I used to think Silicon Valley was a model meritocracy. From 1995 to 2005, 52 percent of the Valley’s startups were founded by people born abroad. Immigrants from India had become the dominant company-founding immigrant group. They had achieved this by mastering the Valley’s rules of engagement and building their own mentoring networks.
Then I moved to Berkeley, Calif., and started frequenting networking events in Silicon Valley. It soon became blatantly obvious that the immigrant data didn’t tell the full story. This “meritocracy” didn’t include many women, blacks, or Hispanics. And an important and influential segment of the Silicon Valley community denies that any imbalance exists.
For me, the most eye-opening event was a tech awards event hosted by the blog TechCrunch in January 2010. This was the tech industry's equivalent of the Oscars. More than 100 entrepreneurs were on stage. It surprised me how few Indians and Chinese there were, given that these groups are founders of a third of Silicon Valley’s tech companies. More troubling was that the stage held just just one black person, representing his company’s founder, and two women: TechCrunch CEO Heather Harde and a performer in a circus act. Otherwise, it was all young white men.
I decided to make this my next research project. Before taking on the issue of race, I decided to look into a subject I thought was less controversial: the dearth of women in tech.
I found that the problem is deeper than merely who gets to go on stage at a TechCrunch event. An analysis of Dunn and Bradstreet (D&B) data by the Kauffman Foundation revealed that of the 237,843 firms founded in the U.S. in 2004, 19% had women as primary owners. Yet only 3% of tech firms in the D&B analysis were founded by women. When I researched the executive teams of the Valley’s top tech firms, I found very few women technology heads. Yes, there were notable exceptions such as Cisco Chief Technology Officer Padrasmee Warrior, but these were few and far between. Even the management team of Apple didn't have a single woman in it. Virtually all of Silicon Valley's venture-capital firms are male dominated. There are some women marketing executives and human resource directors in these firms, but women venture capitalists are a rare commodity. Of the 89 VCs on the 2009 TheFunded list of top VCs, only one is a woman.
Many people in the Valley suggested that the backgrounds and motivation of high-potential women inhibit them from becoming entrepreneurs. To determine if this could be true, I enlisted the help of the National Center for Women & Information Technology (NCWIT). The NCWIT team analyzed datasets that my research team had gathered on the founders of 549 successful technology startups. We wanted to see what the differences were between successful men and women entrepreneurs.
Surprisingly, the analysis found virtually no difference in motivation between men and women entrepreneurs. Just like men, women had started companies because they wanted to build wealth, capitalize on business ideas they had, liked the startup-company culture, and wanted to be their own bosses.
Women entrepreneurs were as highly educated as their male counterparts, had the same early interest in starting their own businesses, and had learned the same valuable lessons from their work experience and from prior successes and failures. The only real difference was that women put a higher value on their business partners and on their personal and professional networks.
So then: Are women less competent as entrepreneurs than men? Are they not cut out for the rough-and-tumble world of entrepreneurship?
No. An analysis performed by the Kauffman Foundation showed that women are actually more capital-efficient than men. Babson’s Global Entrepreneurship Monitor found that women-led high-tech startups have lower failure rates than those led by men. Other research has shown that venture-backed companies run by women have annual revenues 12 percent higher than those run by men, and that organizations that are the most inclusive of women in top management positions achieve a 35% higher return on equity and 34% higher total return to shareholders.
Could the education of women be the problem? Not according to data from the National Science Foundation. Girls now match boys in mathematical achievement. In the U.S., 140 women enroll in higher education for every 100 men. Women earn more than 50 percent of all bachelor’s and master’s degrees, and nearly 50 percent of all doctorates. Women’s participation in business and MBA programs has grown more than five-fold since the 1970s, and the increase in the number of engineering degrees granted to women has grown almost tenfold.
Unable to explain the dearth of women, I started interviewing women in Silicon Valley to learn what is holding them back. To date, I have spoken to about 300 women in technology. In short: They’re lacking role models, they’re lacking funding, and there are some really unreasonable VCs out there.
The Face of Success is a five-part series by Vivek Wadhwa. Part III will examine the hurdles women face in Silicon Valley.