Lessons - Why Women Get 2% of VC Funding | Julia Boorstin - CNBC Senior Correspondent

In this lessons episode, explore why gender equity in the workplace remains elusive despite higher educational attainment among women. Discover how the broken wrong limits early career advancement understand how pattern matching and unconscious bias shape venture capital decisions and uncover how diversified leadership and investment approaches drive stronger outcomes. So where are we at in terms of equity? So what is the reality for somebody going into the workforce now and then trying to move up? What are the problems and the struggles that perhaps we think are gone but are still there? What what do we have to deal with? So what's interesting is that you know women actually graduate from college in higher numbers than men do. Women go to more grad school than men do. I think the numbers are pretty close to equal when it comes to business. Well these numbers change all the time but there's no there it's not like men are getting more education than women do but there've been a lot of studies trying to figure out why women may start in jobs at the same numbers as men but don't end up at the top of companies in the same numbers as men and one of the key theories and this was something that was sort of articulated by Alina and McKinsey study is this idea of a broken wrong. Women get promoted at the lower levels but then there's a sort of a leap to more of a management level where often women just don't get those promotions and interestingly it doesn't necessarily seem to have anything to do with performance. It can have to do with how much women are pushing for promotions or maybe they are are sort of inadvertently penalized for taking time off from work for you know from maternity leave etc so there are so many different reasons but one thing that I really focus on in this book is I look at the tech industry in particular because the tech industry has more of a gap in venture capital funding than in any other industry you'll see in terms of representation. So we all know that tech companies are incredibly powerful they impact the way we live our lives the way we travel with companies like Uber the way we you know order every product to our house with Amazon like there's no company tech their tech companies have massive influence over everything and tech companies are funded by venture capital whether it's Facebook or Airbnb all these company Google all these companies exist because venture capital fuel them and allow them to grow massively while they were still losing money so I wanted to look at this sector because this is the sector with the craziest gender gap women on average female founders have gotten 3% or less of all venture capital funding in the past 10 years so if you look at billions of dollars in in venture capital like 30 billion dollars last year 3% of it actually 2021 it was 2% 3% or so of that money goes to companies of female founders that's absolutely insane so that's the reason why that doesn't really make sense so I really want to focus on that world just because the gap was so crazy that I wanted to understand a why that was happening and b how the women who had defined the odds and had managed to get that tiny piece of enter capital funding how they had done it I wanted to know their secrets because I thought these women are by definition exceptional and I really want to learn from them so so we'll unpack why some women did receive VC funding but that's a really interesting stat so I would have actually assumed that in yeah of course you think of tech is like oh there's all you know the tech bros and whatnot and there's like sort of like a negative connotation with the tech bro sf startup but the numbers that tech is worse than some other legacy industries is absolutely insane so if 3% of it's 3% of female founders are getting VC money it's very obvious why there's not a lot actually it's actually slightly more complicated 3% of VC dollars go to companies with female founders but it's 6% of deals and what's interesting is because you know each deals like the check that's written yeah what that means is that women's checks are smaller than the checks that men are getting if they're getting 6% of deals and only 3% of dollars it means the checks are on average smaller so why is that that's a huge problem to solve for right thing it's another problem too so there's so much in here and I just want to be clear I'm not pointing fingers at anyone I think what's really interesting about this is I don't think there's one group one person no no one group or organizations to blame for any of this this is layers upon layers of structural historical societal patterns that have established this system and it's very hard to break them what I was most interested in and press to learn in my research is just this concept of pattern matching is hugely powerful pattern matching is this idea that if you're a VC and you want to make an investment in a founder your instinct and the data would indicate that you should invest in someone who matches a pattern you should invest in someone whose company is similar to another company founded maybe you have a habit or a pattern of investing in people who were engineers at an Ivy League school and then founded an enterprise software company which they sold and now you want to invest in these as second time founders if you're looking at that subset of of founder you're going to be looking mostly at men so it becomes this feedback loop where people just invest in more and more of the same types of people part of it is that if you're a venture investor you're making some big bets and you want to control every factor you can control so if someone reminds you of Mark Zuckerberg back at influence you there's some crazy quotes in my book I've heard this from BC saying I'll invest in anyone who reminds me of Mark Zuckerberg but I think that it's just this instinct to go with the familiar and also when you're an investor you're going to be spending a lot of time with these companies you're writing big checks to and so you want to make sure this is someone you like and don't mind spending hours upon hours with so there's also this instinct to invest in people who feel like your friends maybe they went to your same fraternity you know for same college we're in your same fraternity so I think a lot of that is this sort of it's a pattern matching which is a symptom of unconscious bias and the more we could just recognize it the more there's a huge opportunity to break the pattern and there's financial opportunity in breaking the pattern there's a VC I interviewed for the book named Josh Coppelman from First Round Capital it's a fund in Philadelphia he had a very successful fund and after 10 years he said let's do a study and let's find out like what has been working with our companies they invested in early stage companies early stage is when there's the most opportunity for bias because you're not investing in a company based on a five-year track record you're investing in a company based on the idea and the founder so he went back and looked at the results of his investments over the years and he found that the female founded investments which weren't there weren't very many of them they tended to perform better he thought this is crazy if the female founders their companies are doing better why are we investing in more of them so you sort of took a step back and realized that there were systems they could put in place to make sure they weren't just you know investing in the in the obvious thing based on the patterns so they before used to only have investors who had had a successful company that they had invested in that limited the pool and they said why do we only have to hire people we've invested in their company let's you know let's broaden the pool so they started hiring different kinds of investors more women and women are twice as likely to invest in a female founded startup than men are so they all of a sudden got this different pool of companies who are coming to them with their ideas because they diversified who their who their venture partners were basically and then interestingly they put these systems in place in their meetings to make sure that they're getting rid of bias they'd hear a pitch and then instead of just opening you know having that founder leave and they'd open the floor for conversation this is something that happens in meetings no matter what type of company you're in they would have a hear a pitch like you could hear a presentation but they'd have everyone write down what they thought about the company then they'd have a conversation that way you didn't have one very loud charismatic person railroad everyone else into listening to their opinion and then everyone would be like okay fine this guy's loud we should do what he wants to do this way you could get people who are maybe more introverted maybe maybe more women who are less likely to want to go out on a limb in a male dominated room and you could just let everyone share their opinion without you know without it having to be a public performance and he found that the outcomes of implementing this system were really really powerful so I think there's so much upside to recognizing and stripping out the pattern matching and unconscious bias so it's going to take these VC firms an incredible amount of self awareness to do with this one VC did which is absolutely incredible curious about your thoughts and I know it's not going to be an absolute answer that we can solve for right now but do you think it would be easier if we teach over some of the things the awareness that we're going to talk about in a second about female founders that have done exceptional things and sort of broadcast that message out to the world or alternatively second potential strategy if we try to get more women founded female founded VC funds that would hopefully start off on the right foot what do you think is more realistic I think you need all of the above ultimately the venture capital industry is very large and very entrenched they get money from all sorts of different sources the only way you're really going to see massive change in terms of who's getting funding is if you have some of the biggest funds of billions and billions of dollars if you get them to identify the value the financial value this is not about helping the world this is about they will make more money if they invest in a more diverse set of companies I think once you have that piece that's when you're going to see more systemic change otherwise it just you know plenty of women are starting funds and that's great but that alone is not going to drive meaningful change to the numbers if you're talking about coming from a place where women founders have never drawn more than three percent of VC dollars in any given year that's still it's a sad but incredible stat so let's let's break down that three percent I mean that's what you did right you broke down you went into the three percent and you found out why why these people got the money what was the what was the differentiator between all the other women founders that weren't successful and then it's also talk about the results because the results are also incredible I know that some of the people that you interviewed they're like on my list of people that like I definitely want to interview like they're like fucking badass like they're awesome yeah so um let's let's first but we can take it whichever way do you want to talk about the results first or do you want to talk about why these people were successful in raising capital in the first place well what do you mean by the results you mean like the incredible companies they built and why there's a financial incentive to diversify your portfolio based on some of the people that you spoke to yeah I mean look there's a lot of powerful data I mean I should back up and say I started this book because I was so impressed by the female founders I was meeting and I thought their approach seemed different from this kind of stereotype of what leaders are supposed to look like and be like and lead like and I kept on coming back to this idea that leadership doesn't have to just be one thing this you know this archetype of male aggressive top-down hierarchical management like that is really not the way things work certainly not anymore and we're seeing women lead in so many different ways and I think it's really empowering to realize like all of these different things work maybe I have a piece of that in myself maybe there's something there that I can I can try to grow in myself and it's okay that I don't look like that like that bro you know the tech bro as you put it or the or the guy in the suit that's our that's our stereotype so I first start off wanting to tell these amazing stories because as you said you guys have to read my book it's so much fun these stories are so surprising and inspiring but behind the stories I thought each of these stories is driven by different characteristics what what this woman is doing trying to form the healthcare system what this woman is doing trying to navigate the pandemic the peak of the crisis with a company that by all of her measures should have gone out of business and instead has gone on to magnet you know magnificent heights what they're doing is a leadership trait or strategy that we can break out and I can find research on so I started with the stories and then I just started reading so many academic studies about management and leadership and I I was really impressed by these studies it's amazing what business school professors have been up to but also to learn that some of these traits um you know that that maybe we don't associate with leadership or business success are actually hugely valuable and we should just throw out the stereotypes of what a leader looks like because it has nothing to do with what in reality actually works thanks for tuning in if you found this valuable don't forget to hit that subscribe button so you never miss an episode and if you want to dive deeper into this conversation check out the links in the description to watch the full episode see you in the next one