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Funding for women entrepreneurs slackens, despite concerns about bias

From left: ZAPPRx Founder and CEO Zoe Barry, 406 Ventures co-founder Maria Cirino, and Sheryl Marshall, the head of Capital W. Globe Staff/file photos

Two years ago, following a high-profile sex-discrimination case, the male-dominated venture capital industry vowed to pull down the barriers blocking women entrepreneurs and investors.

But by some measures, the VC world has failed to deliver and is actually moving backward.

In 2016, only 9 percent of the $71.7 billion in US venture capital funding went to companies with female founders, according to data prepared for The Boston Globe by the research firm PitchBook. That was down from 13 percent in 2015, which had been the highest level in years.

The numbers in Boston are marginally better: Last year, about 13 percent of Boston-area VC money went to firms with at least one woman founder, according to PitchBook data, though that, too, was a decline, from 18 percent in 2015.


Now, the venture world is facing a new rash of allegations, as women entrepreneurs say that investors have propositioned them, tried to wheedle dates, and even touched them inappropriately.

Lakshmi Balachandra, assistant professor of entrepreneurship at Babson College, said the lack of improvement shows the male-dominated industry cannot be trusted to tackle the problem itself.

“I think the bigger issue is that there’s no driver for change,” she said. “There’s no legislation that says they have to invest in more women, or that they have to have more women partners. It’s a private industry. These are private firms. The only people they will really make changes for are their funders.”

The number of female investors has also remained persistently low. Another recent survey, by TechCrunch , showed that only 7 percent of partners at the top 100 venture firms were women.

The dismal numbers contrast sharply with the soul-searching that followed the highly publicized but ultimately unsuccessful gender discrimination case against Kleiner Perkins Caufield & Byers, one of the nation’s most revered venture capital firms, which prompted a number of industry-wide initiatives to improve the climate for women.


Many venture capitalists have signed onto pledges to stamp out discrimination, and there are myriad efforts to add not just gender but racial and ethnic diversity to a field that sorely needs more.

The reckoning has been painful. The New England Venture Capital Association held a closed meeting Tuesday night to discuss sexual harassment in the industry. Before the event, the head of the organization published a blog post acknowledging that some participants were uncomfortable that a number of mostly male venture firms had signed on as sponsors and would participate in the discussions.

Jody Rose, executive director of the association, said the event featured a training session on preventing harassment and bias, and aired some accounts of inappropriate incidents that have happened at Boston-area firms. She said she hoped the discussion demonstrated the urgency of the issue and predicted more tension ahead.

“There’s heightened awareness about the fact that, yeah, there is some stuff that has happened here. This is coming to light, and the question is . . . How do we respond?” Rose said. “It’s also important to highlight that we have investors that are not a part of this list, who are motivated to move this industry to a place where this is not an issue.”

While the share of venture deals to female founders is beginning to inch back up this year, to 13 percent so far, women and minorities remain underrepresented at all levels of the industry, limiting the pool of candidates for prominent jobs.


The tech industry itself has faced years of criticism over its lack of diversity, and giants such as Apple and Google have been seeking ways to bring more women and minorities into their upper ranks.

Among the most celebrated shake-ups was the resignation in June of Uber chief executive Travis Kalanick amid controversy sparked by a blog post in which a former engineer made allegations of sexual harassment at the company.

A recent study coauthored by Babson College researchers found that 97 percent of US venture funding from 2011 to 2013 went to companies where a male was CEO.

“This is a long-term issue that’s going to take a long time to resolve,” said Adam Marcus, managing partner of OpenView Venture Partners. “There’s not a flick of a light switch and by tomorrow we’re going to solve these problems. These are structural issues that have existed for a long time, and you’re going to have to play long ball to fix them.”

Maria Cirino, cofounder and managing partner of the Boston venture firm .406 Ventures, said there are encouraging signs: Investors that provide venture firms with their working capital have taken note of the scandals, and several men at the center of the recent allegations are facing real consequences, such as losing their jobs or finding career opportunities limited.


Maria Cirino.Globe Staff/File

In June, a cofounder of the Silicon Valley firm Binary Capital, Justin Caldbeck, resigned after he was accused of having made unwelcome advances to female entrepreneurs. Bloomberg reported company investors voted to effectively close a fund due to the turmoil.

Cirino said this moment could mirror the 1990s, when investment banks began addressing gender bias.

“It’s not necessarily particular to our industry,” Cirino said. “Morally bankrupt people have been taking advantage of imbalances in power since the dawn of time. The issue gets exacerbated when there’s a lack of accountability.”

Sheryl Marshall, founder of Capital W, a Boston effort to promote venture investment in female firms, said the best way for a company to prevent sexist behavior is to have a diverse team.

“You have a culture in a firm, and the culture is just set by the partners,” Marshall said. “You’ve got a bunch of boys sitting around. I’m not saying they’re bad but it’s not the same . . . when you have women around the table.”

Sheryl Marshall.TJessica Rinaldi/Globe Staff/file

For every woman made uncomfortable by the behavior of a venture capitalist or a superior, there are others who have been passed over or dismissed by male-dominated investment teams.

Zoe Barry, CEO of the Boston startup ZappRx, described meeting a prospective male investor at a 2013 event in California who greeted her as “that little girl with that little thingy.”

ZappRx founder and CEO Zoe Barry recalled having been greeted as “that little girl” at a 2013 investor event. Jonathan Wiggs\Globe Staff/file/Globe Staff

“I’ve got to tell you, that was my absolute first experience of sexism in the industry,” Barry said.” I basically dropped my drink, [and said], ‘Don’t you ever say that to me. I am not a little girl. I’m the founder and CEO of ZappRx.’”


Barry didn’t identify the investor. But the episode lingers in her mind as an example of the discouraging ways women are treated.

Barry and others say they sense the problem is more rife in Silicon Valley, where some of the most egregious examples have emerged, than in the Boston area. Amy Spurling, a serial entrepreneur working on her eighth startup, said she often sees female decision-makers in the room when she makes pitches to venture capitalists around Boston. It’s much rarer in California, she said.

“The numbers are the numbers. They need to change,” she said. “But the interaction I’ve had personally has been very different on each coast.”

PitchBook said women make up 25 percent of the venture capitalists in New England who have seats on the boards of their portfolio companies; nationally, and on the West Coast, that number is 16 percent.

The tech industry faces something of a chicken-and-egg problem: The relative homogeneity is a turn-off to aspiring female entrepreneurs. But whoever figures out the solution will reap an economic benefit: Researchers have long known that more diverse organizations perform better.

Marcus, of OpenView Venture Partners, said his firm has been pushing its portfolio companies to have more diverse boards and workforces. As those companies become successful, Marcus expects them to spin off a new generation of women entrepreneurs and investors who will bring their own diverse networks to the table. He said firms must start by demanding measurable action.

“There’s a lot of people getting on their soapbox, talking a big game, but as soon as they get off the soapbox they go right back to their old behavior,” he said. “People need to be much more open about sharing their goals and objectives and how they’re performing against them.”

Andy Rosen can be reached at andrew.rosen@globe.com. Follow him on Twitter @andyrosen.