What Does Silicon Valley’s “Battle of the Sexes” Have to Do With Crowdfunding? (The Answer May Surprise You)

My old friend (and incredibly smart investor) Steve McDonald recently said that women have superior instincts when it comes to investing.

Now, Steve is one of the world’s leading experts on bonds. I listen to his advice all the time, and he never disappoints.

But when it comes to women?

Let’s just say my expectations are lower.

In this case, he happens to be spot-on. There’s copious evidence to back him up too.

Women do make great investors.

So why aren’t there more of them in startup land?

Men Investing in Men

Two facts…

  • Only 8% of all venture capital firms’ full-time investing partners are women.
  • Venture capital firms with a female partner are more than twice as likely as firms without one to invest in a company with a woman on the management team (34% vs. 13%).

Let’s face it, women-led startups don’t get a fair shake from the VC community.

Men prefer investing in (other) men.

Melinda Gates, who worked as a developer at her husband’s company, says that the VC industry needs to clean up its act

They know male, white, Caucasian, in a hoodie, looks like a geek, comes from an Ivy League or equivalent school. That’s their funding criteria.


Hey, Melinda, they know Asian too, but point taken!

For about half a year now, Silicon Valley has been full of stories of sex discrimination and harassment. Uber may be the best-known case, but it’s just the tip of the iceberg.

If you’re an investor, it’s hard not to come across it yourself, even if you’re based on the East Coast, as I am in Baltimore.

Here’s just one example of a recent experience I had…

I was looking into a crowdfunding company that was helping women chart their “fertility awareness.”

And I found out that two of the three C-suites – the CEO and chief technology officer – were male. Only the chief operating officer was a woman.

Not cool, I thought.

Then I looked at the members of their board. Six out of the seven were guys!

That did it for me. I was done researching.

If any company should have a female CEO, it should be one helping women in the fertility field.

I wasn’t investing.

Don’t tell me this is reverse discrimination – I’m not interested. The problem isn’t too few guys in leadership positions, it’s too few women.

Rampant, Entrenched and Damaging

This is not only damaging to a woman’s place in the startup world, but possibly damaging to investor return rates. (Though the evidence here isn’t as comprehensive as I’d like.)

A Harvard Business Review article examines First Round Capital, one of the more successful early-stage VC firms. The firm reviewed its own holdings and found that female founders’ companies out performed their male peers’ companies by 63%.

It also cites a study by the Small Business Administration. The study found that venture firms that invested in women-led businesses did better than firms that did not.

Unfortunately, that’s it for the hard data.

I suggest you read the entire Harvard Business Review article – lots of useful information in there. But there are times when authors Wendy DuBow and Allison-Scott Pruitt try too hard to make their case.

For example, they cite TechCrunch data pointing out that among the top 100 VC firms, based on longevity, investing and fund size, 38% had a female investing partner. In a wider sample of 2,300 firms, only 8% of full-time partners were women.

This disparity, the authors say, “raises the prospect that having a female investment partner may have helped those at the top.”

Surely, the far more plausible explanation is that as these “men only” venture firms grow, they add new partners. And the bigger they become, the more opportunity they have to diversify and add women partners.

A Sexist Portfolio?

I wish our startup portfolios could contribute to the body of evidence. Of the 20 holdings in our 14-month-old First Stage Investor portfolio, only two are female-led.

They are, however, two of our stronger startup holdings.

Court Innovations is led by a very impressive CEO, MJ Cartwright. She was part of the executive team that built HealthMedia, which was eventually sold to Johnson & Johnson.

We believe she is uniquely qualified to take the business to the next level.

CEO Eve Peters heads up Whim, a dating app that creates good matches while setting up real dates. Every time we speak to her, we come away impressed by her tenacity and drive.

I’d estimate that about 10% of our deal flow is women-founded or led, and 10% of our holdings are women-founded or led.

It doesn’t prove anything in our case – the sample size is just too small.

But I honestly believe we take an agnostic approach to gender. We look for exceptional leadership teams… period.

Their gender makeup doesn’t factor one way or the other. Nor should it.

Women work just as hard as men to impress us. If they have better entrepreneurship skills and qualities than men, they have to figure out a way to make that plain as day to us.

(We spend hours interviewing – our polite word for grilling – them, so it’s not like they lack the opportunity to make an impression.)

If they can succeed in conveying their superior business development skills to us, then perhaps gender becomes a factor (though a second-order variable).

Do I sound complacent?

I’m aware that studies have shown that male VC investors have unconscious biases and ask women different types of questions. Knowing this, I’m extra careful in my conversations with female founders and executives.

Crowdfunding Is Different

I’d like to think Adam and I are not part of the problem. I also believe that crowdfunding is a different animal. So much of VC investing is tied to the “old boy network.”

Crowdfunders are a more diversified group, not only in terms of gender but also geography, age, income and ethnicity.

This dynamic of white Ivy-League-educated guys investing in other white Ivy-League-educated guys is not nearly as pronounced.

Again, I don’t want to sound complacent, not when we have a 1-to-10 ratio of female-led startups to male-led startups in our portfolio.

We aim to build a diversified portfolio. A big part of that is having startups with founders of different backgrounds.

We do a decent job. But can we do better?

Yes, we can. Paying attention to this issue and taking it seriously is a step in the right direction.

Good investing,

Andy Gordon
Co-Founder, Early Investing