GENDEREQ U I TYINVENTURECAP I T A L PROGRESSS I GNALSNEWMOMENTUM, ANDDARDENLOOKSTOCONTR I

By Molly Mitchell

If admitting the problem is the first step toward recovery, it’s fair to say that the venture capital (VC) industry has taken a step forward.

It is known — and widely discussed — that women are significantly underrepresented in decision-making roles at venture capital firms. According to a report from the National Venture Capital Association, 16 percent of decision-makers at U.S. venture capital firms were women as of 2020. This ratio represents an incremental improvement over the past few years, but that is cold comfort for those working toward gender equity. The numbers are even grimmer for women of color.

And yet, one would be hard-pressed to find an investment firm that doesn’t profess a desire to bring more women partners to the table — for the sake of equity and for the sake of profit. Venture capital firms perform better financially with more diverse teams of decision-makers, according to a report from West River Group.

“If anything, firms would really like to broaden their pool, so I think there’s a tremendous amount of receptivity [to hiring women partners],” said Michele Rankin, career coach at Darden’s Career Center.

With the problem acknowledged, what’s the holdup with step two?

Beware Potential Bias

The hunger among female MBAs and other women to break into the VC world is strong. At Darden’s Women in Leadership Summit this fall, the panel on venture capital was packed, and the questions that poured in were often variations on the theme of “How do I get in?”

According to Rankin, venture capital is particularly challenging to gain entry in part because there isn’t a straightforward path or standardized qualifications for the job. Instead, most hiring tends to happen through long-term relationship-building within trusted circles.

It involves “a lot of hustle,” said Rankin. “It takes an incredible network.” Studies show that human beings tend to unconsciously trust and favor those who seem most similar to themselves. The world of startups and the money behind them seems to move quickly from the outside, but the people at the top are few and turnover is far-between. Though diverse representation is improving, there’s not a critical mass of women and minority venture capitalists to course correct without more conscious action.

A Very Particular Set of Skills

Another reason it can be so difficult to break in to venture capital and private equity is that there aren’t that many firms, and the firms themselves are small — perhaps three or four partners with a few junior associates (mostly without MBA degrees). It is not an industry designed to raise and cultivate raw talent at scale. Their hiring needs are partners and employees ready to go straight out of the box, according to Professor Elena Loutskina.

“These are smaller enterprises with a very specific need, at a very specific point of time, and they want that specific need to be filled by someone who is qualified, has experience and can add something to the development,” said Loutskina, academic director of Darden’s Venture Capital Initiative.

What a venture capital firm may need includes a wide range of skills and experiences and depends so much upon the unique situation of each firm.

“Finding a job in VC is like finding a spouse,” she said. “There are a lot of people walking around who have potential, but there is something in that match that has to work and gel exceptionally well to form a good family.”

Check Writers and Check Cashers

More equitable representation of women in decision-making roles at investment firms is half of an equation set to grow the footprint of women in the startup ecosystem as a whole, according to MJ Toms, director of education and experiential learning at Darden’s Batten Institute.

“From my point of view,” says Toms, who counsels students with entrepreneurial aspirations, “the lack of women in VC matters because female founders don’t get funded.” In 2021, startups founded by women only received 2.4 percent of the total capital invested in venture-backed startups in the U.S., according to a 2022 report from Pitchbook.

The elements contributing to the disparity of funding could ease with more women involved in writing the checks, however. According to a study by Kauffman Fellows, women venture capitalists invest in twice as many female-founded startups as their male counterparts.

In addition to bias, whether conscious or unconscious, a limited ability to understand the kinds of problems some women founders are seeking to solve leaves men with blind spots when it comes to how valuable a product or service could be for its intended audience. “I do think most of the investors are consciously trying to invest in women,” said Toms. “But I think it really is hard when they haven’t experienced the problem the founder is trying to solve.”

Seeing Is Believing

While the data doesn’t look great now, trends in the right direction have those in the space feeling optimistic.

“I think we’re on a good upward trajectory,” said Rankin. “We do see more women going into venture capital and private equity firms. That’s exciting because then they’re visible to those that follow. If you see people like yourself who are successful in VC, you’re more likely to think you can be successful in that field, too.”

Darden has launched several initiatives to increase the visibility of careers in VC, private equity and asset management; uplift diverse professionals in those fields; and create the networks and relationships necessary to break in. The Darden Venture Capital Initiative, launched in 2021, supports education, experiential learning and professional development in the venture capital industry for Darden students. The initiative includes the Darden Venture Fellows Program, which offers internship experiences at top venture capital firms, and the Darden Breakthrough Scholars Program, a scholarship initiative designed to foster diverse leadership in asset management. These programs, taken hand-in-hand with the Women@Darden initiative, provide promising starting points for these notoriously unclear career paths.

Never Tell Me the Odds

For women who have set their cap on venture capital, the scant numbers of women in the field can be discouraging, and next steps might seem murky.

If the questions that came up at the venture capital panel at the Women in Leadership Summit are representative, there is a strong desire tinged with apprehension among women thinking about breaking into the space. Loutskina says that putting doubt aside is the first step on the road to becoming a venture capitalist.

Darden Venture Capital Initiative Leadership Team

The Venture Capital Initiative at Darden provides students with a suite of world-class curricular, experiential and professional offerings to support their educational interests and long-term career pursuits in venture capital.

• Les Alexander III

John Glynn Endowed Professor and Professor of Practice in Business Administration

• Caitlin Boyer

Associate Director of Private Capital Strategic Initiatives

• Elena Loutskina

Peter M. Grant II Bicentennial Foundation Chair in Business Administration and Professor of Business Administration

• Paul Reeder

Senior Director, Careers in Finance, Darden Career Center

• Rodney Sullivan

Executive Director, Richard A. Mayo Center for Asset Management

• Robert Creeden

Managing Director, UVA LVG Seed Fund

Those looking into it “need to figure out if it’s worth fighting for and look at it rationally rather than through rose-colored glasses,” she said. “In the classroom, I’ve seen an amazing number of highly qualified women who are smart, thoughtful and lead with warmth. I know they can move mountains, if they put their minds to it.”

Loutskina sees women at Darden doing just that. “Over the last five years, our female students went to work for the growth equity industry or private equity industry in the same numbers as their male counterparts.”

Next, she advises anyone looking at a career in VC to think of a Venn diagram with three circles: one is the technical skill set you need, one is career experience and the third is what the employer is looking for. For venture capital, the technical skill set is relatively fixed, but the variables of your personal experiences and what each VC firm is looking for both vary widely. That’s why it’s so hard to delineate specific steps to become a venture capitalist.

“Every single fund needs a unique puzzle piece,” Loutskina said. With that variability in mind, she recommends focusing on the subject matter you’re interested in, pursuing excellence and experience in a field and staying on the lookout for your moment in VC.

“Figure out what puzzle piece you are.”

Things are moving at such a fast clip, the data might show something quite different even in the space of a couple years, Loutskina predicted.

“Over the last two years, I’ve heard about so many different funds that are run by women, that invest in women founders and that invest in minority founders. It’s happening in the VC space because investors realize that, by ignoring women and minority managers and founders, they are ignoring a tremendous number of business opportunities serving the constituencies that these founders understand the best.”

By Molly Mitchell