Tech startups face wide equity gap
Study: Women get half stock options of men.
SAN FRANCISCO – Women on average make about 80 cents for every dollar a man does. In Silicon Valley, the wealth gap is even wider, extending to the most potentially lucrative currency on the planet: stock options.
Women get half the amount of equity of their male colleagues at startups, giving them unequal access to the Silicon Valley’s wealth generation machine, according to a first-of-its kind study by an investor group and an equity management firm that are urging the technology industry to take action.
For every dollar of equity for men, women hold 47 cents, according to the study of nearly 180,000 employees at more than 6,000 companies released this week by #Angels and Carta. Female founders have it even worse: They own 39 cents for every dollar of equity of a male founder.
The study covers a number of industries across the U.S., but its findings are most significant for the maledominated tech industry, where employees commonly trade higher salaries for an equity stake in hopes of striking it rich. Those who hit the startup lottery frequently use their newfound influence and wealth to fund the next generation of startups or to step onto the national stage to sway policy or politics.
A February post on Medium from the group of six female investors behind investment collective #Angels identified the problem: Too few women – and even fewer women of color – showing up on the capitalization, or cap, tables of successful startups. The cap table records who owns shares in a company and determines who gets paid out when the company is bought or goes public.
Carta volunteered to run the numbers. What its study found was worse than #Angels anticipated. Women make up 33 percent of the founder and employee workforce but hold just 9 percent of employee and founder equity value.
Chloe Sladden, a former Twitter executive who founded #Angels and sits on USA TODAY’s parent company Gannett’s board, calls the “cap table” the “gap table.”
It’s not just that more men work in tech than women. #Angels blames a confluence of factors. Female-founded companies are given lower valuations and give up a greater chunk of their companies to investors. They also get a tiny fraction of venture capital funding.
Women and minorities are scarce in venture capital, where investors, predominantly white men, tend to sprinkle funding in their own networks and on ideas that are familiar to them. Women are also frequently subjected to gender discrimination and predatory behavior: when powerful men in the tech industry use their position to harass women who are trying to build companies or careers.
Now #Angels is challenging Silicon Valley to close the equity gap. Their call to action: Hire and fund women from Day One. Raise money from female investors. Measure and disclose who’s getting equity in your company.
Sara Mauskopf, CEO of parenting platform Winnie, is walking the walk. Winnie disclosed its cap table showing that women hold more than 70 percent of the company’s equity.
Her tips:
❚ Root out bias in hiring: Half of Winnie’s engineering and product teams are women; in a recent round of engineering hires, candidates were 54 percent female, 33 percent from underrepresented groups and 62 percent from nontraditional backgrounds such as boot camps.
❚ Build a family-friendly culture: “My co-founder and I are both moms of young kids, so we take worklife balance seriously. We don’t work late nights or weekends and don’t expect our employees to,” she said.
❚ Pick your investors carefully: “We want to be proud of the partners that will share in Winnie’s success, and we want that wealth to go to investors who share our vision of making parents’ lives easier,” she said. Among her investors are the women behind #Angels.