In the technology industry, pattern matching is often how investors choose who to fund. Like trying to find a sock in a drawer that’s the same color and pattern as the one in your hand, they are looking for founders who have similar backgrounds to founders who have been successful in the past. All too often that oversimplifies to how a founder looks and dresses. In reality, investors are often searching for a sock that looks exactly like Mark Zuckerberg.
Data that suggests that there’s so much more to a company being successful– What’s the idea? Who are the founders? How well can they execute? Is the timing right? It’s hard to know how well someone is going to execute, how they operate under pressure, or how gritty they are. These aspects of a person change over time.
Because of the complexities involved, “many VCs overreach with their pattern matching”:
“A pattern-matched instruction without a rationale provides very little help.”
What does the potential founder look like? Does he look like Mark? … This overzealous application of pattern matching is a disadvantage to every potential founder who isn’t a twenty-something white male who dropped out of an Ivy League school.
If you look at female founders who reach series A funding, they represent only ~3 percent of total venture funding. Obama’s top tech advisor at the White House highlighted the ongoing problem:
“In venture capital, three percent of venture funding is going to women and less than one percent to people of color… We need to support VCs to overcome their biases.”
—Megan Smith, Chief Technology Officer of the United States
It is difficult for women to match a pattern targeting Mark Zuckerberg(s). Gender is a major obstacle. Women can’t dress in the de-facto uniform of jeans, tee shirt, and hoodie (because women who pay less attention to their appearance are undervalued compared to their male peers). But wearing a dress risks being seen as too formal. It’s a Catch-22.
We hear a lot about this being a pipeline problem: that there are not enough women studying engineering, capable of leading companies, or running venture capital firms. But despite ~20% of STEM degrees being earned by women, only ~4% of leaders in technology are women. So the real question is: What can we do to affect this inequality today? Everyone needs to take responsibility to examine and overcome their individual biases. David Rose, founder of investment group, New York Angels, and quoted in the WSJ, isn’t there yet.
“As far as I know in my peregrinations around the startup world, there is zero deliberate discrimination.”
We should be concerned about Mr. Rose’s casual acceptance of “non-deliberate” discrimination. Isn’t that how most discrimination works? Bias is often unconscious, but “non-deliberate” bias still means Mark(s) get funded while women or people of color do not.
We all have biases unique to how we grew up and what we’ve experienced along the way. Admitting that and understanding they exist is the only way to move past them. There are a lot of great people who don’t look like Mark Zuckerberg and if you look at the women who are getting funded, they are outperforming their male counterparts. They do better.