Dave McClure, 500 Startups, & Founders Part II: Sexuality is a Bias Issue in Funding

Dave McClure is a greedy venture capitalist & founding partner at 500 Startups, an internet startup seed fund and incubator program in Mountain View, CA. He likes to hang out with entrepreneurs, and occasionally help or invest in their startups if they are foolish enough to let him.  Dave has been geeking out in Silicon Valley for over twenty years, and has worked with companies such as PayPal, Mint, Founders Fund, Facebook, LinkedIn, SlideShare, Twilio, Simply Hired, O'Reilly Media, Intel, & Microsoft. Years ago he used to do real work like coding or marketing or running conferences, but these days he mostly does useless stuff like sending lots of email, blogging, and hanging out on Facebook and Twitter. Dave also likes to play ultimate frisbee when his knees don't hurt.  You can find Dave @his blog Master of 500 Hats & on Twitter @davemcclure.

Jennifer Chin & Elizabeth Yin are CoFounders of Launchbit.

Jennifer is a graphic and web designer, who in the last 15 years has developed graphics and frontend user interfaces for startups, athletes, universities, orchestras, and of course for her own sites. She holds a B.A. in Chemistry and Physics from Harvard and a Ph.D from MIT in Materials Science.

Elizabeth is an internet marketer and backend programmer, who has done marketing for startups and was a marketing manager at Google. Prior to becoming a marketer, she wrote code for startups during the dot com era and holds a B.S. in Electrical Engineering from Stanford and an MBA from MIT Sloan.

You can find them on their blog & on Twitter

As Chief Executive Officer of khu.sh, Prerna Gupta brings extensive experience in social media product management and viral marketing to the Khush team. She previously founded Yaari, an Indian dating site which grew to over 2 million members. Prerna studied Economics and Computer Science at Stanford University and worked on marketing strategy at Monitor Group and early-stage deal sourcing at Summit Partners before making the move to entrepreneurship. Her favorite instrument is her voice. You can find Prerna on her blog & on Twitter @prernagupta

Part II


Pemo: So the big question obviously with my interviews is: How have you found the investing scene & investors towards you as females?  You've been in the Valley obviously your whole life, have you noticed any bias or do you notice that it's tougher for you girls to actually pitch for funding?

Elizabeth: You know it's really hard to say. 

I really only have a couple of experiences in fund raising.  First time around was with my failed startup & everybody said no! I think there were people who would have said yes without any hesitation if we actually had a market & an interesting business.

Second time around we've done things very differently.  We actually haven't actively raised money but people have actually come to us with offers. So it's different this time around! So now we have more of a choice.  I haven't actually noticed a comparison.  It's not like I have a twin who is a male that I can compare notes with or anything.

Pemo: You've got nothing to compare it to.

Dave: Did you have any different experiences?  You guys were in Boston for a little bit & comparing the market environment there versus here? Or at least some reactions?

Pemo: Yes tell us about that.

Elizabeth: Yeah so we heard a lot of entrepreneurs in Boston say that it was a lot harder out there. I actually know a number of entrepreneurs who have moved here for that reason. But we personally have not experienced that.

Pemo: OK, OK & as regards women entrepreneurs in Boston.  Would they be finding it tougher?  I know Fred Destin said when I interviewed him that they'd had a big conference a few days before & there was one woman there from Krush (her website). But there was only one woman in the whole audience of 50 or 60 people.

Elizabeth: There are definitely fewer but it's hard to say percentage wise because I think the startup scene is a lot smaller out there. But there are more times when I'm there, that I'm the only woman at an event.

Pemo: OK, ok so you notice it more there?

Elizabeth: Yeah.

Dave: Although strangely I think we funded 3 startups out of Boston & all of them have women on their team. 

Pemo: Oh interesting, it's taking advantage of the situation

Dave: It's so weird again!  I think it was our mentors there who funnelled those across.  One of whom is also a woman.

Pemo: Great ok.

Prerna: I personally think that it's changing really rapidly. I do think in the traditional vc space there is some bias.  I don't think it's intentional.  I don't think that these are jerks that are sexist & they watch a woman come into the office & they decide right away that they're not going to fund her.  I think a lot of it is what Dave was saying earlier, which is that you fund what you know. It's a human tendency to look for heuristics. Their brains very quickly look for generalizations that they can make to indicate whether a person is going to be successful or not.

When they've seen people year after year fit a certain pattern: a certain age, they're white, they're male, they dress a certain way, they have certain mannerisms: facial expressions or things that they say, their tone of voice. These things indicate success to them. 

When a woman comes in, maybe speaking more softly or with different body language, I think it's just harder. You don't have those same indicators that say ok this person is going to be successful, the market is going to consider this person important.  And there's some validity to it actually, because it's not just the vcs that think that.  All the business partners & everyone else in the market also use those same heuristics.  I think that's the reason that it happens implicitlty.  But it's changing!  The way that its changing is that as more women come into the market, as more women try & prove themselves, as some visionary investors give those women chances (Laughter), it changes!  Everyone's heuristics change & it's happening very rapidly right now.

Pemo: Yes I would say definitely last year & this year has been the peak.  It just feels like a big shift is happening, doesn't it?  And we're in the middle of that?

Elizabeth: Yeah, you can definitely feel it!

Pemo: And obviously we have path finders like Dave here.

Dave: Ahh I would still say that I've just had the good fortune of investing in a couple of women CEOs early: Rashmi Sinha @Slideshare probably 3 or 4 years ago. Victoria Ransom @Wildfire a couple of years ago. 

Both of them made a lot & both of them are doing really well.  So it was much easier to continue doing more of that having those as successful examples.

Pemo: Tell me what was your experience as regards raising funding?  Have you experienced part of these biases or challenges for yourself?

Prerna: In a way I've had a similar experience to you guys. This is my second startup.  My first one failed. I had a ton of vc meetings for the first one & we weren't able to raise vc money. We did raise angel money for the first one & I did feel a lot of times in some of those meetings some of that bias. Some of it was obviously: the company failed so maybe there was some validity also that had nothing to do with the fact that I was a woman.

Dave: Those assholes were right! (Laughter)

Prerna: So for the second startup, it's going a lot better.  We haven't raised vc money.  We've had a few vc meetings but we were never really interested in raising venture.

Dave: Sorry just to clarify I'm a vc, you have raised vc money.,

Prerna: I still think that Dave is an angel.

Dave: Those damn vcs.  Shit you're invested without me figuring it out. (Laughter)

Prerna: I feel that angels & angel types tend to be much more open in general.  But I think it's changing & I don't perceive any barrier for our company when we're ready to go out & raise some money, even with all of our red flags.

Dave: I think it's not easy doing a startup, raising money.  All of this is low probability for everyone. I really think it's much more based on just seeing role models & examples in front of you that do it. 

For either the investor or the entrepreneur having someone that you have personal experience with who's been successful, either raising money or getting a business off the ground, just makes it a lot easier for you to envision yourself doing it.  Particularly if they're the same shape, size & color as you makes it a lot easier to envision yourself doing it.

Pemo: And you've got some mentors on board who are women, I gather?

Dave: Yeah that has been intentional.

Pemo: So that must be quite helpful as regards them connecting with younger women?

Dave: It's still a minority, probably around 15 to 20% of our mentors are women.  Some of them are founders also but some of them are vcs who are women & other successful business owners who are women & people with operational expertise either in engineering or online.  Yes so construction of the mentor group is probably a lot more intentional than the portfolio in terms of gender & diversity & language.

Pemo: OK so here's the big question for you girls.  How is it working with Dave? (Laughter) Don't hold back!  Give us a bit of honesty here.

Prerna: I think it's apparent even just from this interview.  Dave is really open, he's really honest! I don't notice any difference. 

I'm not reminded all the time that I'm a female entrepreneur.  I just feel like I'm an entrepreneur. The fact that I'm a woman is not really an important part of my identity as an entrepreneur.  I think that's the key thing, I think that's really important.

Pemo: And so you'd recommend another female entrepreneur to pitch to Dave?

Prerna: Absolutely. (Laughter)

Pemo: If she had a good business?

Dave: Right

Pemo: And there was a win:win for him?

Dave: On the risk of tarnishing my image: I think it's impossible to completely ignore the human sexuality issues & other sensitive issues in all contexts.

Pemo: Thank you for talking about that.

Dave: So Prerna being a very attractive entrepreneur is not something that I've ignored completely. I think you always have to fight biases one way or another when you're making investments.  Sometimes its a positive & sometimes its a negative but it does enter into the equation.  I think if I believe in what I'm doing as a venture capitalist, you take risk in all forms & match it.  That's part of the equation. So that's really the best thing in investing in couples or music or other parts of the world.  We do because we think there are successful entrepreneurs everywhere, all shapes, sizes, colors, whatever.  Occasionally we think, when other people don't think that's true, we also even want to do that more. Both philosophically that's true & from a very selfish investment point of view it's also true.

Pemo: Fantastic, thank you.

Prerna: One thing that I just want to say about this whole issue of sexuality which I think is really important. 

Pemo: I'm so glad someone's brought it up!

Prerna: I think that this is one issue that definitely affects women from a really early age.  The reason we don't have more women in technology & as a result more women in entrepreneurship is because there's this tension.  And again it's a human tension, individuals are not bad people, they're not doing it on purpose.  I think when you're a woman being attractive is one of the most important things you can do as a woman, as a human female. For whatever reason, being intelligent & being powerful, these things are at odds with being sexually attractive for a woman. We are very sensitive to this at a young age. I think if you have to choose between the two, a lot of women go towards being attractive.  That is one thing that I hope will change.  It's something that we're fighting against with evolution. But I think we are capable of changing that with more role models & understanding that you can be more than just one thing. You can be a human being & there are different parts of that.  If you're a woman & you want to be sexually attractive, it's ok to do that & also to try & be successful & powerful.

Pemo: And so you think that that may be one of the reasons that's holding women entrepreneurs back?

Prerna: I do & I don't think it's explicit.  I think it just happens very early on.

Dave: It may also even be a bias on the entrepreneur's side & investors who won't invest in women where there's a concern that tension may arise?

Pemo: That that may become an issue? It is interesting because no other investor or founder has spoken about this issue.  So thanks Dave for bringing it up! Although it's the most obvious issue? So it's just interesting that everyone has skirted around that.  I appreciate that.

Pemo: I was wondering how it is for you guys working with Dave?  Can you give us some feedback?

Elizabeth: I would agree with everything you've said. One thing about the gender thing is that Dave has a reputation for cussing. 

Pemo: Oh has he, I haven't heard that??? (sarcasm)

Elizabeth: But he cusses less at the women than at the men.  I haven't done any analytics about this but... that would be my guess.

Dave: That's new information.

Pemo: So he holds back a bit?

Elizabeth: I would guess that, I don't know?

Prerna: We just get more respect!

Elizabeth: Or maybe we need less cussing?

Pemo: Yeah maybe you're just much better than the guys?

Dave: I've gotta do some navel gazing on that one. (Laughter)  I know I've written a couple of posts that really don't make me seem like the most ardent defender of women's rights.  One in particular where Rashmi came to my defense, but a bunch of other people were ripping on me for it.

Elizabeth: I don't think I've seen that one, I'll have to look at that one.

Dave: Yeah something about nuts & faces which I won't get into now.

Pemo: Well look thanks so much all of you for your time today, really appreciate it.  Really appreciate your feedback, also for that very pertinent piece about sexuality which obviously is a core issue in this.  So thanks to all of you.

Thank you.

Thanks to Alexander Blu for music 'Concert'

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