The year 2017 was a turning point for women in tech. That’s when former Uber engineer Susan Fowler wrote a blog post that went viral describing the sexism and sexual harassment she endured during her year working there.
Her blog broke open the doors for many other women to come forth with their stories, not just about sexual harassment but the discrimination they experience as founders, venture capitalists, and all aspects of the funding chain.
“That’s very different than anything we’ve seen before,” said Sutian Dong, a partner at Female Founders Fund, which focuses exclusively in women.
When tech companies are raising funds, they encounter people who cling to the idea that investing in women or people of color is charity, that it’s not returns-optimizing, and that there’s no money to be made.
There’s nothing unconscious about that bias, said Arlan Hamilton, founder and managing partner at Backstage Capital.
“I don’t believe in unconscious bias anymore,” Hamilton said during a SXSW panel discussion. “It’s all conscious.”
Hamilton, Dong and other fund managers sat down before an audience at SXSW 2018 to discuss how investing in diverse startups can lead to greater returns. They talked about the challenges that entrepreneurs from diverse backgrounds face as they try to raise money and build their businesses, and how startups can leverage their diverse perspective as a competitive advantage.
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Here’s an excerpt from the discussion moderated by Kai Bond:
Kai Bond: How do you go out and raise money? What differentiates you? How do you convince the individuals that invest in you that deploying this capital in your areas is the best way to return their capital?
Sutian Dong: Female Founders Fund was started with the thesis that you can make top-deck, top-of-market returns by investing exclusively in female founders. When we were starting in 2014, people said really? Are there enough of them out there? It’s a very different story now. You see a tremendous rise in female founders, not just starting companies but IPO companies. This goes back to reinforcing our stories … that we as female general partners have a unique point of view to female founders. We have a unique access and unique networks that other funds may not have. We’re building a network of female founders helping each other. We are seeing companies earlier than other folks because our founders are telling their friends to come to us first.
Charles Hudson: One of the differences when you’re raising a fund as a person of color or woman (is that) there’s a set of people out there who still have this outdated idea that somehow investing in women or people of color is charity — that it’s not returns-optimizing, that there’s no money there. I get why they think that way. If their research process is, “Let me go ask a bunch of people who’ve never written checks to women and people of color,” … unsurprisingly, the answer is often, “No, we don’t see enough people that fit our criteria to build a fund around.”
Arlan Hamilton: I didn’t have any untoward experiences in raising a fund or working in a fund in venture capital, so my experience was a little different. We have 50 limited partners — they (write) smaller angel checks. I think there are a few people who just figured because I had the luxury of ignorance, I could see things from a different point of view than they were used to. So they diversified their portfolio in general by putting a check in us.
Kai Bond: (Arlan has) one of my favorite quotes:
“Privilege is the hand-me-down heirloom rooted in (circumstance). Entitlement is something you procure and choose to wear.”
I can’t think of a (better) statement that speaks to the topic of conscious and unconscious bias as it relates to venture. What are your thoughts on this as it relates to funding of underrepresented founders? What are the keys to breaking down the barriers?
Arlan Hamilton: I don’t believe in unconscious bias anymore. Its all conscious bias, which we all have, by the way. Every one of us has bias. I am less interested in trying to teach a Facebook or a Google how to understand me or how to understand us, than to enable someone in the room to create their own from the ground up. So I’m a little bit of a rebel in that way. They’ve had the cards for so long. It’s time for us to get our own. The more time I spend with venture and the older I get, the fewer fucks I give.
Kai Bond: We as an industry have witnessed and experienced sexual harassment on a scale that I’m sure everyone here is appalled with. Are you seeing founders saying ‘Im no longer going to take capital from these funds’? How does that affect deal flow and market dynamics as a female founder’s fund?
Sutian Dong: In 2017, Susan Fowler published a blog post around sexual harassment that broke open the doors to many other women to come forth with their stories about not just sexual harassment but the discrimination they experience in their time as a founder, sometimes as a VC, across all aspects of the funding chain that’s very different than anything we’ve seen before. That stuff has really changed in the last year. We’ve come to realize that is a problem that is endemic in the industry which is not a good thing but that enables us to have a dialog. In terms of deal flow, what we’ve seen is curiously on the other side of the table where VCs look round for portfolios and say, “Oh man, I haven’t invested in a lot of female founders or people of color.” Why is this happening? What is going on with my deal flow, my sourcing, decision-making process that is causing me and my fund to not invest in the future of entrepreneurship?