Oct 22, 2018 · 11 minutes

A few weeks ago, my new company, Chairman Mom, hosted a retreat in a restored gold mining town for 100 women. There were no men on site-- including the staff. And it was during the Brett Kavanaugh hearings.

It’s hard to describe the energy and friendships that came out of it. Conversations happened that are hard to have a mixed gender room. There was a clarity that is frequently missing in conversations where you are talking to men as well as women.

One of our speakers was Sallie Krawcheck, among the most successful women in the history of Wall Street, once called the “Last Honest Analyst” by Fortune Magazine, and the founder of Ellevest, a company that wants to solve the investment gap between men and women.

She gave a fiery talk about everything from the limitations of the #metoo movement, what white women need to do right now, and her own challenges fundraising-- despite a pedigree most women don’t have.

She has told me the stories before about the Silicon Valley VC who mansplained to her how hard it would be to hire and manage analysts. But in the middle of fundraising once again (because at that stage of company with that much growth, you never really stop…) she said something I hadn’t heard her or anyone say before in the context of gender.

She said she was sick of wasting her time and from now on, she was going to ask VCs how their partnership makes decisions before even pitching them. Because if the partnership requires a consensus, it’s almost always going to be a waste of time for women or people of color. It only takes one white man to torpedo you because of explicit bias, believe a company tailored at women is a “niche” opportunity, or simply just not have that same “gut feeling” about a woman or person of color that they do about someone who looks, acts, and talks just like them.

Her comments were like a lightning bolt striking me.

Of course.

Let’s take the bigots out of it. This is an industry that is 98% made up of White and Asian men and just over 98% of the money go to the same. Like invests in like in Silicon Valley. It’s hard enough to be a female CEO and ask a VC to go against what’s clearly a deeply ingrained point of view of what success looks like. If you are pitching a consensus partnership, you’re going to have to do that with multiple partners.

I don’t even know what she said after that because I was so busy scanning through my experience fundraising, and friends of mine who are female CEOs. How my best supporters have typically come from firms that don’t operate on consensus, single-partner firms, or deep-pocketed angels. At Chairman Mom, none of our three most supportive institutions required consensus, in part because two of them were solo-VC shops.

That can’t be an accident.

I thought more. The most frustrating “no’s” I’ve gotten are from ones where the partnerships are deeply divided. Where I know-- because of backchanneling-- that partners desperately wanted to do the deal, but there was one or two holdouts.

This, too, is likely part of the reason that firms with just one female investing partner tend to fund double the female founders. Even if those firms operate on consensus, it’s not the same uphill battle when it comes to pure gender bias.

It was the first time I thought that for women and people of color to succeed in this industry, the things the industry has taken for granted as positives might also have to change.

* * *

Krawcheck isn’t the only one who’s expressed frustration with consensus-driven partnerships in recent years. Upfront Ventures’ Mark Suster argued that the truly risky, potentially most high reward deals are ones where consensus is unlikely:

“There’s a problem with consensus driven decisions by VCs. I personally believe the most interesting companies are often doing things that most rational people would too outlandish, too against industry norms, too difficult technically, too much regulation or similar. I can’t imagine most consensus-driven decisions would have thought Oculus, WhatsApp, Airbnb, Uber or DropBox would have been as massive as they have become…

...We’ve been betting more aggressively on agriculture technologies because we believe that water scarcity will be one of the defining issues of the next generation and we believe this will drive huge economics and have an impact on the world. We’ve backed more healthcare companies even in parts of the industry with regulation.

These deals seldom have complete consensus. And as a firm we try to breed that culture. We want really high conviction...”

I remember stories of Jim Breyer arguing for Accel to invest in a then very controversial Facebook. He ultimately pledged to put his own money alongside of it as a show of conviction. Think of the other early backers of Web 2.0 companies: Peter Thiel answering to no one at his own firm, Reid Hoffman investing as an angel, Marc Andreessen investing as an angel. The broader Sand Hill Road elite didn’t have anything close to consensus that the consumer Web could make money.

The other problem with consensus driven cultures is they tend to favor the rainmakers and the dictators within firms. From a Medium piece on how VCs make decisions:

“ Most VC firms operate on consensus but it’s unequal. Like in almost any organization some partners, based on seniority or because of their specific credibility, do hold stronger voice….in various firms the person championing can get an investment through despite significant opposition, the key is obviously them doing so very occasionally while holding a strong track record.”

Those investors with the most power within firms are almost unilaterally white and Asian men.

We hear this all the time when it comes to female VCs-- so frequently they don’t have the same juice within a consensus-driven partnership to push for deals that might get some pushback. This insight might help explain something else we’ve seen: Why small or female-founded firms have produced some of the top women in venture today, whether Aileen Lee, Ann Miura-Ko, or Kirsten Green.

* * *

While data shows that even a single female partner helps, it’s hard to see how this changes just by hiring women into large, consensus driven firms.

More than a decade ago, I was an up and coming reporter making my way in Silicon Valley. There was little talk about gender. In fact, most people got angry if I asked them about what it was like to be a woman in Silicon Valley. Senior women in the valley almost always thought success was their gender disappearing.

I remember some friends trying to get a “women in tech” breakfast group going back then. They were lucky enough to get one senior woman to show up. She ranted for ten minutes or so that if we spent the breakfast talking about “women’s issues” she would never return.

Most of the women in this meeting were up and comers in their careers, so locked out of the halls of power by a lack of experience or lack of a penis that they were looking for any edge, any network that could help.

I’ll never remember a young female associate of a venture firm who was sitting next to me when the conversation shifted to deal terms. She by far had the best gig of any of the young associates in the room. At one point we were talking about a deal that did or didn’t happen (I can’t remember.) What I can remember-- and I even can still she her face and her bob haircut and her expression when she said it-- was her justifying a deal that didn’t make sense by saying, “no one ever lost their job by following Kleiner Perkins, right?”

If that was how you came into venture capital, I thought at the time, how on earth were you ever going to succeed?

She didn’t. But it wasn’t her fault. She was in a catch 22. When you have the baggage of a gender or race disadvantage, how do you take enough risk to push for those standout deals which Suster argues are the career making deals that then give you the leverage to be the dictator within a firm?

Making matters worse is the obsession with “pattern recognition” as a thin veil for bias in venture investing. Whenever I do talks about why pattern recognition trumps data in the tech world-- despite its insistence that the industry is data driven-- I show that famous quote from John Doerr at the peak of his power advising an audience of venture capitalists how they too can be successful:

“If you look at [Amazon founder Jeff] Bezos, or [Netscape founder Marc] Andreessen, [Yahoo cofounder] David Filo, the founders of Google, they all seem to be white, male, nerds who’ve dropped out of Harvard or Stanford and they absolutely have no social life. That correlates more with any other success factor that I’ve seen in the world’s greatest entrepreneurs.”

So many things about this quote to unpack. The “seem” is amazing. As if it’s happenstance he keeps backing young white men, when he’s telling an audience, that’s the playbook to success. That he actually SAYS “WHITE”! I don’t know why, but I’m always shocked he brings race into it so explicitly.

But there’s another thing I always point out when I bring this up. He forgets to mention Yahoo’s co-founder Asian Jerry Yang. In his mind, he’s whitewashed Yahoo because it didn’t quite fit the pattern he wanted to believe in so ardently.

I gave a keynote at Amazon’s gender and diversity summit recently, and it was only after I sent in my slides that another inaccuracy was pointed out: Jeff Bezos was not a Harvard/Stanford drop out! He graduated from Princeton. He was also turning 30 when he started Amazon. Not even the age of a young white male dropout with no social life. Oh, and he was married.

After my talk, I saw a long time journalist and pal Michael Copeland in the audience who had a stint at Andreessen Horowitz. He pointed out another inaccuracy that I can’t believe I’ve missed as well as I know Marc Andreessen and as many times as I’ve read this quote: Andreessen went to University of Illinois Urbana-Champaign, and he also did not drop out. Why this inaccuracy matters in particular: Privilege. Andreessen did not come from a rich, high status family that could just waltz into an Ivy League school.

Doerr’s quote-- this point of view-- was not remotely controversial at the time. (And isn’t in many quarters of venture capital now.) Doerr is just the unlucky one to have been memorialized saying it in front of an audience. It is a secret map to how VCs think and why women and people of color just don’t meet that amorphous “gut feeling” test. Not only do they claim race, gender, and age as the reason companies like Google succeeded, they tweak history to make other founders fit that biased pattern.

It’s not just that consensus causes the problem Krawcheck described of in an industry that lopsided there is always gonna be a conscious or unconscious bigot in the room. It’s worse than that: It’s that consensus doesn’t tend to be equal in consensus partnerships, with men disproportionately more likley to have the bigger voice.

You combine this with “social proofing”, another way VCs make decisions, and the odds of backing diverse CEOs falls further. Also from that same Medium post about making decisions by social proofing:

“Call it herd mentality but there are good reasons VCs like to take bets when other VCs are taking the bet. It reduces their individual financial risk because they are not the only ones who will have to fund the company. And it also increases the outcome probability since the company will have access to another set of investors bringing in governance, knowledge, connections, and sometimes actual operational help. So there is indeed an optimal point for you as an entrepreneur to disclose to a potential investor who exactly is coming in the round — if the other party is respected and very close to committing.”

My fear is this problem is becoming bigger in the industry not smaller, as the playbook is going towards raising larger and larger sums of money, that will require more points of agreement before doling out. At a time so many people in the venture world are demanding more diversity, the way partnerships make decisions doesn’t seem to be set up for it.