The startup world is known for being dominated by men. With The Billion Dollar Fund for Women, entrepreneur and investor Sarah Chen wants to change this by channeling $1 billion towards women-led and gender-diverse projects.
Chen, 29, born in Malaysia, hosted her own television show from the age of nine. Today, she is the chief strategy officer of the startup Bloxed and lives in Washington D.C. In October 2018, she founded The Billion Dollar Fund for Women with four other women. Shelly Porges, an American investor who worked with Hillary Clinton for years in the State Department, is co-managing partner of the fund.
DER SPIEGEL: According to Fortune, $85 billion in venture capital was invested in startups in 2017, but only 2 percent of that was invested in companies founded or run by women. If money is opportunistic, why doesn’t it automatically flow towards success?
Chen: Because decisions made about the use of money are never black and white. And those who control where the money goes are still subject to the law of familiarity, at least when we talk about venture capital. Unfortunately, not all venture decisions are made based only on statistics. Otherwise investors would always favor diverse teams. Studies show that such teams are more successful and generate around 50 percent higher revenues.
DER SPIEGEL: But investors want to see returns. How is it possible that this investment gap exists at all?
Chen: A key underlying issue is the unconscious bias we each naturally have. When a venture fund invests in a company at a very early stage, even without any proven repeatable revenue, what do they invest in? They invest in the judgment of the founder’s track record and potential success — and yes, the law of familiarity means that an old white man might back a younger white male entrepreneur who reminds him of himself when he was an entrepreneur, who may have accessed him through a Harvard old boys network or so. This means that by looking different, we may not fit the bill of a safe bet.
DER SPIEGEL: You and four other women founded The Billion Dollar Fund for Women (TBDF). What exactly is your goal?
Chen: We are determined to ensure that in the next few years, at least an additional $1 billion is invested in startups founded or run by women. There is a lot of talk about the gender pay gap, but not enough about the gender investment gap. The cake is big enough for us all to have a bigger slice.
DER SPIEGEL: How is that going to work?
Chen: We’re not a separate fund, but a consortium of funds: We rally venture capital funds to pledge to invest a certain amount in women-founded companies. Our ultimate goal is to mobilize a larger pool of capital within the existing framework of funds, to support the continued capacity to invest in women-founded companies. We talk not only to U.S. investors, but also to decision-makers across the globe, from Asia, Europe, the Middle East and Africa. This is about a major problem. Which requires a major solution.
DER SPIEGEL: What exactly is your contribution?
Chen: The Billion Dollar Fund for Women is above all a consortium of venture funds who question and want to change the status quo. On the founding team, we bring in culturally and professionally different experiences. The investment partner funds make into any company is subject to the firm’s own due diligence standards, but we encourage them to see it with a lens that they may not have had previously.
DER SPIEGEL: You started the project in October. How many supporters do you have on board at this point?
Chen: We were overwhelmed by the response! Our initial goal was to obtain pledges of $100 million to be invested into women-founded companies through 2020. To date, we have reached more than $650 million, pledged by 30 funds. I am confident that we will soon crack $1 billion.
DER SPIEGEL: But so far, these are mainly voluntary commitments on paper. Who checks whether the investments are actually being made?
Chen: That’s our job. There may be instances where a pledge is not fulfilled completely, but even if a part of the promised capital is invested in women’s visions of the future, I think we are off to a good start.
DER SPIEGEL: One billion dollars is rather limited given the sums currently being distributed in the tech industry.
Chen: Actually, that’s not true. In light of the fact that companies founded solely by women in 2017 raised only $1.9 billion in venture capital in the U.S., an additional $1 billion would be very material.
DER SPIEGEL: Women are often regarded as founders with a mission. That sounds good and nice, but none of the big funds are there to save the world. Their priority is to make good money.
Chen: There’s some truth to that. Facebook was founded because Marc Zuckerberg wanted to learn more about others in his university, and of course in the Hollywood-stylized version of the story, it was a tool to find the coolest girls. And there are also women who found the 10th shopping app that the world doesn’t need.
DER SPIEGEL: Startups are successful when they want to solve a problem that affects many people…
Chen: Exactly. And women often start businesses that solve women’s problems. Sometimes men simply don’t understand that these problems exist. A disproportionately high number of ventures with a social impact seem to be founded by women.
DER SPIEGEL: Can you give an example?
Chen: Shelly Porges, one of my co-founders and managing partner of TBDF, supports a female founder who provides coworking offices with licensed childcare. The quality of childcare is a major issue in the U.S., especially for working mothers. Coworking places are in high demand right now. Many providers lure their customers with additional offers such as fitness studios or shirt service. However, most women are not interested in such things. They can only use the space if they know that their children are well looked after. I see great potential in this.
DER SPIEGEL: A man could also have thought of that.
Chen: But again, entrepreneurs are inspired by their experiences. The hard revelation of the example above is that the lion’s share of domestic responsibilities today still fall upon a woman, and therefore, in this case, a woman thought of it because it was her experience. Or think of women’s health. That’s a billion-dollar market. Heart disease is the leading cause of death worldwide, yet only one in three participants in cardiovascular research trials is a woman. The symptoms women experience, shortness of breath and jaw pain, typically aren’t the ones people watch for. That’s why Alicia Chong Rodriguez designed a bra with built-in sensors that collects data from the heart, analyzes it for irregularities, and funnels vital information to a doctor.
DER SPIEGEL: You have only been living in the United States for a year. Before that, you worked for a venture capital fund in Malaysia. Couldn’t you have made sure that more money went to female founders back then?
Chen: Looking back, I realize how conservative many of our decisions were. The nuances of decision-making as a young executive in a conservative Asian conglomerate is certainly difficult, and I take a self-critical view of this.
DER SPIEGEL: Why do you think that was?
Chen: Because it’s simply not the norm to experience women in management positions. I was mostly the minority in every meeting: young, female and a non-Muslim in a Muslim-majority country like Malaysia. There are sectors, such as consumer goods, where women are seen more commonly in leading positions. But in the tech scene I work in, we’re simply not the norm. It’s the classic chicken-and-egg problem: We need more women leaders to show more women they can lead, and we need to show more women they can lead to get more women leaders. And every company always needs a courageous person to start with it.
DER SPIEGEL: Is it enough to support only women?
Chen: In the end, of course, it’s not just about gender or race. The most successful teams are diverse teams where people from different cultural or educational backgrounds work together. Different people look at problems differently. This is where the potential lies. Even corporations have understood this by now.
DER SPIEGEL: Do you have an example?
Chen: Let’s take a great brand we all know, Disney. In their films, the heroines of today are no longer just princesses with light-colored skin and long blond hair waiting for Prince Charming at the end of all adventures. The success of “Frozen” shows that sometimes you don’t need a prince, if you trust yourself and have a great sister.
DER SPIEGEL: There are a lot of clichés in the business world, for example that men are optimistic and fond of taking risks.
Chen: I would argue that women are instead risk-aware. And that usually pays off, especially with a startup. They often question themselves and their ideas much earlier and more critically than male founders do.
DER SPIEGEL: Nevertheless, men tend to have more success with pitches and earn more money on average.
Chen: Yes, but we shouldn’t kid ourselves. The problem doesn’t just start when I, as a female founder, stand in front of a round of investors. It starts from what led us to that stage. We should pay attention to how we educate our children, which qualities we promote. I myself have always been encouraged by my parents to be ambitious, and they have treated me no differently from my older brother. I was brought up to ask questions, even critical ones. But, of course, I quickly realized that this was not the average, that especially in many Asian families, girls grow up quite differently from boys.
DER SPIEGEL: That obviously helped you in your career.
Chen: Yes and no. Let’s be clear: Being an ambitious, assertive young woman can come at a cost.
DER SPIEGEL: Why?
Chen: I believe the likeability penalty for women is real. When she is more successful, she is seen to be less likeable compared to her male counterparts. And this does boil down to insecurity, especially where women in power are viewed with caution. This plays an important role, for example, in promotions. Do I, as a boss, support someone who toes the line, who doesn’t intend to become a threat to me? Or someone who questions my actions and thus challenges the status quo? But this is the only way for companies to make progress, with employees who also ask unpleasant but necessary questions for growth — of course, driven by the right intentions.
DER SPIEGEL: You are co-founder of the Lean In Malaysia initiative, which was inspired by Facebook COO Sheryl Sandberg. Isn’t Sandberg, who has been criticized for dealing with election manipulation via Facebook, an example of a woman who isn’t the best manager?
Chen: I would never say that all women are going to be better managers. But I think it’s significant to examine how Sandberg is being attacked personally right now, and how “Lean In” is then put into question in the same sentence. My view is that “Lean In” has been misunderstood widely by critics. The fact that we have communities of women supporting each other to get into tangible leadership positions, that women are encouraged to work towards their ambitions — that should be seen as a positive and cannot be discounted despite Sandberg’s professional challenges.
Or when I think of the extreme criticism of Bozoma Saint John, the former Apple manager and recent marketing director of Uber. These hostilities show above all how unusual it is for many people to see women in such powerful positions, and that the automatic response is to search for flaws.
DER SPIEGEL: By arguing that people should invest more in women, aren’t you implicitly saying that women are better managers?
Chen: Nobody in our group would be so presumptuous to say that investing in female founders will always pay off. We’re talking about high-risk bets on technology, the future, team personalities. But it is wise to build up a diversified portfolio in a very targeted manner. Data shows that investing in women-led companies and gender-diverse teams is good business.
DER SPIEGEL: Ms. Chen, thank you for this interview.