A record number of women are remaking Silicon Valley in their own image.
They’re founding startups, joining top venture capital firms, and pushing back against a culture that has, traditionally, excluded them. They’re women like Silicon Valley engineer Tracy Chou who co-founded Project Include to help tech companies recruit more diverse employees; and Arlan Hamilton who rose from sleeping out of the San Francisco airport to raising millions as the founder and CEO of Backstage Capital, a seed-stage investment fund that’s investing in companies with at least one founder who is a woman, aperson of color, or LGBTQ; and Katrina Lake, the founder and CEO of Stitch Fix, whose e-commerce startup went public for $1.4 billion last November.
Despite the progress, it will likely take decades before women reach parity with their male counterparts. The #MeToo movement, and multiple instances of prominent venture capitalists harassing women founders, has forced us to interrogate (yet again) the myth that Silicon Valley is a meritocracy.
The portrait of a founder or venture capitalist as a young, white male having graduated (or dropped out) from a handful of elite schools is coming to an end.
Quartz spoke with more than three dozen women investors and founders to see what’s really changed in Silicon Valley and cities across the US.
It’s complicated
The starting point for women is dismal. Decades of discrimination have fostered one of the most lopsided gender imbalances in American business. The venture capital industry—where investors decide which startups get millions of dollars to pursue their dreams—is still at least 82% male, according to an Equal Ventures analysis of about 1,500 VCs. Another study put the number as high as 91%.
While Silicon Valley likes to see itself as a place where talent and hard work are all that matters, historically, that has mostly applied to a select group of well-connected men. In recent decades, the share of women in technical fields has actually declined. After hitting a high of around 36% in 1991, the share of women in computing occupations has fallen to less than 25% (pdf). Just 21% of tech executives (pdf) are women. Google, which has spent $265 million on diversity initiatives in recent years, has had only meager results (pdf) to show for it; the percentage of women in its workforce rose to just 30.9% in 2018 from 30.6% in 2014. In technology positions, the figure rose from 16.6% to 21.4%. And for women of color, the figures are even worse: the number of women, people, and Latinx employed at Google rose by just 0.1% last year.
A similar story plays out with investors. Only 2.2% of venture dollars in 2017 went to all-women teams, and 12% of funds went to companies with male and female founders, according to Pitchbook. By contrast, all-male teams brought in 79% of the total, about $67 billion (7% of teams were not classified). Even among top women founders, the discrepancy persisted, with women raising just 20% as much venture capital as their male counterparts, according to a Quartz analysis of Pitchbook data. Valuations of women-led companies received a similar discount.
But there is a palpable sense that the old guard’s grip is loosening. When asked whether the environment has been improving since #MeToo, female founders’ and investors’ responses were clear. “Absolutely. One hundred percent,” says Joanne Wilson, a New York-based angel investor. Wilson noted that sexist behavior, once ignored, is now grounds for firing—or, as Binary Capital discovered, shutting down the firm. Women are no longer afraid to speak up.
Michel Feaster, founder of enterprise software company Usermind, saw the trends moving in the right direction after decades of little progress. Women are now entering the ranks of almost every top venture capital firm, and dozens of new groups are forming to help other women founders. “MeToo was a wakeup call for a lot of men in power,” she said. “I don’t think it’s perfect, but it’s a hell of a lot better than two years ago.”
Steve Hirschfeld, a Silicon Valley lawyer and key investigator and witness in Ellen Pao’s 2015 gender discrimination case against venture firm Kleiner Perkins, sees more firms taking harassment claims seriously now. “Over the past few months, the sheer number of internal complaints of sexual harassment have jumped pretty significantly, but the number of lawsuits filed is down,” says Hirschfeld, whose firm conducts training for technology and investment firms on sexual harassment policies. ”Women feel more empowered to speak up. Companies now have a pretty robust reporting process. They’re taking it seriously, and handling it internally.”
Stalling out
Yet the most notable metrics of success in Silicon Valley are still stalled out: valuations, fundraising, and the decision-making power on investments all persistently favor men. Women-led startups received $12.4 billion last year, according to Pitchbook, marking a big increase over previous years, but the relative share of venture capital flowing to women (mixed or women-only teams) has remained around 15%.
While more women are being funded than ever before, the increase has largely tracked the total number of venture-backed startups. The relative share of women-led companies hasn’t budged much since 2014.
So why aren’t women gaining more ground? “It is a systemic problem,” says Alexis Ohanian, co-founder of Reddit and Initialized Capital. “It starts with the structure of the firm itself.”
Women controlling capital
The National Venture Capital Association’s survey of 1,336 VC firms in 2016 found (pdf) women accounted for just 11% of investors in the industry, despite filling 95% of administrative roles and 75% of investor relations, communications, and marketing positions. For minorities, the numbers were even worse. The survey found no African-American venture investors, and only 2% of respondents were Hispanic.
An increasing number of venture firms are now led by women, though. More than 16 such funds have started in the last four years, including Aileen Lee at Cowboy Ventures, Sonja Perkins at the Perkins Fund, Theresia Gouw and Jennifer Fonstad at Aspect Ventures, and Anu Duggal at the Female Founders Fund.
Some established firms are also adding accomplished women to their roster. Pitchbook estimates 16% of venture firms now have female investing partners, many for the first time. Initialized Capital, where three of the firm’s eight investing partners now are women, say they prioritized recruiting women when starting the firm in 2013, tapping their personal networks. Ohanian and his co-founder Gary Tan are now aiming for gender parity in order to make investment decisions that a less diverse team would miss. Most are catching up belatedly. Andreessen Horowitz announced Angela Strange as its newest general partner in a blog post on Aug. 30.
The effect of these shifts will be more blockbuster successes years down the road, but in the near term is increased visibility and support. The Female Founders Alliance is giving women one-on-one mentorship, and access to a community of female founders and investors. AllRaise sponsors Female Founders Office Hours for one-on-one mentoring, as well as email lists of positions in venture capital that formerly circulated primarily in male social networks.
The more women who achieve billion-dollar exits, and the highest level of startup success, the easier it will be for others to follow. Only a few blockbuster startup success stories feature women, but the number of women leading “unicorns,” startups valued above $1 billion, is rising.
One of the most prominent is Katrina Lake, the founder and CEO of Stitch Fix. Lake was the only female CEO to take a tech company public in the US in 2017. Her e-commerce startup listed for $1.4 billion. Rent the Runway CEO Jennifer Hyman told Recode in an interview last November that Stitch Fix, and startups like it, are changing what a good investment looks like for venture investors.
“We work in an industry where pattern recognition is still the name of game,” she said. “So the more people like Katrina—and hopefully people like myself—who deliver results, the more other women are going to get opportunities.”
Women-founded companies valued at or above $1 billion
Over time, having women in powerful positions—placing bets on women and taking meetings with women founders who might never have gotten through the door at male-dominated firms—could radically transform the industry.
“The only way to solve this is more female founders and investors help each other,” says Usermind’s Feaster. “I don’t think it’s [VC firms adding more women] tokenism. [Women] are really empowered at their firms. That will change the landscape over the coming years.”
The power of LPs
One way to ensure this happens is pressure from limited partners (LPs)—the pension funds, foundations, and other pools of money that serve as the main source of funding for venture capitalists. Duggal of Female Founders Fund says her conversations with LPs have started to change.
“We’ve recently seen questions during due diligence from LPs asking if there have been any accusations of sexual harassment,” she said. “It’s come up in a way it hasn’t come up before.”
The efforts to date have been largely informal. But widely shared guidelines are coming, promised Emily Mendell of the Institutional Limited Partners Association (ILPA). Today, none of ILPA’s materials ask questions about diversity, inclusion, or sexual harassment during due diligence. Mendell says, this month, new guidelines will ask venture firms to disclose any sexual harassment allegations, as well as diversity and gender numbers by role and responsibility. Those questions are meant to extend to portfolio companies as well.
“Binary Capital was a wakeup call to the industry that these things go on and should not go on,” says Mendell. “LPs did not know who they were investing in. We determined very quickly that this bad behavior has to stop.”
Will this prevent another Binary Capital?
Not necessarily, since answering the questions is voluntary and VC firms may not be forthcoming anyway. Caldbeck, for example, had already been kicked out of Lightspeed Capital for similar behavior, but was still able to raise Binary Capital’s fund despite a checkered reputation among many founders and investors.
Some female investors say LPs are reluctant to press the issue because they’re competing to invest in the most desirable funds. Rather than take a stand, few want to risk access by requiring funds to publicly prohibit behavior.
While Mendell says she is not aware of any LPs with public positions on sexual harassment or diversity, she predicted a shift in attitudes.
”Many are starting to draw a line on this behavior not just because it’s the right thing to do, but also because drawing a line is good business,” she says. “That will send a message that LPs care about this. This has to get better.”
From pledges to policy
Since most incidents are not reported, it’s difficult to say with certainty that the worst of the abusive behavior has been rooted out. Jessica Mah, the founder and CEO of accounting software startup inDinero, says she noticed a striking decline in mentions of egregious incidents raised in conversations with colleagues.
“I think we’re talking about it more, and it’s happening less, based on talking to many, many women starting companies,” she says.
Of course, “less” is a low bar. A 2015 survey of about 200 senior women in tech found 90% had observed sexist behavior at conferences or off-site company meetings, and 60% had reported incidents of unwanted sexual advances in the workplace to their companies.
In the wake of engineer Susan Fowler’s revelations about Uber’s treatment of women, LinkedIn co-founder and Greylock partner Reid Hoffman published the “Decency Pledge,” which asks investors to disavow doing business with sexual predators, harassers, and people abusing their power in any capacity. More than a dozen prominent VCs publicly signed the pledge, yet many VC firms have dragged their feet disclosing their policies. In February, the NVCA released sexual harassment guidelines for the industry, but these too were voluntary.
To ensure pledges turn into policy, Cheryl Yeoh Sew Hoy, whose account of sexual assault by 500 Startups co-founder Dave McClure led to his removal from the firm last year, founded #MovingForward last March. It’s an effort to verify whether firms were committed to creating “diverse, inclusive, and harassment-free workplaces.” She soon discovered the vast majority of VCs didn’t have any policies in place regarding sexual harassment, diversity, or discrimination. “If they had a policy,” she says, “it only covered existing employees, and it wasn’t public at all.”
Now, most prominent firms registered on MovingForward’s site (110 at the latest count) have diversity and harassment policies stating investors or employees can be fired for sexual harassment and discrimination, and extend protections to those outside the firm.
“That’s a huge improvement over what was there before,” she said. It’s also a tectonic shift for an industry that has long refused to abide by any rules, says Wilson, the angel investor in New York. “For years, HR was such a joke,” she said. “Now it’s the most important job in the company.”
Resisting a backlash
But as the face of the industry changes, some women are worried about a backlash.
Hirschfeld warned against the temptation to respond to incidents quickly by preemptively firing people rather than taking a deliberative process.
“The concern I have is of overreacting without giving both sides a fair shot,” he said, noting that he was dealing with cases of harassment and bullying against men, as well as women. “People are accused, firms can’t afford the bad publicity, and then people are fired. It’s one strike and you’re out.”
Several female entrepreneurs said they heard of men musing over some version of the “Mike Pence rule.” A 2017 profile of the US vice president revealed he “never eats alone with a woman other than his wife and that he won’t attend events featuring alcohol without her by his side, either.”
How, they ask, could a woman ever assume leadership role without interacting with men one on one?
“I’ve heard men say, ‘I don’t want to be with a woman. I don’t want to take her to lunch,’” says Wilson. “Please, buck up. If you don’t know how to behave in a meeting, then you shouldn’t be working.”
Ultimately, the perceived risks of not dealing with female colleagues will hit the bottom line, as well as investors’ credibility. Over the next few years, venture firms without a significant number of female partners or investments in women-founded companies, may seem not just anachronistic, but discriminatory and uncompetitive.
Solving this problem in Silicon Valley would ultimately help solve the problem for everyone, says Lynn Jurich, CEO of SunRun, a solar energy company.
Jurich launched her startup in 2007 when she and her husband were attending business school. They both agreed to start their own companies at the same time. Whoever’s startup looked most promising would pursue it, and the other took a steady job. Jurich got there first. Sunrun is now a $1.5 billion public company, and the nation’s largest residential solar provider, employing more than 2,500 people.
Jurich warned the tech industry not to retreat from the issues #MeToo has put into the spotlight. “There is so much unspoken stuff. Let’s get it out there,” she says. “When the world is out of balance, both sexes suffer.”