It’s bad business to leave women’s good ideas on the table

I am often asked for advice by young women entering the tech industry. I usually respond with a story about “authenticity” and the importance of being yourself – about how as a woman and introvert who started out as an engineer in the aggressive, male-dominated tech culture of the 80s and 90s, I tried every possible way to change myself to fit the expectations of the people around me. How there were countless times I almost gave up. And how it wasn’t until I stopped trying to be someone I’m not (and received the support of many, many allies) that my career really took off.

Today, as part of my role leading business development at Microsoft, I oversee our corporate venture fund, M12. I’ve spent a good part of my career working with startups, listening to pitches and meeting with founders alongside other VCs. In that time what’s become crystal clear is that VC funding is paradoxical: though the industry prides itself on disrupting the status quo, the industry disproportionately funds entrepreneurs who fit squarely within it. So that advice to young women about being yourself? It should, unfortunately, come with a caveat: be yourself, unless you’re a woman entrepreneur.

Take the pitch process. A 2017 Swedish study looked at how VCs speak about male and female entrepreneurs, concluding with this depressing finding: “Aside from a few exceptions, the financiers rhetorically produce stereotypical images of women as having qualities opposite to those considered important to being an entrepreneur, with VCs questioning their credibility, trustworthiness, experience, and knowledge. Conversely…male entrepreneurs were commonly described as being assertive, innovative, competent, experienced, knowledgeable, and having established networks.”

Still too often, female founders and their innovative ideas simply get filtered out of the funding process because of these biases, and I’ve seen it firsthand. There’s a fairly prescribed formula for how to pitch and get funded in Silicon Valley, and it’s based largely on an approach that today’s successful founders used – almost all of whom are men. In fact, a whole cottage industry has sprung up to teach women how to pitch (spoiler alert: students aren’t encouraged to “be themselves”).

It’s clear that women are being left out of the funding proces. In recent years, only about 2% of venture funding went to companies founded by women. Funding for women of color is essentially a rounding error – less than 1%. Oftentimes VCs rely on referrals from the same insular, homogenous networks they have for years, and it shows in the numbers. So if you’re a woman who makes it far enough to get criticized for how you pitch, you’ve already beaten the odds.

This year, the topline number ticked up slightly to nearly 3%. But again, that’s not the whole picture. If you dig into the data behind it, another pattern emerges: VCs prefer to invest in women when their businesses specifically cater to other women.

A recent study by Crunchbase looked at more than 13,000 startups over five years and showed that women who found companies in gender-neutral categories like enterprise technology get 54% less funding than those who focus on products that appeal to other women.

The message to female entrepreneurs? Even in 2019, the most important line item on your résumé is your gender.

It’s disgraceful, not only in terms of gender equity, but also as a simple matter of business. Research from the Boston Consulting Group found that if female entrepreneurs got the same level of funding as their male peers, the global economy would expand by $5 trillion.

It’s bad business to leave good ideas on the table, yet that’s exactly what’s happening. It’s time to disrupt the current approach.

That’s why my team at M12 is partnering with two other firms–Mayfield and Pivotal Ventures—to reach outside the traditional VC networks and hold an open competition for female founders working in enterprise or deep tech; the four winners will receive a combined $6 million. We’re passionate about creating change for female entrepreneurs, but this is by no means charity. We’re simply following the money. We know what the status quo is costing us all.

So here’s a pitch for you. Want to be part of a $5 trillion business? Stop asking women to change who they are. And start investing in them.