Edith Dorsen's resume reads like a history of fin de siècle American finance.
After graduating from Harvard Business School in the mid-’80s, Dorsen landed her first job consulting for McKinsey and Co., moved on to Salomon Brothers as an investment banker and later served as vice president for business development at the Children’s Television Workshop. There, among other pursuits, she gave Sesame Street a refresh. In 2011 Dorsen co-founded the Women’s Venture Capital Fund, a firm aimed at closing the gender gap in venture funding. The fund invests in eight portfolio companies, including a bridesmaid dress rental company, Vow to Be Chic, interior design startup Decorist and ed-tech companies Newsela and EdSurge.
In these edited excerpts, Dorsen discusses the rise of the female entrepreneur, the shifting venture landscape and why only 5% of venture capital goes to women-led companies.
The evolving role of female business executives
The most ambitious young women today don’t want to do what I did. They don’t want to work on Wall Street. They don’t want to work for consulting firms. I’m making a generalization. But they are very much attracted to building entrepreneurial ventures. We believe in the next five to 10 years, women are going to become a major force entrepreneurially.
Marketplace dynamics shaping venture capital
The early-stage landscape has bifurcated. You have one group of companies that don’t need as much capital as they used to. You have another group, particularly in consumer products, that requires tremendous amounts of capital. With hundreds of millions of dollars under management, venture funds don’t want to do efficient deals. So it remains very challenging to go beyond that first couple of million when you’re a capital-efficient business. It was the confluence of both — the women leadership emerging along with capital-efficient opportunities — we thought created a very viable investment strategy and in an underserved and undervalued market.
The Women’s Venture Capital Fund is a bit of a misnomer
Seven of our eight companies have a woman CEO. But in all cases she has a male co-founder. What we’ve been interested in is the diversity in senior leadership. We named it the Women’s Venture Capital Fund to attract women entrepreneurs, but we have made it absolutely critical we will not be going into a leadership team that doesn’t include women as well as men.
You define diversity in terms of gender, not ethnicity or other criteria
Look, if we are to put all sorts of criteria today, we will not achieve venture results. We certainly are very open to diversity of all kinds. Gender diversity produces the lowest-hanging fruit and is the most obvious one for us.
You describe yourselves as “mentor capitalists”
While part of me feels that’s so trite, it really is what we are trying to do. We have tried to be very engaged in virtually all of our companies. Some need our team’s experience more than others.
We have a short list of approximately one dozen companies that we have earmarked and done a deep dive. There is no shortage of opportunities. The much bigger challenge is having a pool of capital. Last year we looked at 400 companies, approved four and invested in two. Those are pretty daunting numbers.
While a lot of the media is focused on the big established firms that are looking for the next Uber, the rest of us are slugging it away on the other side of the fence. Most of the money in the venture world is made by selling relatively early-stage companies to larger corporations. Big corporations often prefer to acquire than to develop and innovate from within. As such, we spend fair amount of time thinking about who are possible strategic buyers. We need to make sure there are enough of them. While financial buyers do come and go, strategic buyers are more reliable.
How many of your investors are women?
We have 58 investors. Our initial core group was largely women. Over time we got more and more men. As a first-time fund, we believed the most appropriate funding strategy was individuals. But as we were closing, the Oregon Growth Board indicated interest and participated, as did Meyer Memorial Trust. Before the institutions came in, 40% of capital came from bona fide couples, an investment decision made jointly by two spouses.
Why gender bias is so entrenched in venture capital
These are for the most part small partnerships. We’re all engaged in a risky business, and there is a predisposition to hire and fund people who look and sound like ourselves. There are experiments that show all of us are guilty of that, but specifically in the venture world. I think a lot of the egregious behavior reported in the media is still a fraction of the problem. If men are looking to fund people like themselves, it is unconscious bias.
How the climate is improving
When co-founder Monica Dodi and I first took this idea to my Harvard Business School roundtable of women in 2009, there was virtually no research or data. Today there is a plethora of research to help legitimize the importance of including women. When you are building businesses that are serving large groups of women, it only makes sense to have leadership that is inclusive. I don’t think the reality for women has changed, but just in the last 18 months, we’re seeing the beginning of a consciousness change.
The icing on the cake
The most fun is working with the companies and seeing their progress — surmounting their struggles, helping and supporting them. We got into this business because we were excited about working with entrepreneurs. That is by far the best part. Bar none.