The VC boys club is now an advantage . . . for competitors

One of the Valley’s most high profile venture brand names — Kleiner Perkins — has been served in a lawsuit for sexual harassment, gender discrimination and retaliation by partner Ellen Pao, who has been with the firm for seven years. Kleiner says the allegations are unfounded, while Fortune’s Dan Primack reports that the real problem is that Kleiner didn’t disclose the lawsuit to its limited partners before they closed their latest fund.
I have no idea if the lawsuit has merit or how likely it is to succeed. But I do know that gender discrimination and sexual harassment are alive and well in the traditional venture capital community and to some extent in the Valley. The issue is something that I’ve talked about ad nauseam with female founders, reporters and press over the almost ten years of my Valley reporting career. It’s not a secret — if you’re a woman that works in the Valley, you’re familiar with this.
But the reality is that this old school, old boys club mentality, is one of the many things about the established venture capital community that will need to, and I think eventually will, change, purely for competitive reasons — not necessarily because Sand Hill Road all woke up one day and took a class on gender discrimination. If firms are under utilizing women investors and are seen as unfriendly to women founders, it’s a competitive disadvantage.
Some of the younger, more nimble, incubators and firms know this and are actually using how undervalued women are in the traditional venture capital community as a competitive advantage. For example, an investment thesis behind 500 Startups is to invest in under-represented groups — both women founders and founders of color — and women make up more than half of the small team of 500 Startup’s partners.
There’s a growing amount of women founders taking place in Y-Combinator every year, though it’s still pretty small. But if a firm has a reputation for being not friendly towards women, then it’s just another barrier to doing these types of deals in an increasingly competitive environment. Internet firms like Etsy are trying to proactively grow — and then tap into — an emerging population of women engineers and developers. It makes sense, they’re a population that’s being under utilized. Women 2.0 is trying to grow a female founder, mentorship ecosystem as well.
There’s a lot of things that aren’t working for the traditional venture capital world. The Kauffman Foundation issued a report recently that found that the venture capital industry was not delivering the desired returns, and basically not adjusting to the times. I feel like an old-school mentality around gender is just another symptom of that failure to evolve. And VC firms that are continued to be seen as old boys clubs will just miss out on potential investment opportunities.
Tech Crunch and Fortune point out that Kleiner has more female partners than most, and that it’s been trying to lead in this area. I’m not sure what will happen with Kleiner’s lawsuit, but the fact that it’s out there publicly, clearly isn’t good for building their reputation around being women-friendly.
Image courtesy of stevendamron.