When Theresia Gouw and Jennifer Fonstad launched Aspect Ventures in 2014, it was a big deal. Gouw and Fonstad are two of the highest-profile women in the venture capital industry, with Gouw having been a partner at Accel and Fonstad a managing director at Draper Fisher Jurvetson.
Aspect has since closed on a $150 million fund and gained some notoriety for being one of an increasing number of venture firms, run by women, willing to look at women entrepreneurs and women-run companies in a new way. Gouw spoke with me about why she's bullish on female entrepreneurs, the scarcity of women graduating with engineering degrees, and the perception that women entrepreneurs lack for confidence and big thinking.
During your career as a venture investor, the percentage of venture capital going to teams that include a woman has risen to 18 percent from less than five percent. Do you see any particular trends that are favoring female founders?
One difference is that now, a lot of consumer-focused businesses are being built. They're either consumer products and e-commerce type businesses, or they're businesses for which 50 percent or more of the target customers are female. I think certain women entrepreneurs are uniquely situated to see those opportunities, and capitalize on them earlier.
The other trend is that many of the companies that were built on social media distribution owe that success to women. Women are 60 to 65 percent of active users and sharers on social media. Women are also the most active users on the current technology platform, which is mobile. They spend more time on their mobile phones than men do, and they tend to have more apps on their phones.
When will we see more female founders bringing companies public?
Well, we've got Lynn Jurich at SunRun, which we can presume to be a public unicorn exit. But in the next IPO cycle, I certainly believe there will be a huge spate of female founders that will take their companies public.
I think there will be a lot of positive things to be seen in the next five to 10 years.
These things just take time. In the seed round or even a Series A, the companies that I invest in today will, on average, not be public companies for 10 to 12 years.
How big a problem is the pipeline--the fact that women earn only 18 percent of computer science degrees? Do you think this is part of the reason that women get so little venture capital?
The pipeline is somewhat of a problem, but I think it's also an excuse. Yes, it's true that the number of women with computer science degrees has dropped. But we don't even hire into the tech industry at the same percentages of what we graduate. It's a convenient excuse.
When we talk about CEOs of billion dollar companies, all the male CEOs don't necessarily have engineering degrees or computer science degrees or even backgrounds in those fields.
Is it possible that coding will become a less-critical skill for startup founders?
I think in some ways that's already true. As there are businesses that are really built on business model change, or on seeing new market opportunities, it will be more about the application of technology and creating a product that is custom-crafted for new market opportunities.
The ability to see new markets and new customers for a core technology is something that is available to founders and CEOs with more diverse skill sets, including women.
Why do you think there's been such a large gender gap in high-growth entrepreneurship?
The challenge is potentially, a few things. We need to have more stories being told of the women who have been successful, both in building companies and in raising capital. People who have successfully raised billions of dollars in aggregate.
The other thing, which is unfortunate, is we do hear a lot of real stories of female entrepreneurs who feel that they are not as welcome. They encounter subconscious bias, but we've also been told of male investors saying they don't understand how women think. That women don't follow business logic. This is astounding. We see more stories written about straight-out harassment, which thankfully is less common.
Another rationale for the relative lack of women in high-growth entrepreneurship is that women founders don’t think big enough or aren't confident enough. Is this something you've seen?
When people sometimes say that women's ideas aren’t big enough, I think that is a place where subconscious bias comes into play. If you don't express confidence in overly optimistic projections, people say you don't have a big business.
Most fast-growth companies start by going after a niche market and then grow into a large market. I was involved with both Trulia and Kayak. Google was already a public multi-billion company, and search was thought to be won by them. You want to start small, and as you grow, you see how your company can be something like Kayak or Trulia, going after multi-billion-dollar opportunities. You have to show confidence that in five years, 10 years, this is how the market becomes much larger.
I think the other side of it is that, particularly on the consumer side, when we say we don't understand the market, what we don't understand is how large it is.
We have Harry's and Dollar Shave in men's shaving and grooming. But look at Birchbox, which is beauty and grooming products for women. They really created the monthly paid subscription. Now they're valued at more than a billion dollars. They are actually the largest paid subscription business and were the fastest to get to $100 million in paid subscriber revenues. A lot of men would not understand why that is a big business. Why would people pay $10 a month for prestige beauty samples? But if I took the product out of it, and said here's a business that went from zero to $100 million in two years, they have the fastest growth in paid subscribers at 67 percent gross margins, that's a really interesting business. When you say what the product is, all of a sudden it's harder to understand the opportunity.
Are you seeing more pitches from women at Aspect than you did while you were at Accel?
It's said that about 20 percent of venture-backed companies have female co-founders. Our portfolio looks more like 40 percent, and that is pretty representative of our deal flow. At Accel it was probably more like 20ish percent of pitches were from women.
We see an increasing number the number of women founders who are venture-backed. Entrepreneurs are going to start to look more like the general population. But these things take, on average, 10-plus years.