There’s a joke venture capitalist Kerri Golden sometimes tells audiences when she gives lectures: The good thing about working in a male-dominated industry is that during conferences or events, there’s no lineup for the women’s bathroom. “The bad news,” she says, “is all the deals are happening in the men’s room.”
Golden has a long history in venture capital. She’s currently the co-founder and general partner at JOLT, a micro-seed fund and technology accelerator in Toronto, and serves as chief financial officer for Information Venture Partners, an offshoot of RBC Venture Partners. Throughout her career, she’s never had to identify herself on a conference call. “I’m the only female voice they’ll hear,” Golden says. “It’s been that way since I started, and there hasn’t been a significant improvement.”
The dearth of women in technology, finance and other fields has been oft-documented in recent years. But it wasn’t until a recent high-profile court case in the United States that the spotlight turned on the venture capital industry. Ellen Pao, then a junior partner at Kleiner Perkins Caufield & Byers in Silicon Valley, filed a lawsuit against the company in 2012. She alleged the firm discriminated against women, denying them advancements and compensation, and did nothing to stop retaliation against her when she complained about sexual harassment. She alleged further reprisal when she was fired five months after launching the suit. A jury ruled against Pao in March, but not before she had brought the issue to the forefront.
What the discussion revealed is an industry where few women hold senior roles, where male investment teams tend to dole out money to male-led companies and where, in some cases, apparent gender bias leaves women uncomfortable, ignored or excluded.
In Canada, numbers on how many women work in venture capital are scarce, but a forthcoming analysis to be published in May by MaRS, a non-profit startup accelerator, found 32 women in a total of 257 investment roles—or about 12.5%. A previous study found about two-thirds of Canadian firms had no women at all on their investment teams. (Both examined firms that made at least one seed or early-stage investment between 2010 and 2013.)
The problem extends far beyond the industry. Venture capitalists are the gatekeepers who decide which bright, young entrepreneur or new innovation to throw their support behind. While there are positive developments taking place, such as a rising number of female angel investors supporting women entrepreneurs, it’s still tougher for women to secure funding in an industry dominated by men—despite studies that suggest companies led by women have better odds of success. And when worthy women-led startups are denied venture backing, ideas are stifled, potentially successful businesses stagnate and the economy loses out on a vital source of growth and jobs. In other words, it hurts everyone.
Janelle Anderson vividly remembers an out-of-town meeting earlier in her investing career with a man from a biotech startup seeking millions in investment. The team accomplished a lot, and Anderson directed much of the conversation to push forward the deal. But when it ended, he turned to her to ask where he could get a cab. She wasn’t local, though others in the room were. She was, however, the only woman. It was the kind of question one might ask an assistant—not a potential investor.
“It made me re-evaluate whether he had been taking me seriously during the meeting,” says Anderson, who recently joined Montreal-based CTI Life Sciences as a managing partner. “It was an innocent question…but I can’t imagine why you would risk insulting an investor.”
Anderson is used to the gender disparity today. But it was more difficult in the past, when she was often the only woman in the room and the most junior. She hasn’t experienced overt sexism very often, but a cascade of subtle, endless snubs, like men constantly interrupting her and avoiding eye contact. She was once told she couldn’t attend a meeting because it was going to be “mostly guy talk.” The incidents might not seem like much. But they add up. “It’s death by a thousand pinpricks,” she says.
To address these issues, Anderson analyzed the traits that helped others succeed in the workplace. “I probably picked up some male traits,” she says. She once realized during a heated meeting (again, she was the only woman) that she was the least emotional person there.
Her experience is far from unique. Sarah Applebaum entered the industry as she was wrapping up her MBA, and joined Pangaea Ventures Ltd., a Vancouver-based firm focusing on advanced materials startups. Applebaum had previously travelled throughout Asia and Africa, and experienced being an outsider in various settings, but it was still tough to find herself the only female at work. She would meet regularly with some peers (Applebaum was the only woman) to talk about the industry over drinks. Wanting to formalize the meetings a bit, the group gave themselves a name. The acronym they came up with referenced a part of the female anatomy. It wasn’t intended to be derogatory, but Applebaum found it completely inappropriate. Her alternate suggestions were overruled. She faced a choice: Leave the group and miss out on the chance to form connections in a small industry where relationships are vital, or remain a part of it and push to include more women down the road. She stuck around. “There is this immense grey area that can be difficult to navigate,” she says. “You have to determine where you draw the line and what battles you want to fight.”
The lack of women in venture capital isn’t just problematic for those in the industry. Female entrepreneurs have a harder time getting funding as a result. A 2014 paper published in the Proceedings of the Natural Academy of Sciences found that men seeking investment were more likely to succeed than women—even when the pitches were identical. Those narrated by men were selected 68% of the time, versus 32% for women. The men’s pitches were rated as more persuasive, logical and fact based, according to the paper. Venture capital firms with female partners, however, were twice as likely to invest in companies with women in management roles and three times as likely to do so when the CEO was a woman. Venture-backed companies with women at the helm fare better, too, according to a 2012 report by Dow Jones. The study found the median proportion of female executives was 7.1% at successful companies—more than twice the number at unsuccessful ones.
Lise Snelgrove knows what it feels like to pitch to an all-male investing team. After 12 years working for a leading technology company, she’s currently seeking funding for her firm, This Space Works, which connects companies to temporary workspaces in the Toronto area. “Women fundamentally do business differently than men do,” she says, noting all-male firms seem to focus on growing quickly, whereas women tend to prioritize sustainability. Finding investors whose visions align with the entrepreneurs’ is central to success, but making that connection is harder, she says, “because we’re different, and we play a different game.”
This creates what Geneviève Morin, chief investment officer of the labour-sponsored Fondaction and board member of the Canadian Venture Capital and Private Equity Association, calls a vicious cycle. Many venture capitalists come from entrepreneurial backgrounds, so when few women receive venture backing, it narrows the pool of females who can enter the sphere. “If you don’t have many, you don’t attract many,” Morin says.
It also hurts venture capital firms themselves. Jennifer Reynolds, president and CEO of Women in Capital Markets, says partners at all-male venture capital firms have told her that when presented with an idea geared toward women, they’ve gone home to ask their wives for opinions. “That’s fine, and their wives might have a good perspective, but their wives are not venture capital investors,” Reynolds says. “Clearly, they don’t have the right talent around the table.”
Even though male venture capitalists know having diversity in teams adds value, there are still many firms that consist entirely of men. Peter Williams, CEO and managing partner at the Calgary-based venture fund Annapolis Capital, says his all-male investment team would “absolutely welcome” women—if it could find them. “We are certainly not seeing a lot of applications from women,” says Williams, who focuses on oil and gas exploration and production companies, a largely male-dominated field. Williams says the industry would benefit from having more women in it, but his company hasn’t tried to actively recruit women. With only nine people on staff, it doesn’t have the resources. “We generally hire within our sphere of those we know,” he says.
So why aren’t venture capital firms hiring women? The talent pool is small, for starters. Shermaine Tilley, a managing partner at CTI Life Sciences—where, exceptionally, half the partners are women—says venture capital typically requires a deep understanding of finance or a background in science, technology, engineering, mathematics or computer sciences (STEM). “You still have a minority of women studying, for example, biochemistry, studying immunology, studying engineering, and in finance,” says Tilley. Indeed, at the university level, women accounted for 39% of STEM graduates in 2011, according to Statistics Canada.
Golden says the way the venture capital industry has emerged also makes it tough for outsiders. Many private funds grew out of wealthy family offices. Seasoned entrepreneurs and finance veterans are the ones who launch firms. When they do, they hire people they already know and trust. In Canada, where the venture capital industry is so small, there aren’t many jobs to go around. “For the guys, too, it’s not an easy industry to break into,” Golden says. But women have to work even harder. “You have to really be pushing it and be a bit above average for them to accept you as a woman,” she says.
Boris Wertz, CEO and founder of Vancouver-based Version One Ventures, says investors are often more comfortable hiring and backing people who are similar to them. “Self-selection probably favours people who look very much like the people who are already in charge,” he says.
To fix the problem, venture capitalists have to overcome their biases and actively recruit women. While Wertz is the only partner at his firm, he’s made a point of hiring a female associate from a different part of the country with an engineering background to complement his business experience. He has been an outspoken advocate for having more women in tech and venture capital, a topic many shy away from discussing publicly. His fund has done “phenomenally” well with female entrepreneurs, Wertz says, and he wants them to know that if they don’t feel welcome elsewhere, “they sure are here.”
There are other signs the gender gap could narrow further. More women are graduating from STEM programs and going on to succeed as entrepreneurs. Various programs are throwing support behind female entrepreneurs, too. The Business Development Bank of Canada announced in March that it has earmarked $700 million over three years for women-owned businesses; angel funds like Maple Leaf Angels have revamped to focus on women-led companies. “The only way to get more female VCs out there is to have more successful entrepreneurs with successful businesses who have the funds to turn around and invest in other businesses,” says Snelgrove.
Applebaum says building more mentorship opportunities between women in venture capital, including linking those in the U.S. and Canada, is sorely needed. “As a young person starting your career, there’s no leadership development program or straight career path,” she says. “That might give some women cause for concern, just trying to navigate their careers in an industry that doesn’t really have many rules.”
Educators and venture capitalists argue that women need more exposure to the industry, both as a potential career choice and as a funding option. That can be done, for example, by having venture capitalists chat with high school students or holding forums featuring successful female venture capitalists as panelists. “The role model thing is huge,” says Julia Deans, CEO of Futurpreneur Canada, a non-profit that supports young entrepreneurs. “If you don’t see other women doing this sort of thing, you won’t figure out how to go that way yourself.” Funds can do more work to reach out to female entrepreneurs through events like women-only information sessions, she says.
Reynolds says firms need to make it a priority to recruit women to senior roles. “They have to go outside their networks and find partners, because they’re certainly out there,” she says. “It’s been a matter of people choosing people they’re comfortable with, and I think that’s just laziness on the part of people running these funds.”
Solving the problem is in the interests of everyone, Reynolds argues. “The Canadian economy has been missing a lot when it comes to productivity and innovation,” she says. “We have to make sure that venture funding is getting distributed to the best talent and not just the talent that’s known to us. This is really important, not just for the venture capital industry but for the Canadian economy as a whole.”
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