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Does the Female Customer Perplex VCs, Too?

Many male tech entrepreneurs are baffled about women-focused products, but the confusion seems to extend to plenty of investors as well.
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Plenty has been written about how the male-dominated landscape of the tech industry poses hurdles for female founders, but according to a recent Wall Street Journal article, it's also often a problem for female consumers.

The article, "When the Female Customer Perplexes Techie Male CEOs"(subscription required) by Katherine Rosman, charts the missteps of male executives when they try to build products that appeal to women. She speaks with a variety of tech entrepreneurs about their struggles to get inside the heads of female customers, including Ashish Arora, CEO of crafting product maker Cricut. Arora"would come home from work dejected, telling his wife, 'I find my instincts consistently wrong,'" the article reports. Leaders at Bustle, Craftsy, and even female-favorite Pinterest confess to initial bafflement.

The Myopia of Male Investors

All of which adds another few bricks to the already rock-solid case for the industry needing to attract and retain more female founders, but it also raises the question of whether male cluelessness ends withentrepreneurs. According to a recent Inc.com interview with Poshmark co-founder Tracy Sun, executives might not be the only men in the tech industry occasionally oblivious to female-focused business opportunities. Investors can behard to persuade of the value of these business ideas as well.

For those of you too swamped to watch the whole thing right now, the money line from Sun is this: "I happen to be in a world that's run by men, and yet Poshmark is all about women. The grind was talking to the umpteenth potential investor...and them be like, 'I don't understand why people would want to sell stuff from their closet. I don't get women.' Well, you're not supposed to get it. It's women that need to get it."

Sun isn't the only one who has noticed the phenomenon of male investors passing on promising female-focused business ideas out of simple unfamiliarity with the customer and her day-to-day desires. Amy Millman, co-founder and president of Springboard Enterprises, an organization devoted to helping women build big businesses by, in part, connecting them with investment, has publicly spoken about this issue, too. "Investors, like bankers, pretty much invest in what they know, something that they understand or that is clear to them," she told CNBC. Fashion businesses and other companies focused on women, for instance, often don't fit that bill.

Christine Tsai, a partner at500 Startups, agrees that challenges exist forthese sorts of businesses when they try to raise money. "Investors may have a hard time understanding the pain point a female-focused company is trying to solve because they haven't experienced it firsthand. As a result, they may mistakenly perceive it as a niche market," she noted in an email to Inc.com. Though she feels the problem is far from dire and may be overshadowed by more generalmisconceptionsfaced by female-founders no matter their niche.

"I've seen female founders face more challenges raising money vs. male founders, regardless of the business. In my opinion, that continues to be a much bigger problem than investors overlooking female-focused businesses," she added.

Profiting from Others' Cluelessness

These more general biases and hurdles, along with the issue of male confusion at women's needs and problems,help explain why femaleentrepreneurs take home a pathetically small share of venture capital--less than 5 percent. But while the dominance of men among VCs is a hurdle for women pitching theirbusinesses, it's also an opportunity for investors who are tuned in to these opportunities.

"There are some markets that women are more likely than men to find interesting and appealing--something like Birchbox, which happens to be the largest paid-subscription e-commerce business out there, but it's focused on beauty samples. It's unlikely that two dudes would have started that business," Theresia Gouw, partner at two-woman VC firm Aspect Ventures, told Inc.com earlier this year. The Aspect team, she stressed, viewed itsgender as a boon to the bottom line and an aid in finding these successful female-focused ideas. "Diversity--not in every aspect but in some situations--will bring value added to the bottom line and that's what we're all interested in," Gouw stressed.

Where there's money to be made--and according to Gouw, there's plenty of opportunity in investing in these underappreciated female-focused business ideas--interest will probably soon follow. Plus, asTsai notes, "women control the majority of consumer spending--no good investor would doubt this."So while the mostly male ranks of VCs may be perplexed by the likes of Poshmark at the moment, it's a good bet that more diversity-minded investors are hoping to profit from that lack of insight. Hopefully, that will bring change to the industry soon.

Last updated: Jul 25, 2014

JESSICA STILLMAN

Jessica Stillman is a freelance writer based in London with interests in unconventional career paths, generational differences, and the future of work. She has blogged for CBS MoneyWatch, GigaOM, and Brazen Careerist.




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