Entrepreneurial

Will the next Google be started by a woman?

By Guest Contributor
August 17, 2010

The following is a guest post by Tereza Nemessanyi, founder and CEO of Honestly Now Inc., a web and mobile social media platform which will release its beta product to the market in September. The opinions expressed are her own.

After decades investing in “white male nerds who’ve dropped out of Harvard or Stanford,” venture capitalist John Doerr broke a pattern in July: he invested in a woman.

Not that Kathy Savitt was a risky bet.

The former CEO of American Eagle Outfitters and a senior executive at Amazon, Savitt built Lockerz.com, a social networking and commerce site for ages 13 to 30. She grew it from 50 college and high school students to 15.5 million users in less than twelve months, leveraging natural networks of friends and social influence. In the web technology world, she’s a rock star.

Doerr, and his firm, Kleiner, Perkins, Caufield and Byers, are well-known for prescient, industry-leading investments including Google, Intuit, and Amazon. They estimate they’ve created 150,000 jobs.

But in an industry obsessed with placing bets based on what’s known as “pattern recognition,” women-led companies are funded less than 9% of the time. According to Shaherose Charania, this recently dropped as low as 3%. For women age 40+, the rates are even lower.

Savitt, a 47-year-old mother of two, breaks that mold.

Mark Heesen, president of the National Venture Capital Association, describes this more recent phenomenon: “There are more women in the world. They represent a greater share of markets and purchasing power. Being more proactive about increasing their presence in the industry just makes sense.”

Recent studies by the Kauffman Foundation and venture capitalist Cindy Padnos of Illuminate Ventures show high-tech businesses with women in leadership outperform the rest. They are more capital efficient, launching with 30%-50% less capital, generate 12% higher revenues, and have lower failure rates.

If women are so good at starting businesses, then why does it take them longer to start one? Well, according to a Tampa University study, women are bitten by the entrepreneurial bug later than men. Our startup sweet spot is between the ages of 35 and 45 — after we’ve finished school, gained professional experience, had children, and transitioned out of the early “interruption parenting” years. We are eager to apply what we know, to create new businesses on our own terms.

Nonetheless, the two-white-guys-in-a-garage stereotype remains the romantic ideal.

Consider Y Combinator, the tech industry’s most prestigious startup incubator.

Founded in 2005 and located in Mountain View, CA, Y Combinator’s mission is to introduce many ideas to the market quickly and cheaply, so mistakes are small and earnings arrive early. The model works.

It’s funded by big, smart tech money, which is backed by internet pioneers Paul Graham, Trevor Blackwell and Robert Morris. Its participants, who hail from around the country, get to rub elbows with the biggest names in technology. A Y Combinator badge is like flypaper for investors.

But it turns out that fewer than 3% of Y Combinator participants are women. According to Y Combinator partner and author of “Founders at Work” Jessica Livingstone, this ratio represents their applicant pool.

Now, I’m a swing-for-the-fences kind of gal so last year I looked into applying to Y Combinator. They require a three-month relocation to the Valley. Trouble is, I’m a 40-year old suburban wife and mother of two young kids from the New York. So no can do.

I blogged and commented in recent weeks about it, and learned I’m not alone.

Leading venture capital investor and blogger Fred Wilson also blogged about the topic to his 100,000 daily readers. And out came a tidal wave — four times his average comment activity. Hundreds of women emerged from the shadows.

Do we need an “XX Combinator” for women entrepreneurs age 40+? Perhaps.

But many male voices of “a certain age” came out too. So did women in their 20s and 30s, without kids. So did African Americans.

They offered compelling alternatives such as the “Kids-In-Bed Combinator” — prime work hours from 9pm to 2am!

Or we could call it “NY Combinator.” The New York startup scene is breaking out. Great wins are happening for our home-grown, such as Gilt Groupe, Foursquare, Etsy and Tumblr. While these groups weren’t conceived by women, despite some of them directly serving that population, New York’s creative class does provide a mother lode of female talent. According to Richard Florida’s 2007 “singles” map, he counted 185,000 more highly-educated, creative single women than men.

These creative juices could be flowing to tech startups if they could get products to market and raise capital. We should grab this moment to support the diverse technology innovation that is popping up all over New York and start serving up the best of what New York — and everywhere else — has to offer, including young-white-guys-in-garages too.

It’s taken me, a Wharton grad with 18 years experience and several startups and an IPO under my belt, twelve months to get from idea to product introduction. In an era where speed-to-market is the name of the game, that is way too long.

Our country is in desperate need of jobs. Innovation creates jobs. And great ideas can come from the most unexpected of places. Including a mom from the ’burbs who yearns to build the next Google.

Comments
6 comments so far | RSS Comments RSS

I love the idea of a tech/start-up incubator that would be intentionally designed to be inclusive of all kinds of individual entrepreneurs. The ‘two white guy nerds in a garage’ is a nice meme, but it isn’t reality. Reality is moms with MBAs & kids, 50 yr olds with life & industry experience, innovative thinkers with deep connections to a client community… all wanting to build real businesses. I’d love to see NYC make an investment in a project like this, so that VCs could invest in entrepreneurs outside the ‘same old same old’.
CV Harquail, AuthenticOrganizations.com

Posted by cvharquail | Report as abusive
 

This essay reads like the wishful thinking of circular reasoning. Women would do better at startups if only the world of men would change the entire system of capitalism to accommodate the weaknesses of women. The only trouble is that flawed reasoning based on nothing but fallacies is a well-known character trait of females. Most males are familar with the motif by the age of 12, and it becomes increasingly difficult for females to fool them after that age. The image that females would succeed more if only men would pamper, indulge and give them more for free, doesn’t honestly make a lot of rational sense. But it is typical of what comes out of a female brain.

Posted by FirstAdvisor | Report as abusive
 

Thank you for the great post and thoughtful idea, Tereza. It’s true there is a start-up entrepreneur stereotype and also true that is changing over time, thanks in part to VCs like Bain Capital Ventures, which has invested in many women founded and/or run businesses in the past few years. FirstAdvisor, women entrepreneurs are not asking for pampering – I encourage you to read more on the subject and to reread Tereza’s piece thoughtfully.

Posted by dinarebecca | Report as abusive
 

It is interesting that the comments on this topic are so different. One need only spend five minutes understanding that the first commenter has a firm grasp on what is happening in the workplace, and the second seems to be a person whose job it is to stir up comments. Thanks CV for your comment and for the cool work you are doing at Authentic Organizations.

As for what Tereza suggests can be accomplished? “Our country is in desperate need of jobs. Innovation creates jobs. And great ideas can come from the most unexpected of places.” I am a 50 year old mom, with life and industry experience, who is an innovative thinker.

Here’s an idea: Why don’t a couple of committed, innovative, hard ball playing women get out in the market and build a business framework that facilitates women owned businesses with tools, and support and advice and when it makes sense….money.

That business could impact the growth of our economy and our society in a positive way. What is so bad about that?

Posted by msksboyd | Report as abusive
 

Very interesting insights and points, Tereza.

I chatted over iced green tea today with a very prominent woman in the online marketing space and one of the things I shared with her was:

These numbers are EXACTLY why women need to be AT THE FUNDING TABLE.

I think it’s critical that women business owners get funded, for sure, AND we need to be at the deal table with partners who won’t give us the side-eye if we decide to fund two, three, four or 20 women-led startups in a row!

Those who control the means control the outcome.

I’m not sayin’, I’m just sayin’.

Posted by lenawest | Report as abusive
 

There is a program just starting to expand into other cities and locations from it’s birthplace in Maryland (via an NSF grant in 2005). It is called ACTiVATE and it specifically geared to mid-career women to ‘incubate’ them through not only coming up with an idea (which could involve licenseing a technology from a university or federal lab) but through fail-fast feasibility analysis and business planning.

It isn’t about some equality issue, it is about economic opportunity as you (Tereza) pointed out. And it isn’t about asking for favors or freebies, these women that have been through our ACTiVATE program are smart, successful career women (and some entrepreneurs and post-docs) who need tools, connections, and knowledge on how to start a business. The program and results speak for themselves and are only going to get better as we expand. http://www.PathForwardCenter.org/program s/activate.

And I also agree with LenaWest that we need to get more women at the funding table. We’re working on building that pipeline!

Posted by JulieLenzerKirk | Report as abusive
 

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