Over the summer, there was a lot of media press about sexism in tech, and recently reports, such as the Newsweek cover story (What Silicon Valley Thinks of Women), are reviving the topic.
Part of the introduction into a well written analysis of the issue includes:
There is, though, one thing these two founders are missing, and it is almost the sine qua non of the fabled Silicon Valley startup. They don’t have penises.
And one major tech company, Intel, publically announced plans to address the situation. Intel will invest $300 million over the next 5 years to improve diversity (which includes women and minorities). Intel CEO Brian Krzanich explains:
“It’s not good enough to say we value diversity and then underrepresent women and minorities…Intel wants to lead by example.”
But the sexism is apparent in more than female founders, female investors and female engineers. The problem about sexism in tech delves deeper into products and marketing at women.
The Baffler on tech consultants, which are also typically all white guys.
“It’s so easy even your Mom can use it!” goes the common tech-marketing refrain. Dad’s masculinity, the messaging implies, automatically ensures his grasp of all new products and services out of the gate. While women are belittled for (supposedly) not knowing how to use new tools, men are allowed to remain ignorant about the social context in which those tools are put to use and the fact that some people, and not only women, are prevented from using them. The result is an Internet so simple even your Dad can understand it, and it is this vision of the Internet that dominates today; indeed, it is the vision presented by most men who make their livelihoods pontificating about technology. Complicated power dynamics do not fit neatly into an Internet simple enough for Dad to understand.
So basically: Design for Mom, but So easy Dad can understand.
But what does this mean for investors and why is it important from a business (and not just a moral) obligation.
If we look at the rise of marketplace or platform business models (i.e., Groupon, AirBnb, etc.), they rely mainly on consumption. How can you successful sustain marketing to half of the demographic if you have no presence in your senior management?
If we look at social media models, which rely on advertising (i.e., Facebook, Pinterest, Twitter, etc.), how can you engage half of the demographic if you have no presence in your senior management?
Many, if not all, of the new Web 2.0 tech darlings rely on consumption to achieve and sustain the amazing growth numbers.
Tinder (for all the saga) is a good example of diversity in action (when not fueding), the technology was designed by men, but according to initial reports, Whitey Wolfe orchestrated the product rollout and marketing strategy. From reports, she recruited sorority members to join, then asked fraternity members to check out the app. The true test of a marketplace is providing goods/services to both parties and she was the main cog in this process.
So does a consumer tech company exist if it doesn’t have users?
Rachel Sklar wrote a nice retort to the Newsweek article. She made the point that not all tech positions are software developers.
It is a RED FUCKING HERRING to constantly blame Silicon Valley’s gender problem on a lack of female engineers. If Silicon Valley’s money people or fancy keynote founders or biz whizzes on the cover of Entrepreneur were all engineers crushing code 24/7, then fine. But that is not the case.
The issue is not solely related to development. The New Yorker’s James Surowieki recently published Valley Boys, which goes into the same statistics regarding female tech employees. Obviously, technical talent is a major source of initial employees, but as noted, it is not the only source of employment:
A familiar explanation for tech’s gender disparity is the so-called pipeline problem: the percentage of female computer-science graduates has almost halved since the nineteen-eighties. But this doesn’t fully explain why there are so few women in senior management or on company boards (where skills other than programming matter). Nor can it explain the high rate of attrition among women in tech. A 2008 study found that more than half of women working in the industry ended up leaving the field. The pipeline isn’t just narrow; it’s tapering.
But from an investment standpoint, what is the impact? Returns matter.
As noted in the Newsweek column (emphasis added).
VCs are not funding women. According to a study by Babson College, only 2.7 percent of the 6,517 companies that received venture funding from 2011 to 2013 had women CEOs. Meanwhile, the Kauffman report found that female-run startups produce a 31 percent higher return on investment than startups run by men.
Why is this the case? We haven’t found any definitive information, but have seen similar numbers by Babson Global Entrepreneurship studies. To propose a reason, typically a woman will ask for help more than a man. This is vital to success. If you don’t know the answer, then don’t pretend, find a team member that can help and advance the idea.
Generally, women are also more inclusive, which naturally would lead to more diversity of background and thought. As noted in Valley Boys:
Promoting diversity isn’t, as many techies think, pure do-gooderism. It’s genuinely good for business, since a large body of evidence suggests that making organizations more diverse can also make them perform better. A recent McKinsey study found that the organizations with the most diverse executive teams had dramatically higher returns on equity and earnings performance than those with the least diverse teams. A study of investment clubs by Brooke Harrington, a professor at Copenhagen Business School, revealed what she called a “diversity premium”: groups made up of both men and women outperformed single-sex ones. A worldwide study, published in May, of more than four thousand R. & D. teams found that gender-diverse teams were considerably better at driving “radical innovation.”
In a lengthy, but important paragraph that further supports the role of diversity in business, Ms. Sklar writes:
And yes there IS a compelling business reason to have women specifically, and diversity generally, around your boardroom table. (How many studies need to be published showing that diversity leads to better bottom-line results? Here’s one. Here’s another. Here’s another. Here’s another. Here’sanother. Here’s another. Here’s another.) So if you DON’T have diversity around your boardroom table then what is wrong with you? What kind of ace business person identifies a major factor to improve the bottom line and then just ignores it? No kidding this VC didn’t want to be singled out in this article — this quote makes him and his firm look like a bunch of hapless, backward tools. “Oh it’s so embarrassing, yes we need women but golly-gosh they’re so hard to find!” There is nothing take-charge or baller about sputtering excuses for why you have failed egregiously to innovate.
So, if I was an LP and looking to invest in the next “secret” it would be female founders.
Further, a Fortune article about How Female Founders can Join the Unicorn Club (startups valued at $1 billion or more):
Women famously struggle to raise capital. Eighty-five percent of companies that were funded between 2011 and 2013 have no women on their executive teams,according to Babson College researchers. The firm Lee launched in 2012, Cowboy Ventures, is “open for business for supporting a more diverse group of founders.” She believes female founders (and teams with more diversity) will drive “awesome” returns.
For my money, I’d back Ailleen Lee and Cowboy Ventures and hope that the male-dominated VC world remains stubborn and refuses to change. If 90% of the field is avoiding an investment class, then that provides a nice competitive advantage.
Of note: As a white male (from CT), not sure if I’m part of the problem or offering a useless opinion.
The following quote didn’t quite fit into the main article, but didn’t make much sense, which is included in the previously noted Newsweek article:
It is still the kind of place where investors can tweak women who ask them for financing with barbs like “I don’t like the way women think. They haven’t mastered linear thinking.”
Everything I know about VC and possible investment opportunities is the best ones are not linear. The beauty of 10% growth month over month is the exponential power at the end of the year. So, as an investor, I’m good without knowing linear thinking…too many people think in straight lines anyway.