Women entrepreneurs: VC rejection does not equal sexism

05Feb
Blog

Women entrepreneurs: VC rejection does not equal sexism

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By Sramana Mitra | Founder of One Million by One Million (1Mby1M)

I am stating the obvious – or at least what should be obvious – that rejection by a venture capitalist does not automatically equate to sexism.

However, of late, the media has started sensationalizing a lot of stories of VC rejection and transposing them as stories of sexism.

These are two different issues, and the cause-effect relationships of the two are ambiguous at best.

In some of these stories, the VCs have exhibited rather inappropriate behavior, no doubt. However, did they reject the deals because the entrepreneurs were women? I don’t think so.

You’ve often heard me say that over 99% of the entrepreneurs who seek financing are rejected. If you get rejected by Accelerators, Angels or VCs, and they don’t tell you why, you need to understand the objections and the analysis that led them to their decision. Most good investors take the time to explain. Also, there are some fairly standard reasons why entrepreneurs get rejected by investors: business are too early, too small, or too slow growth.

A few years ago Jennifer Hyman was a 29-year-old Harvard Business School graduate with no experience in fashion or technology, pitching her startup, Rent the Runway, to a boardroom full of partners at a big-time Boston venture capital firm. The idea then, as now, was to buy designer dresses wholesale and rent them, over the Web, for a night or two for a fraction of the price. When Hyman was about to get to the part where she explained how many inventory turns she could get from a Diane von Furstenberg, one of the men interrupted the presentation, cupped her hand in his and said, “You are just too cute. You get this big closet and get to play with all these dresses and can wear whatever you want. This must be so much fun!”

What Jennifer describes about the guy who interrupted her and cupped her hand is actually not one issue, but two: firstly, the guy didn’t get her business and secondly, he chose to communicate his lack of knowledge in a sexist way.

This happens regularly with VCs. Marc Benioff got rejected by 27 VCs when he shopped Salesforce.com around, back in 1999. Many VCs today claim eBay in their anti-portfolio: a portfolio of companies they rejected, but that eventually went on to become not just big, but gigantic.

The truth is, venture capital is a very difficult business. To see the future as a founder sees it is extremely difficult, especially in domains that one doesn’t have any experience in. This man who rejected Jennifer clearly had no experience of the designer fashion industry. Very few VCs actually do have experience of the fashion business.

In fact, it is a well-known fact in the venture business that if you have a truly good, contrarian idea that will be path breaking, a lot of VCs WILL reject that idea. That’s not necessarily a bad thing. You will not have 35 venture-funded competitors in the market.

Jennifer, clearly, had an excellent idea, and some VCs saw it as such. The one who didn’t, whom she describes in the Forbes story, did not get the idea. That, in itself, is not sexism.

How he chose to communicate it to her was sexism. It was, in fact, utterly ignorant.

And the distinction is very important for us to consider.

I have read many other stories of women entrepreneurs getting rejected by VCs who report the rejections as instances of sexism. In many of those cases, I went and looked at the businesses of those entrepreneurs. Often, I concluded, that I too would have rejected to invest in those businesses. I do not want to call out specific scenarios to illustrate this out of respect for the entrepreneurs who are working on those ideas.

My advice to them, however, is not to use sexism as an excuse and hide behind it. Instead, it would serve them well to be intellectually honest about the flaws in their business logic, and address those.

In many of these reported cases, also, there are instances of utterly improper behavior on the part of a VC that DOES reflect sexism. However, that sexism is not necessarily what drives the rejection.

The point I want to make, in summary, is that women entrepreneurs should not use sexism as a way to explain why they are getting rejected by VCs. It’s an easy out. The real journey of a serious entrepreneur is far more complex.

Jennifer Hyman has made that journey with commendable intellectual honesty and persistence. The company she co-founded in 2009 is estimated to worth $1 billion or more. 

Leave aside the sexism issue for now. It isn’t productive to complain about it. Let’s work on your business and make you successful, instead.

Once you are successful, do what Jennifer did. Give an interview to Forbes, and tell them how you overcame the odds, including your experiences with sexism.

Those tend to make very good stories!

The original version of this article was first published on Sramana Mitra’s blog. The full article is available here. 

Sramana Mitra

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Sramana Mitra is Founder of One Million by One Million (1Mby1M), a global virtual accelerator that aims to help one million entrepreneurs globally to reach $1 million in revenue and beyond. She is a Silicon Valley entrepreneur and strategy consultant, writes the blog Sramana Mitra On Strategy, and is author of the Entrepreneur Journeys book series and Vision India 2020.