What if Thomas Edison had been a woman?
The inventor famous for saying that genius is 1 percent inspiration and 99 percent perspiration probably wouldn’t have found enough investors willing to buy him a towel to wipe off the sweat, let alone fund the laboratory that would produce the phonograph, the incandescentlight bulb, the electrical lighting system, wireless telegraphy, the steel alkaline battery, electrical sockets, insulating tape, and more than 1,000 other patents.
The playing field hasn’t improved much.
Recent research from the Center for Talent Innovation, the New York-based think tank I run, found that the playing field remains depressingly tilted. Ideas and innovations from women, people of color, LGBTs, and even Gen Ys are half as likely to win the support and backing as their straight, white male counterparts. Having something inherently in common with the funder, decisionmaker, or investor makes an enormous difference, it turns out. The Center found that 56 percent of decision makers don’t value ideas they don’t personally see a need for, even when there is strong data and evidence that it’s a good, marketable idea.
This reality is especially stark among venture capitalists who provide the seed funding to get so many ideas into the marketplace. Women entrepreneurs receive only 4.2 percent of VC funding, according to new research from Stanford University’s Clayman Institute for Gender Research. Lesa Mitchell, Ewing Marion Kauffman Foundation vice president of initiatives on advancing innovation, told The New York Times, "[Women] raise 70 percent less money than men do because of their lack of access to capital."
There are not enough women at the top.
The lack of women in VC firms themselves clearly plays a significant part. According to the 2011 National Venture Capital Association Census survey, only 11 percent of investment professionals at VC firms are women. The life sciences and clean technology industries had the highest percentage of women investors, at 18 and 15 percent, respectively. Information technology (IT) followed, with women representing 12 percent of business-to-business IT investors and 11 percent of consumer IT investors. The lowest percentage of women investors was in the non-high tech products and services sector, at 8 percent.
At a senior level--where the key decisions get made--the disparity is even worse. Only five of the Forbes 2012 ranking of the Top 100 Tech VCs are women, and only one of those is in the top 70.
Women entrepreneurs report huge, well-documented challenges to being taken seriously when pitching to VC firms. The mindset shaped by this glaring gender gap was described in a recent post by successful businesswoman Jules Pieri, co-founder and CEO of the Daily Grommet online marketplace:
It often feels like a 1969 office scene when you visit a VC in their native environment. The offices are swish and modern, but the workforce looks like the cast from Mad Men, diversity-wise. The only women you see moving along the corridors are serving admin roles (i.e., coffee) or are 26-year-old associates who are just passing through. One VC I visited made me seriously question my ambition to fund a startup. He was friendly enough. But the office walls were covered with endless pictures of all-male startup teams, and after hearing my pitch he asked, with a vapid grin, "So do you work out of your home?" I had 15 employees. I had impressive angel investors backing me. This was my third startup experience. Seriously? Did I work out of my HOME? And this is a relatively young VC, so he gets no free pass for being over the hill.
As CTI research indicates, without more women inside VC firms, the situation isn’t likely to change--and that has disturbing implications for innovation and economic growth.
Women make enormous intellectual and economic contributions.
Adam Quinton, a start-up advisor and active angel investor, writes in his blog that such groupthink fails to acknowledge women’s intellectual capital (women graduate with close to 60 percent of undergraduate degrees in the U.S. and make up nearly a third of all business school students) and their commercial clout (women account for approximately 75 percent of consumer purchases).
The number of women being granted patents and trademarks is increasing: Women were listed as inventors on 18 percent of all patents issued to U.S. inventors, according to 2012 data from the National Women’s Business Council. That’s double the share of patents women were granted in 1990. Women received a third of trademarks issued to individuals.
A number of female-focused capitalization options have stepped in to try to fill the void. These include Astia Angels and Golden Seeds (angel investing), Belle Capital and Illuminate Ventures (VCs), and Plum Alley, which uses crowd-funding to accelerate the success of women inventors and entrepreneurs.
Diversity matters too.
But that’s just one solution. Meanwhile, even as the big funding money still resides with the Old Guard, paradoxically, it’s those traditional VC firms that have the most to lose by ignoring the competitive advantages in diversity. Recent CTI research shows that a workforce comprised of women, people of color, and gay individuals "matches the market" and can better identify those "points of pain" among potential customers and create appropriate solutions.
Companies whose leaders foster a culture that supports, mines, and leverages that diversity are more likely both to produce more ideas with market potential and to move those ideas from the pipeline to the marketplace. That’s just the kind of successful outcome VCs seek--and, because of their limited perspective, won’t find.
If Thomas Edison had been a woman, we might be reading this in the dark.