Of all the questions venture capitalists ask as they evaluate startup founders, one is perhaps more important than any other: Whom do you know?
And since venture capitalists are overwhelmingly male, as are their professional networks, it’s no wonder that only 2 percent of money doled out by the investors goes to women-owned companies.
Now, a group of tech executives wants to make sure their colleagues can never again claim that they’re not hiring women because they don’t know any. Following the example of one Boston venture capitalist, dozens of investors across the nation are pledging to take the simple step of sitting down with eight women entrepreneurs they haven’t met.
The hope is that investors will use these meetings to broaden their networks and begin a real effort to give women-owned companies a fairer shot at opportunities in tech.
Though the investors harbor no illusions that a few meetings will be enough to bridge the chasm of opportunity, the Start with Eight initiative is an acknowledgment that the entire tech industry has to take action.
“There’s no pushback anymore that this is a real problem,” said Michael Troiano, partner at G20 Ventures in Boston, who has joined the effort. He said there is widespread recognition “that it hurts us not only from a moral and ethical standpoint, but maybe an economic one as well.”
Troiano said he already has one potential investment from his meetings with women entrepreneurs this month.
“What I love about this program is that it gave us a very specific, practical way to take a step in the right direction,” he said.
Start with Eight doesn’t ask much of its participants. All they have to do is ask colleagues for names of women who could become “founders, hires, board members, executives” and set up meetings, and then ask others to do the same.
Flybridge Capital, a local venture capital firm, has been promoting the Start with Eight initiative along with the West Coast firm Alpha Edison.
Chip Hazard, a general partner at Flybridge, started what became the Start with Eight initiative last year after he looked at his records for six months of meetings about prospective investments. Ninety percent of them had been with men.
That realization led to frank conversations and a difficult reckoning with the realities of discrimination and harassment in his field.
“This is an industry that I’ve been in for 20-something years that I love, and I think what we do as investors, and what our founders do in terms of building and creating companies, is amazing,” Hazard said. “The idea that it’s flawed for half the population is crazy, and many of the stories are outright disgusting.”
On top of that, he said, it became clear to him that the limits of his network meant that he might be missing good investment opportunities. Several studies have found that firms that have female founders perform better.
Flybridge is now supporting XFactor Ventures, a small, $3 million fund in which several female entrepreneurs make investment decisions and invest solely in women-owned businesses.
In advance of International Women’s Day this month, Hazard wrote a blog post describing his experience and encouraged others to expand the number of women in their networks. More than 40 venture funds have taken the Start with Eight pledge, from Boston to Silicon Valley.
Anna Palmer, an investment partner at XFactor and chief executive of the Boston shopping startup Wondermile, said she believes the Start with Eight program can make a significant difference if investors keep up the effort after they complete the pledge.
“I think eight would turn into 16, which ultimately turns into hundreds and 50 percent of the deal flow,” Palmer said.
Rica Elysee, chief executive of the startup BeautyLynk, worries that networking efforts like Start with Eight could be counterproductive if investors use the meetings to signal good intentions but don’t follow through.
She said she at first was concerned that participating in the initiative would be wasting time with investors who thought “they’re going to get a bonus point because I am a female founder, or they’re going to get a double point because I’m a black female founder.”
Elysee ended up connecting with Troiano, and both said they thought the meeting would lead to additional conversations. But Elysee is still waiting to hear from other investors who might want her help to meet female entrepreneurs. She said venture capitalists should also be undertaking a similar effort to include minority founders in their networks.
Lakshmi Balachandra, an assistant professor of entrepreneurship at Babson College, said venture capitalists looking to change their networks might want to consider decreasing their reliance on whom they know.
In a field that’s supposed to be on the forefront of data science, she said, there are other ways to determine whether a company is viable.
“They claim to really evaluate markets, but I think there’s so much bias in that evaluation that it’s so much more about the person and how they feel,” she said.