminate Ventures, said increasing the number of women partners at VC firms was key, since those firms with at least one woman partner are 70 percent more likely to lead investments in a woman-run company than those VC firms with only male partners. (Padnos’s firm recently published a whitepaper aggregating new research on women entrepreneurs.)

Of course, it’s not just about adding women partners—the firm’s culture needs to change, too. Padnos told the audience this anecdote: “When I go out with these women-led companies and introduce them to women [venture capital] investors, I frequently hear a comment that shocked me—and when I thought about it, I realized they were right. They say, ‘I’m a new partner here. I’ve already done one woman-led deal. I can’t do another.’ Now substitute another male-led deal, Indian-led deal, Asian-led deal; anything else and you would think that person was absolutely out of their mind. But in reality when they’re in a partnership where they’re the only woman partner…and they are a junior partner in the firm and they’ve made one bet already on a woman, they’ve got to see it through successfully before they feel comfortable taking on another.”

Reader Comments

Kristen Dolle

June 11, 2010 1:21 PM

It's unfortunate to hear that VCs are missing out on all of the innovation and business women-owned companies offer simply because of gender. How can the business world not be past this yet?

Thanks, Nick for writing about this issue honestly!

Kristen Dolle,
CEO, Pink Brick House
www.pinkbrickhouse.com

Adrienne Graham

June 12, 2010 9:12 PM

Interesting article. The sad reality is that it's not just a woman thing. Like the author said, there is a fear that because they are (woman, Black, Hispanic, Asian, etc) that all eyes are on them and they don't want to be perceived as playing favorites. But if they don't at least consider "one of their own" then they are labeled sell outs. I agree that venture capital firms need to be more diversified so that businesses are considered based upon merit and not gender or race. I'm a diversity specialist and stories like these always frustrate me.

Karlene Sinclair-Robinson

June 17, 2010 10:24 AM

Nick, thanks for bring this article to us. Yes, there is that disparity between male and female-owned entities accessing this type of capital infusion.

Often times, it is not about the business or the idea but the thought process that women are not aggressive enough to take on some of the risk men would be willing to take. It is unfortunate because there are many such companies with brilliant ideas and concepts that could really make a difference in their given market.

I do hope that the mindset shift will come soon than later because many of these women-owned companies can make a difference.

Brian Javeline

June 25, 2010 9:09 AM

It shouldn't matter whether the partner is a woman or man, white or black, or whatever religion. What matters while the VC community is going through radical changes is that VCs go back to basics and get some experience and successful entreprenuers on the team. There are just way too many mathmeticians, who without any insult to their expertise, simply do not add value to the building of a company. This is why our company has so far focused on angel investors who have capital and experience to bring a vested interest into our company. Angel should not be discounted, and in fact, in a short time have our early stage company www.MyOnlineToolbox.com awarded a Dell Top 10 Innovator and a Forbes America's Most Promising Company. We are not fully financed, and welcome conversations regardless of gender, religion, etc..... except for a smart investor or entrepreneur who wishes to seize opportunities.
Brian Javeline
President & Co-founder
MyOnlineToolbox.com

Janet

July 21, 2010 1:57 AM

I agree with Brain that it doesn't matter or should not even matter whether the business partner is a man or a woman or regardless of color. What should be considered is how an individual will be an asset to the company.
Unfortunately, there are still companies either here in the United States or somewhere else in Asia, that the gender of a business partner is still an issue.
I am not sure how long women should prove their worth in the society.

gerald bell

February 23, 2011 12:49 PM

To-the-point post. Here are couple thoughts. What excites me is that positive changes seem to be emerging for the US private equity industry in comparison to last 2 years, supported by increased valuations and conditions in the capital markets. The private equity industry has not been immune to the affects of the struggling economy, as 2009 results demonstrated, but performance to date in 2011 has been promissing. Opportunities abound in the current environment given ample investor capital to deploy, as well as evidence that some of the best performing PE vintage returns, historically, were made at the bottom of the cycle.

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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