Ask most in the venture capital ecosystem for their take on the issue of gender diversity and you’ll get a mixed reaction. Some men avoid the topic for fear of stepping on a land mine. Some women tell us it’s passé. We hear that the tech industry has a big problem. For us, the topic of diversity isn’t an issue to simply brush under the rug. The trouble is, the topic can be tough to talk about. But if we do, it opens up the chance to help everyone figure out why the gender balance is off and how to potentially change the ratio.
A look inside our Annual Meeting
We use our annual meetings to explore trends, issues and opportunities with our Limited Partners, the investors that serve as the backbone of our funds. We address dynamics that may not be so apparent on the surface, as it influences our decisions and the way we operate on boards. Right now, the gender issue is top of mind.
Let’s be honest – we are looking to get the highest return for our investors. In our case, we’re finding that some of the best performing portfolio companies happen to be led by women. That’s one reason we gave four of them the stage at our annual Limited Partner meeting in Cambridge, MA last week.
Soraya Darabi, co-founder of Zady, moderated the panel and here are five concepts she helped us discover:
1. The industry needs more role models.
A study conducted by Babson College found, “only 2.7 percent of venture capital-funded companies had a woman CEO.” Despite these horrible industry numbers, bright female entrepreneurs do exist.
On the panel, Lisa Maki, the co-founder and CEO of PokitDok commented, “I don’t think people are anti-women in the Valley. I just don’t think there are enough good examples that we know about out there.” We’ll open up this post pointing to some strong examples – Lisa being one of them, in addition to the three other panelists we had on stage. Here’s what they all look like:
- Susan Aplin spent 25 years in merchandising, ecommerce, and supply chain operations at premium retailers like Williams-Sonoma and The Gap. She created Bambeco to sell sustainable home goods through its site and places like J.Crew, OneKingsLane and Whole Foods. She led Bambeco through a Series B round of $20M, which closed this month.
- Based in New York, Soraya Darabi started Zady, which sells clothes for the conscious consumer and is best described as “The Whole Foods of Fashion.” Soraya is a newly appointed World Economic Forum “Young Global Leader” and led our panel at the annual meeting.
- In world where you can’t “Google” medical options nor the costs for care, Lisa Maki, started PokitDok to reimagine a healthcare system built on APIs to improve the orchestration of care, including the threads of financial components. She’s clearly on to something because she closed a $34M Series B round in August.
- Deb Nicodemus is the CEO of Moda Operandi, which holds nearly 600 trunk shows a year for 250 luxury brands, including Dolce & Gabbana and Oscar de la Renta. She has executive tenure at Maison Birks and the LVMH Group and successfully raised $60M earlier this year.
2. Companies with a balanced gender have a higher IQ.
Deb points out that “when you have a mix of genders, it increases the IQ of the company.” And she referred us to a piece published by McKinsey that says, “… a 2012 study by the Credit Suisse Research Institute found that the shares of companies with both men and women board members outperformed those of companies with all-male boards. Businesses that promote gender equality are not only more just but also more effective.” Deb reported that while her CTO, Keiron McCammon is a male, 30% of his engineering team is female. At PokitDok, that number is closer to 37%, led by Ted Tanner, the co-founder and CTO.
We found these numbers high, relative to the market so we followed up with them to find out how this occurred. Keiron says, “it has part to do with the business we are in, it attracts folks with an interest in fashion. That combined with the culture we’ve developed within our team…I like having the balance and have been fortunate in each of my ventures to foster a balance (not by design, per se). I believe the balance of masculine/feminine energy (versus male/female gender) is healthy and helps create cohesive teams that work together well.”
In Ted’s case, “I hire the best, not to fill a quota.” Denise Gosnell on his team who holds a PhD in Computer Science mentioned, “As I considered opportunities, it was very obvious that PokitDok was recruiting me to be a data scientist and engineer. They were hiring me for my technical chops and not my gender.”
The McKinsey article points out that, “research suggest that commitment and accountability from the top are important prerequisites and that gender diversity has a better chance of taking hold when it is seen as a business imperative as well as a moral one.” As board members, this was yet another reason we were compelled to do this post.
3. Sectors that naturally attract women can inspire change in others.
Bambeco’s Susan Aplin noted, “our company is 65% women. That’s shifting as we grow the company. In the home goods industry, women tend to fill positions….” and they often have purchasing power for those items. “In technology across other verticals, women are under-represented,” she says.
Deb’s take is, “stereotypes about women are very passé. But that is in my industry,” [luxury fashion, which is dominated by women].
On the other hand, Soraya confessed, “I was at a pitch meeting with an investor and the guy thought it was a date.” Before Zady, Soraya co-founded Foodspotting, which was acquired by OpenTable and before that, worked at drop.io which was acquired by Facebook. As opposed to retail, her roots skew towards technology, much like Lisa at PokitDok.
Soraya asked the panel, “Is there a barrier for women in tech?” Lisa responded, “Yes, there’s absolutely bias. But it made me much more creative. I was already bucking an entire industry, so why not the issues of gender and age…NAV was blind to gender and age. So entrepreneurs should find a VC that understands their business and shares a fundamental thesis.”
Even from this small sample of companies, it is clear that there is a wide range of attitudes out there. Sectors with a higher quotient of women, like e-commerce are helping showcase role models for other women to emulate and begin to change biases in the market.
4. Women creating successful companies are fostering gender blindness.
When Deb was raising expansion capital, she said, “I didn’t go into this, thinking I was meeting with a bunch of men. I was interviewing them and looking for a good partner.” Moda Operandi successfully closed a $60M round late last year to “stretch its tent globally with luxury fashion.”
Just this month, Bambeco announced it closed a $20M Series B round to support the company’s expansion in selling sustainable goods for the home. In Susan’s case, she said, “I can’t think of an instance where being a woman hurt me. We ended up with multiple term sheets. The women VCs were actually WAY tougher on me than the men.”
Responding to Soraya’s anecdote, Lisa points out, pitch meetings aren’t dates, they’re dating analogies. She says, “You ARE marrying your VC. Until exit do we part. I had to look farther and harder to find investors that were age and gender blind.” Soraya added: “the moment your business starts to speak for itself, the less you’ll encounter bad behavior.”
5. There’s a network effect that creates a virtuous cycle.
We didn’t originally set out to create a gender-diverse portfolio but investing in women-led businesses has turned out to be a virtuous cycle. Our female CEO and founders, which represent 24 percent of our portfolio, have collectively raised $230M in the last five years and are running companies that are out-performing. We’ve been humbled and lucky to attract these women entrepreneurs – all who operate in different pockets of the United States – Silicon Valley, New York, Baltimore, Seattle and Charleston, South Carolina. And, we now have more women-led entrepreneurs coming to us to share their business plans. We think diversity is a good thing in venture capital, not only because it is the right thing to do, it’s the smart thing to do. The numbers back it up and the four entrepreneurs on stage last week show how it can be done.
Thanasis Delistathis and John Backus are co-founders and managing partners at NAV.VC. Backus is a member of the NVCA Board of Directors. Find them on Twitter at @tdelistathis, @jcbackus and @navfund.