Leading Ladies Fund Women At Silicon Valley’s Canaan Partners

By Greta Kaul
San Francisco Chronicle.

Silicon Valley’s well-publicized gender gap is apparent not just at tech companies, but at the firms that fund them.

Venture capital firms — the tech industry’s kingmaker — employ fewer female partners than they did during the dot-com bubble, dropping from 10 percent in 1999 to just 6 percent in 2013, a study from Babson College in Massachusetts found.

Such low figures may compound tech’s broader diversity problem: Firms with female partners are more than twice as likely to invest in companies with women on executive teams.

At Canaan Partners, a firm with $4.2 billion under management and offices in Menlo Park, women make up two out of eight general partners on the firm’s investment team. The firm is flat-structured, and run by committee, so all its general partners make decisions on the firm’s investments, manage limited partner relationships and help run the firm.

Canaan General Partner Maha Ibrahim believes having women in the room is a competitive edge for Canaan in attracting founders — including women — when partners look for deals.

“Those folks from more diverse backgrounds (may have) felt more comfortable coming to us and felt more comfortable that we would understand their business,” she said.

At a recent meeting, Canaan general partner Ibrahim extolled the virtues of the business model at the RealReal, a San Francisco luxury consignment clothing startup that was founded by former CEO Julie Wainwright, one of many female founders in Canaan’s portfolio.

Beat industry average
About a third of the startups in Canaan’s last fund have female CEOs, compared with an industry average of just 3 percent, according to the Babson study.

In Canaan’s current portfolio, 20 percent of companies have female co-founders, while other well-known firms range from 19 percent at Felicis Ventures to just 4 percent at Founders Fund, a Business Insider survey found last year.

Women’s share of top positions in venture capital is smaller than in Fortune 500 finance and insurance agencies, where 18 percent of executive officers are women, according to a 2013 study by Catalyst, a nonprofit whose goal is to expand opportunities for women and business.

The barriers faced by women in the venture industry will likely attract further scrutiny as opening arguments in a suit alleging discrimination and sexual harassment against Sand Hill Road venture capital firm Kleiner Perkins Caulfield & Byers are expected to start Tuesday in San Francisco Superior Court.

Not getting to top
When it comes to venture, Ibrahim sees women hired in junior positions these days, but says many of them aren’t reaching top ranks.

“A lot of it is social psychology; these are small groups,” she said. “Small groups tend to be more homogeneous than larger groups.”

A major problem is the lack of mentorship, said Canaan General partner Wende Hutton, who has been in the industry since 1993, when she became the first female investment professional at Mayfield Fund.

“Typically it’s been somewhat of a mentorship business,” said Hutton, who focuses on health care investments. “The senior men are more apt to want to get invested in the success of younger male colleagues who reflect a lot of their own pathway. It’s just human nature.”

Follow-through lacking
Julie Papanek, who worked at a major biotech company and started a business of her own before she joined Canaan, where she’s now a principal, also sees professional networks as a hurdle for women. She said she believes firms when they say they are looking for diversity, but that when it comes to hiring they don’t always follow through on that principle.

“Maybe they’re not hiring women because they just don’t know as many qualified women,” she said.

She said she knows plenty of qualified women, and hopes firms call her for recommendations when they’re looking for resumes.

That’s not to say venture’s lack of women is entirely structural.

“People meet me and they make assumptions of what I’ve accomplished,” said Papanek, 32.

Many hurdles
She asked around for advice about a career in venture capital when she first interviewed for a position at Canaan.

“They said, ‘Don’t join venture. Go get operational experience.’ They said, ‘Go get a graduate degree in math or science … go start a company and fail.'”

She already had.

“I just looked at him and said, ‘Is there any other barrier I should jump over before I should consider a career in venture? I’ve checked all the boxes; what else do you want me to do?'” she said. She was hired at Canaan in 2013.

The field’s lack of women has caught the attention of the National Venture Capital Association, which announced in December it had formed a diversity task force, part of what it called an ongoing effort to “shine a light on the diversity imbalance in venture capital and the innovation economy.” As soon as its membership was revealed, it became a subject of criticism: only three of the 11 members announced were women.

Its co-chair, Kate Mitchell, who is a founder and general partner at Scale Venture Partners, where three of eight partners are women, said the number of white men on the task force is a strength — not a weakness.

“If it had been all diverse candidates, we would have been in a little room. We’ve been invited into the big room. It’s now a topic that (men) want to lead on as well,” she said.

Adhere to Rooney Rule
The diversity task force had its first meeting in January, and is now meeting with groups to take the industry’s temperature and make recommendations.

Though she’s not a sports fan, Mitchell looks toward the NFL’s Rooney Rule, which requires that football teams interview at least one minority for head coach and general manager jobs, for inspiration. Unlike the NFL, venture capital’s trade association can’t establish industry-wide hiring rules, but it can make suggestions.

And lately, Mitchell said she’s encouraged by what she’s hearing.

“I find more men coming up and saying, ‘I’ve got all male partners, (but) we’re trying to figure out how to hire women,'” she said.

It’s about winners
Though Canaan isn’t the only firm with women in top leadership roles, Mitchell called it a leader in the industry.

“The research does say if you do have more women around the table … you improve culture and you get better decision-making,” Hutton said.

But in venture capital, it all comes down to investing in winners — no matter what they look like.

“It’s very gratifying to see these credible, capable, talented women in my portfolio and in the Canaan portfolio … but at the end of the day, we want to win, and we want the best talent,” said Hutton.

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