venture capital


Why are Women Funded Less than Men? – a new conversation

If you are thinking of starting a company, or raising venture capital, and happen to be female then Pemo Theodore’s new ebook is for you.

Why are Women Funded Less than Men? a crowdsourced conversation presents a thoughtful collection of advice on how to do it and the challenges you face, drawn from a fascinating set of video interviews. Pemo interviewed VCs, entrepreneurs and advisors, asking them all to speak about the issues and challenges facing women trying to raise venture capital.

In a world more than 95% run by men, and 95% invested in by men, advice for the female entrepreneur is invaluable, and by presenting the advice in short video form, Pemo makes it very easy to absorb and enjoy.

Raising venture capital has never been a problem for me, and as I watched the videos I found myself thinking was I lucky, good, or just really ignorant of the challenge? I very much resonate with the advice to not be aware of your gender as you pitch, to be aggressive and to ignore that you know most VCs are not women friendly – your idea is still great.

I also resonate with the advice from Janice Roberts at Mayfield Fund that you can empower yourself by choosing the right VC. Finding the right investing partner is critical – my advice on how to pick a VC is in this post.

Many of the contributors speak about how important confidence is. So many women let themselves down by expressing self doubt. DON’T. VCs are already taking enough risk – they won’t invest in someone that reveals their fears – and men don’t let on no matter how scared they might be. Be confident, project confidence, and your investors will follow you.

As I said in my forward for the book:

While the facts are that only 3-5% of venture capital goes to female entrepreneurs there is simply no good reason for this to be the case. Women are as strong and smart as men, and often have the advantages of better management skills and stronger team building ability. But today’s venture world is dominated by men looking for the classical male style of leadership and until that changes women need to adapt to the current rules of the game, get funded and win so they can change the game.

It take confidence, courage and authenticity and a healthy dose of advice and encouragement. This wonderful collection of advice, shared experience and often humorous stories will be an inspiration to any female entrepreneur. Pemo interviews across the spectrum: VCs, entrepreneurs, those who have succeeded, some that have failed, all that have learned and share their experience with you. It’s a terrific resource if you are raising money from venture capital, plan to do so for your next brilliant idea or are a VC yourself wanting to unlock higher quality deals by tapping into the female advantage.

The complete videos of Pemo interviewing me on raising money are here and here too.


I get called a “naughty girl”

Sadly there is no titillation with this story – just the usual gender patronage.

I was on the phone with a sixty-ish business man a few days ago and I was selling. Not selling hard but describing my business and answering his many questions as he queried me to get a good sense of where we are, what our strategy is and the source of our momentum.

After an hour of high quality conversation I went for the close and asked for his conclusion. His response “You are a naughty girl for asking me so directly”.

I was gobsmacked. Can you imagine a man saying “you are a naughty boy” to another man? In any business setting?

So, gentle-reader, how, pray, did I respond? Jane Austen would have been proud of me. I stayed with my immaculate good manners, apologized for being so direct, and reminded him that he would think less of me if I did not try to close him, all with a sense of humor.

In the end it’s just funny. I know this gentleman greatly respects me. He’s just not aware of what his words communicate and he’d be mortified if he was so I am not going to tell him, I’m just going to succeed in his world.


Living the Social Network: a Silicon Valley cliche

The Rosewood Hotel sits in the perfect location. At the intersection of 280 and Sand Hill Road with beautiful views of the Portola Valley hills it’s surrounded by sleek offices dedicated to making money. The who’s who of venture capital, private equity, and now even tech centered hedge funds for the guys who want to be where the real action is (and that’s not New York if you are a geek investor).

On any given evening the people watching in the Rosewood bar is better than any movie. Take an evening a week or so ago. To my right a group of Justin Timberlake knock offs – all white young men, 30-ish, dark shirts, dark pants and one even had on a fedora (I thought he was trying a little too hard). These are probably associates from a local private equity or venture capital firm – MBAs from the best schools apprenticing at the feet of the masters. Looks, brains and confidence – making money but less knowledge than they think.

After a while two women approach them, very tight white jeans, high heels, the requisite small slice of midriff showing below deep cleavage. Long hair and on the prowl for customers. A toss of the hair subtitle “have you noticed me yet”; a well practiced eye lock and knowing smile subtitle “I find you attractive and am available”; and next thing you know they are sitting snugly on a small sofa with money.

To my left a man walks by to greet the waitress with a knowing hug and a pat on the butt. Dark tan, shirt unbuttoned showing chest hair and a gold medallion. Thinks he’s a player but I doubt he is – he’s prowling.

In contrast standing in front of me are very young interns. 20-ish, skinny boys and girls, in cheap, ill fitting suits (short skirts on all the girls) clustered together drinking expensive drinks they can’t really afford. But no worries, there is usually a partner or two in the mix hosting them. They are earnest, ambitious and often an easy mark. The friend I was with is a wealthy partner in a prestigious firm and he sized them up with a practiced eye – giving me a hilarious commentary at the same time.

It’s not all about sex and entertainment. There are the two serious VCs sitting at a cocktail table outside under a heat lamp. They’re older – in their late 40s – and oblivious to everyone around them as they hammer through how to get a stumbling deal funded. If you listen carefully you hear talk of pre-money valuation, revenue run rate and dilution. Many a deal gets done on a hand shake in places like this.

I bump into a friend who is a partner at a household name law firm – although the lawyers are usually pale and tired – they don’t get out much when the Valley is as hot as it is right now.

The place is packed and the air is on fire – talking, flirting, drinking (vastly over-priced drinks), deal-making — many are there to experience Silicon Valley, to find the next big thing and ride the wave. The movie captured it well, and made it a cliche. It was like this in 99, again in 07 and now again in 2011. Wild, geeky and the real money is being made by the facilitators – the investors, lawyers, bars and entertainers all preying on the brains who hope to come up with the next big idea.

And me? The Rosewood bar is on my way home from the office, has terrific olives, and is a convenient place to meet my Palo Alto friends. I don’t go for the buzz and the people-watching, do I?


Video interview – on raising venture capital as a woman

Pemo Theodore of EZebis is creating a series of interviews with women, and a few men, around the challenges and successes women face raising venture capital.

The low number of women entrepreneurs getting funded (see the WSJ chime in on this, and Techcrunch be controversial as usual) is a hot topic right now. And how and whether women should get extra help. Dip into the comments on these two articles to see how intense people get on the subject.

Here’s my interview with Pemo which she published today:

I’ve been fortunate enough to successfully raise money in the private and public markets over the last 15 years and I have some opinions about what it takes, and why women have to be serious about themselves, and not self sabotage. Bottom line – we need more women going into technology, and staying technology, and getting technical and operating experience. The statistics are not in women’s favor right now and we must change it.


Gender bias is alive and well in Silicon Valley

I was very amused by a recent post on TechCrunch by Vivek Wadhwa:

Silicon Valley: You and Some of Your VC’s have a Gender Problem.

It’s a good read – and a less politically correct article than the one Vivek wrote in Business Week. Here are some stats from it:

An analysis of Dunn and Bradstreet data shows that of the 237,843 firms founded in 2004, only 19% had women as primary owners. And only 3% of tech firms and 1% of high-tech firms (as in Silicon Valley) were founded by women. Look at the executive teams of any of the Valley’s tech firms – minus a couple of exceptions like Padmasree Warrior of Cisco, you won’t find any women CTOs. Look at the management teams of companies like Apple – not even one woman. It’s the same with the VC firms – male dominated. You’ll find some CFOs and HR heads, but women VCs are a rare commodity in venture capital. And with the recent venture bloodbath, the proportion of women in the VC numbers is declining further. It’s no coincidence that only one of the 84 VCs on the 2009 TheFunded list of top VCs was a woman.

Since I’ve lived this for more than 20 years now I am a mine of funny stories about gender bias, and it’s not a myth – it’s real – but you have to stay amused or it would just be depressing.

For a while I thought the issue was over, or at least getting better, but a posting by Megan Berry on HuffPo – The Gender Battle’s Not Over – confirms that even though she is only 22 she finds the dearth of women as prevalent as ever.

With the VC community it’s all about natural bias and exposure. Silicon Valley is the land of the tech frat boys. Lots of nerdy men – some young – some not so young – fascinated with technology and admiring or dissing each other as they work on it. Because the majority of VCs are male they hang out with men all day. Women are an oddity. Many women of my generation have become tougher and more male in order to fit in – you only have to hear Carol Bartz drop an F-bomb on her earnings call to know that she learned to be tough and one of the guys very early on at Sun Microsystems.

My approach was just to work harder, be smarter, and be more ruthless than the guys around me. But even now when I have been successful as a female entrepreneur, backed by some of the best VCs in the valley, even I get stopped in my tracks sometimes.

Just one little example to wet your appetite: the VC who told me “we don’t hire female CEOs because when we have to fire them they always sue for sexual harassment”. It’s true CEO turnover is high in small companies and as a CEO you have to be ready to be fired if you don’t perform, but for a VC to not want to hire a female because he thinks he’d be sued if he fired her – yikes!

My response to that comment…..”That’s not my style. If I was the type to sue for sexual harassment I’d have done it a long time ago given what I’ve experienced”.


Fear is the mind killer

As we have declined into this ugly recession there has been a lot of fear mongering in the VC/startup world of Silicon Valley. Articles about the impact of the recession on venture capital and on startups – typically with a gloomy outlook that the glory days are gone and everything is going to be bad for a long time.

The most irresponsible was the now infamous Sequoia doom and gloom presentation to its companies advising everyone to cut deep and fast to “just survive”. But to me this is a terrible mindset and a mindset driven by fear.

I believe Fear is the mind killer [to quote Dune]; you cannot build a company from fear and my job is to build a company or if I fail, not fail due to lack of trying. The implicit contract between great venture investors and their CEOs is to do whatever it takes to build something of high value – company or technology – and create a great rate of return as a result. It is certainly not to survive and create lifetime employment without creating value – and cutting too deep in a young company can destroy the very value you are in business to create. It’s a challenge to cut as deep as possible to create as much runway as possible (which we have done at FirstRain) but not damage the asset which is your very reason to be in business and not damage your support of your customers who are your future.

I also believe that great change is a time of tremendous opportunity because it illuminates underlying power structure that is actually harder to see in a strong market when everything is working – and fear will blind you to seeing the opportunities.

You have probably observed how power shows itself when a company is going through a reorganization – you can see who consolidates their personal power and scope of responsibility as the reorg goes down. In markets you see this in a downturn – the truly profitable pieces of the market show themselves. I can see this today in our December orders – who is buying and renewing and who isn’t. Also as markets shake out you can see new ways to make money that were not visible before. Today we are teaming up with a new partner to take share from their weaker competitor and we have new distribution opening up for completely new applications of our technology. Both of these new relationships emerged as the market cratered in October.

Fear is an indulgence that a CEO cannot allow him/herself – not only is it a waste of time and energy but it can cripple your actions and hurt your company by preventing you from taking the very risks that you need to take. There is some sound advice on this subject in Sunday’s TechCrunch article Fear Kills Businesses, Dead.

The best way I have found to manage fear is to be very conscious of my own mind and just not allow it. This can make me seem unsympathetic – so my apologies if I offend.


Valley alarms

Sitting in a London hotel lobby, waiting for my room to be ready, half asleep but reading through my email…. I picked up the Gigaom article Sequoia Rings the Alarm Bell: Silicon Valley Is in Trouble. I had posted a few weeks ago that the valley was not immune, but it seems that people had to see the market crash to get the message.

Clearly Sequoia has see this type of downturn before. The burst of the dot com bubble was much worse for silicon valley than for the rest of the country. Startups went under at an incredible pace. The glory days were over then and there was speculation that the valley was finished, never to recover. (And the side benefit was less traffic and easy restaurant reservations.)

But the doomsayers were wrong. As has happened repeatedly now, a few short years later the valley was booming again with a new generation of heroes like Google and Facebook and the highest number of billionaries outside of Manhattan.

I think the same cycle will repeat. No question this downturn, like the last just 8 years ago, is going to be brutal and we all have to tighten our belts and hunker down to survive it. But the companies that survive will come out the other side much stronger. They’ll have better products, more resilient management teams and the respect of the market for surviving.

It’s my job to make sure FirstRain is one of them.


The VC energizer bunny

It keep going and going…
Despite talk of a tech bubble earlier this year, despite the difficulty of getting to an IPO, despite the credit crunch and it’s effect on cash availability for some young companies venture capital investment dollars continue to flow in – as reported by the San Francisco Chronicle.

Diagram via CNNmoney.com However, while Silicon Valley continues strong, the strength is not consistent by geography. The Washington Post reports that local investment in the Washington area fell 15% year over year “It’s really a question of staying the course and surviving,” said Roger Novak, general partner of Novak Biddle Venture Partners in Bethesda. “This is the worst we’ve seen.” It is taking an average of 8.6 years for a venture-backed company to go public, compared with four years a decade ago, and venture capitalists think that’s unlikely to improve soon. As the time horizon stretches out you can see that the total number of deals is down in Q2, and there is a swing towards later stage deals which should have a more secure path to liquidity, albeit at a lower multiple. But this means venture firms are staying with companies for the long haul and placing bigger bets into an uncertain economy – and I do believe that the good ones will reap the benefits because valuations are more rational these days.

At some level Silicon Valley VCs are like the energizer bunny. They just keep on going (thankfully for our local economy). I can attest that as we hire engineers, which we are doing in San Mateo right now, it’s as competitive a hiring market as ever. Fiercely competitive. There appears to be no shortage of well funded, exciting companies for good engineers to go and work for.


Chairman/CEO – or independent?

Many startups have the founder as both CEO and Chair. The company starts small, there are a few angels who come to board meetings but don’t want to run the company, and then when venture capital comes in the VCs sit on the board and wield power but they rarely want to put the time in to be Chair.

So how, and when does the transition to a separate CEO and Chair happen? It turns out it doesn’t the majority of the time, even though this separation is well recognized as being good governance. The WSJ journal reports that “Today, despite growing shareholder opposition, the CEO and the chairman remain the same person in 65% of the S&P 500 companies.” in an excellent article about the Imperial CEO.

The problem is that in well run public companies the chair sets the agenda for the board meeting and drives the recruitment of new board members. Without an independent board there is a risk that insufficient checks and balances are in place for the CEO – as discussed here about the banking crisis. With CEO as chair s/he sets the agenda when planning the board meeting thereby exercising control of what’s discussed.

So as a company grows up how can you manage this problem?

– First, nip it in the bud – assign an outside chair on the first infusion of venture capital. Smart VCs would make this a term of investment for companies they believe have the potential to go public.
– If that doesn’t work then make the break on the IPO. These days bankers and lawyers wield so much power on that transition that they could easily team with the independent board members to insist. It does affect ISS governance ratings after all.
– And then finally, if you just can’t separate the chair/CEO for personality reasons then be sure to name an independent director who is a strong personality – with a mind of his/her own – and willing to go nose to nose with the chair-CEO to get the right issues discussed and the right directors onto the board.

Nothing is worse for a company than a passive board. Speaking from my own experience – tough board meetings where I am challenged are the ones where I learn the most and make breakthroughs in my own assumptions.