Wednesday, May 12, 2010

Female Entrepreneurs, Capital and a Misguided View

If given the choice, would a venture capitalist or private equity investor be more likely to chase a deal or a skirt?

In the near 20 years I have worked in technology, I’ve had a healthy amount of interaction with equity investors. I’ve represented emerging growth companies, been an advisor to M&A transactions and IPOs, and rubbed shoulders at countless industry forums and networking events.

In no way do I gush over fat wallets, yet I do admire a professional investor’s singular focus on making money for themselves and for their limited partners.

So…I say deal, rather than skirt.

Yet, an article published last month by the New York Times entitled “Out of the Loop in Silicon Valley” portrays a different view of investor motivations.

The story authored by Claire Cain Miller explores a myriad of issues that impact the success of female entrepreneurs, technologists and entrepreneurs – such as education, personal goals related to family and the absence of professional role models. However, for the purpose of this blog post I’d like to explore Miller’s accusation that venture capitalists are inherently sexist.

The article leads with entrepreneur’s Candace Fleming’s frustrating tale of attempting to raise money for Crimson Hexagon, a start-up company she headed. She made the rounds to some 30 venture firms only to come away empty handed and insulted. (Photo: entrepreneur Candace Fleming, image courtesy of the Journal of New England Technology.)

One VC referred to Fleming as “mom.” Another made an indecent proposal involving his yacht and a naked photo of himself. While a third was more interested in discussing the impact biking has on male reproductive capabilities.

“I didn’t know things like this still happened,” Fleming told the NY Times. “But I know that, especially in risky times like the last couple of years, some investors kind of retreat to investing via a template. A company owned by a woman is just not the standard template.”

In no way do I defend the behavior of these venture capitalists. If true, their comments were completely out of line, inappropriate and degrading.

Yet, I also believe Fleming is misguided in her belief that it was her gender that tempered financial interest in Crimson Hexagon. More likely, it was the VCs conclusion that the company was tethered to a faulty business model, or Fleming was ineffective at presenting the company’s vision, strategy and growth plan.

Buried in the NY Times story is the revelation that Fleming recently resigned from Crimson Hexagon because “she had drifted too far from the creative side of the business.” Soon thereafter the company announced completion of its financing and the appointment of a new CEO.

So maybe sexist views didn’t block this start-up from much needed capital. It could have been an ineffective CEO.


Maggie McGary said...

So the comment about the yacht and the naked photo had to do with her ineffectiveness as a CEO? Or "if you had business cards all they'd say is 'mom'"--that comment was ok because she's a crappy CEO? Regardless of how good or bad a CEO she is/was, having to endure being shown nude photos or stupid, sexist comments is not cool.

Marc Hausman said...

@Maggie-- I agree...I agree. Their comments were way inappropriate and I wrote that in my blog post.

It is never OK to mistreat someone because of their gender, ethnic background, religion, age, etc.

My argument is that is wasn't sexism that led to a lack of VC interest. The investors concluded it just wasn't a good deal.

cparente said...

Good post Marc. Everyone -- regardless of gender or ethnicity -- needs to take a hard look at themselves before they cry discrimination.

Made me think of an article in the Post Sunday. It was about returning to work after maternity leave. The writer was talking about getting less exciting projects on her return, and former projects aren't being transferred back to her.

I was feeling some empathy, until I read this line: I think this is unfair, especially considering that I wasn't particularly motivated to come back to work because of my baby.

Whoa -- so your motivation is low, and you expect all your favorite projects to be taken from colleagues who covered for you the past five months and returned to you? And you only want to work on exciting projects? My empathy evaporated at that point.

Here's the link if your readers are interested:

Sheryl Schultz said...

I am a Crimson Hexagon board member, and the company's lead investor. Under Candace's skilled hand, the company did 170% of its plan last year and will do 4x that this year.

The company has taken in more than $4M in capital from a combination of angel firms and boutique VC's, so there are clearly investors who believe in the business and its management.

Companies need different leaders at different times. Candace knew that it was time for someone else to run the business she founded and she should be commended for making that decision and sharing it with her board. I have met both male and female CEOs who have not done the same. Candace left the company in great shape, and in the skillful hands of a new CEO.

Separately, I am also the forum co-leader in Boston for Golden Seeds, an angel capital firm that funds female owned and operated businesses. While Candace's story made national headlines, she is not alone in experiencing VC discrimination. Her stories are clearly colorful, but currently only 8 - 10% of venture capital goes into businesses with female entrepreneurs. It is hard to argue with the research that has been done by reputable organizations tracking angel and venture capital investments.