The venture capital industry, which last year doled out $84 billion to startups, manages a neat trick. While relatively new—and devoted to seeking out what’s next for business and the world—it’s as old-fashioned as it gets, comprising overwhelmingly male, overwhelmingly white partnerships who overwhelmingly do business with those who remind them of their younger selves.

  • As of last year, at the top 100 venture firms, only 8 percent of investing partners were women. Two percent of venture capitalists were Hispanic. Not even 1 percent were black. And almost a quarter of VCs with MBAs got those degrees from Harvard.

But some of that is finally changing. In September 2017, General Catalyst hired its first female managing partner. Union Square Ventures, First Round Capital, and FirstMark Capital soon followed. This year, BoxGroup, Redpoint Ventures, and Bain Capital did the same. In June, Andreessen Horowitz hired Katie Haun as a general partner to run a new $300 million cryptocurrency fund; in July, it promoted Connie Chan, an expert on the intersection of Chinese and North American tech, to general partner.

A handful of brand-name appointments won’t change an industry overnight. Being the only woman on an all-male team is generally not fun, and research shows that one woman on an otherwise all-male public-company board won’t make much difference. (For that, you need three; there’s little reason to think venture capital is different.) And some women VCs admit they are reluctant to invest in women. They know that if that investment goes south, it’ll be doubly difficult to get support for the next female team.

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Still, “three or four years ago, 75 percent of the venture funds in Silicon Valley did not have a woman partner,” says Trish Costello, the founder of investing platform Portfolia. “Every one is now looking for one.”

All this didn’t happen because new data showed that diverse teams perform better. Such teams have long been known to process facts more carefully and be more innovative than homogeneous teams.

  • According to McKinsey, companies in the top quartile for gender diversity are 21 percent more likely to have above-average profitability than companies in the bottom quartile. And companies whose leaders are at least 30 percent female have net margins 6 percent higher than companies with no women among the senior ranks. Venture capitalists pride themselves on being data-driven, but this data apparently didn’t convince. What did?

“Always being the only woman in the room. It’s draining after a while.”
—A female founder responding to the question “What was the most difficult part of raising money?” on Inc. and Fast Company’s State of Women and Entrepreneurship survey.

Rewind to June 2017, when six women said they had faced inappropriate advances from Justin Caldbeck, the co-founder and managing partner of Binary Capital, which had $300 million under management. Accusations quickly followed against Dave McClure, co-founder of 500 Startups, and, among others, Steve Jurvetson, the co-founder of DFJ. Five years after Ellen Pao sued Kleiner Perkins, six months after Susan Fowler left Uber, Silicon Valley women were squarely in the middle of #MeToo.

As were Silicon Valley men. Binary Capital collapsed. McClure lost his job. So did Jurvetson. “This was one of the first times there were real consequences to bad behaviour,” says Jess Lee, a Sequoia Capital partner and Polyvore co-founder. “For the first time, you had firms fall apart.”

Venture capitalists insist that they didn’t mean to build brotopias. It’s just the pipeline, don’t you see? The pipeline theory insists successful venture capitalists need to have been tech wizards or successful founder-CEOs—preferably of companies that made truckloads of money for other venture capitalists. Tragically, the argument contends, there just aren’t many women who meet those qualifications. (Of course, with less than 3 percent of venture capital going to female CEOs, it’s not entirely surprising that there are so few women with nine-figure exits.)

But after Binary Capital imploded, those all-male partnerships started to look sinister. Why couldn’t these well-connected men find a single worthy woman? More crucially, firms started worrying. If Binary hadn’t been all-male, would Caldbeck have gotten away with such bad behaviour? (His partner knew about his reputation.) What if a venture capitalist who thinks he’s done nothing wrong loses his firm because the party-boy partner everyone loves to have around behaves abominably toward a woman who’s sick of taking it?

And suddenly, women were getting hired. Maybe you didn’t have to have an engineering degree or a founder’s pedigree to have the makings of a good VC after all. “I’m not technical,” proclaimed Sarah Tavel, upon being hired as general partner by Benchmark, although she’d managed tech teams at Pinterest and spent six years at Bessemer Venture Partners. Catherine Ulrich had been chief product officer at Shutterstock and Weight Watchers before she became the first female partner at FirstMark. Sarah Smith, the first female partner at Bain Capital, had previously been an early-stage investor and a vice president at Quora.

As it turns out, maybe the pipeline of those with impressive experience building products, leading teams, and producing serious results was always a lot broader than the old guard thought. Maybe those new female partners will knock it out of the park. And maybe—after many years of bad behaviour and shortsighted investment theses, and after a very recent spasm of fear—one of the last redoubts of the old boys’ network will finally become a bit more modern.

Like Silicon Valley was always supposed to be.

KIMBERLY WEISUL is an Inc. editor-at-large.

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