Individually, Jennifer Fonstad and Theresia Gouw are a rare breed in Silicon Valley—two veteran female venture capitalists who rose through the ranks to senior positions at top firms. As a team, with the new VC firm they’ve launched together this month, they are practically unicorns.
If women are underrepresented at tech companies, they are even more scarce in the world of venture capital, the industry often responsible for making or breaking the fates of early-stage startups. As of 2011, only 11% of VC partners were female, according to an industry survey, and that percentage is likely even lower today.
This puts their new firm, Aspect Ventures, in a unique position. "We are at the top of our game, and if there’s an opportunity to be entrepreneurial, this is it," says Fonstad, who served as partner and managing director at Draper Fisher Jurvetson for 17 years. They founded it to return to their passions for advising very young companies. "We also think there is an opportunity to serve as a role model in our industry."
Launching the fund with their own fortunes to start, they’ll also be banking on diversity to boost their investment returns. A number of research studies have shown that diversity isn't just a socially important goal—it also makes financial sense. For example, one analysis of more than 20,000 venture-backed companies in the U.S. showed that successful startups had more women in top positions than failed startups. Another study showed that public companies with more women on the board have significantly better financial performance.
"Having diversity in management makes business sense for the bottom line," says Gouw. "Because of the nature of the unbounded decisions that are being figured out at these startups, it really helps when you’re looking at it a lot of different ways," she says. Aspect Ventures will be putting such ideas to the test with the investments they chose and in the advice they give from their board seats at their portfolio companies, she says. They intend to emphasize the value of different backgrounds and perspectives, whether that is gender, race, or simply professional background.
Yesterday, illustrating this philosophy, they announced their first stake—participating in a $15 million Series B round investment in the San Francisco company UrbanSitter. The startup—founded by four busy parents—helps people with children find trusted babysitters and nannies through their own social networks, mostly via a mobile app. The company is pursuing a large market need that young male entrepreneurs following startup guru Paul Graham’s oft-quoted advice—find startup ideas by looking to solve one’s own problems—might never have dreamed up.
Gouw, who led Accel Partners’ investment in rising e-commerce star Birchbox during her time at the firm, knows this first-hand: "I’m pretty sure two dudes would not have started that company," she says of Birchbox.
Diversity in hiring can also help startups avoid mistakes serving female customers. The early developers of voice recognition software, for example, did not do testing on female voices—and so Siri’s predecessors couldn’t understand women as well for a long time. Infamously, many decades ago, drug companies did not think about diversity in selecting participants in clinical drug trials. Fonstad, too, tells a story of working with the product development team building a hardware device prototype at one startup she has advised. It was an engineering team of all men, and then one day a woman engineer with longer fingernails joined. "She was unable to use the device," says Fonstad. "It became quickly clear it wasn’t going to be a viable device the way it was currently prototyped."
The pair, who have known each other since their first post-college jobs, will face challenges, and want to make sure they stay true to their mission of focusing on very young companies with potential for growth. The biggest challenge they’ve faced so far, they say half-jokingly, is simply finding an office space. With rents rising rapidly in the region, and space in high demand, it’s doesn’t matter who you are—winning a bidding war in Silicon Valley is tough.
Another early minefield, especially as the tech field has gotten so very sensitive about any issues regarding gender, was simply choosing the name and branding their new venture. They discarded one of their first choices because others thought it sounded "too female."
"Jen and I don’t go out our way to hide who we are. Yes, we are women. Yes, we are venture capitalist," says Gouw. But with so few other females in their field, she notes, "You are also thoughtful about not wanting to seen as a first and foremost as a woman. You want to be seen on your own merits."