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Women Entrepreneurs and Venture Capital

Underrepresentation is a historic fact. So what’s the future?

I’ve written before about the role that women played in building Silicon Valley into what it is today. And yet last year, according to PitchBook, less than 3% of all US venture capital went to startups led by women.

So why is that? Is it systemic sexism in the system? Is it a pipeline problem? Or are women just not very good at pitching? (this HBR piece suggests that there is implicit bias in reviewing investment pitches).

I’ve been pondering this question recently and so I had a call last week with my friend Danielle D’Agostaro. I figured she’d have some thoughts on this topic — she’s a Partner at WV Ventures, and previously spent 7 years running the Alchemist Accelerator where she invested in and worked with over 400 early stage startups.

Historically, it’s been a pipeline problem”, she told me, “But the top of the funnel has changed dramatically in the past five years and we’re seeing much more diversity in our deal flow today”.

There is growing evidence that diversity in venture capital portfolios delivers better returns. “Diversity has become part of the vernacular today”, Danielle said, “Everyone today understands that diverse teams tend to be more successful teams”.

She also observed that gender balance varies by sector. She’s been looking at a lot of health startups recently, and there tends to be more female founders there. But B2B software, for example, is still very male-heavy.

It’s also true, of course, that personal networks tend to drive selection bias. The deal flow that a venture capitalist sees is very much a function of their own personal network. Until recently, venture capitalists were overwhelmingly white dudes, and so were their personal networks. “I have a lot of women in my network which has led me to have more conversations with women-led companies by default”, Danielle said. As the gender balance among partners at VC firms changes, the gender balance of the deal flow changes with it.

Eight years ago Aileen Lee founded one of the first female-led venture capital firms, and she also helped to found All Raise, an organization that advocates for women in venture capital and entrepreneurship. Since then several new venture capital firms focused specifically on female founders have been established. There is definitely a sea change going on.

The data doesn’t lie — historically, women have been underrepresented in the world of tech startups and venture capital. That’s a fact. But my conversation with Danielle seemed promising for the future. Hopefully we’re entering a new era of gender balance and diversity at all levels of the capital ecosystem.

This piece was adapted from an earlier edition of my newsletter.

I’m a Silicon Valley guy. I teach entrepreneurship at Stanford, coach startup CEO’s at Miller Center, and run the 4thly Startup Accelerator. Also, I love tacos.

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