Technology start-ups founded by women hire more women, study finds

Rachel Sandler | USA TODAY

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SAN FRANCISCO — Technology start-ups with at least one female founder have more women employees than major technology companies and twice as many women employees as start-ups with no female founders, a survey has found.

The survey from FundersClub underscores research that shows women in leadership positions are crucial for the advancement of other women. It’s also a signal that more women are pursuing entrepreneurial paths and that young companies may be more becoming more open to recruiting diverse workforces in an industry widely criticized for being a boys club and for having a widening gender gap.

“We didn’t go into this survey with any expectations, but the magnitude was surprising for us, the 2x difference was very surprising for us,” Alex Mittal, CEO and co-founder of FundersClub, an online venture capital firm, told USA TODAY.

Of the 234 start-ups in FundersClub’s portfolio, 85 responded to the anonymous survey.

Though the survey shows progress by female-led start-ups, the status quo remains. Some 17% of start-ups in 2017 had a female founder, according to a recent CrunchBase study. That number has been flat for five years, the study found, even though women make up nearly half of the U.S. workforce and are majority owners of 36% of U.S. small businesses.

Still, diversity experts say they are seeing some start-ups taking steps to recruit more women and people of color.

“If you don’t create diversity at the beginning of a company, it’s never going to change,” said Ann Crady Weiss, a partner at True Ventures and co-founder of Hatch Baby, a maker of products for infants such as a baby changing pad with a wireless scale and a nightlight and sound machine that can be controlled with a smartphone. “These are the future Facebooks, the future Ubers, and it’s important for them to have women from the beginning.”

Chiara McPhee and Jen Kessler’s start-up Bizzy was the first to graduate from incubator Y Combinator with two female founders. They didn’t set out to hire women, but women gravitated to them, they said. On average, half the staff at the email marketing firm which was recently acquired by Sendgrid were women.

“When we spoke to female applicants they were definitely really excited about the idea of having two female founders,” Kessler said. "And it always came up in the first call."

Ellen Pao, an investment partner at Kapor Capital and the chief diversity and inclusion officer at the Kapor Center for Social Impact who unsuccessfully sued her former venture capital firm for gender discrimination, says her own experience bears this out.

“As an executive and then CEO of Reddit, I saw that I could hire women and people of color who were more qualified and more excited about their roles," Pao said in a statement to USA TODAY. "I have no doubt it was in part because I am a woman of color.”

That’s a rarity in Silicon Valley, where decades of hiring from the same old networks and the same old places has produced an industry that is dominated by white and Asian men. Now the tech industry is wrestling with how to recruit more women and people of color and creating work work cultures that are more welcoming to them.

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The findings of the FundersClub survey indicate start-ups with at least one female founder, on average, have 48% women. That’s more than twice the number of women at start-ups with no female founders. It’s also more than Google, which has 31% women, Facebook, which has 33% and Apple, which has 32%.

The survey also found that executive leadership and engineering teams at female-founded start-ups are comprised of more than twice the number of women than at start-ups with no female founders. In addition, companies with female founders have on average one female founder and one male founder, the study found.

Of the 234 start-ups in FundersClub’s portfolio, 85 responded to an anonymous survey. Many of the start-ups that responded have fewer than 20 employees, though Mittal said he didn’t know exactly how many.

That’s why smaller companies were the focus of the study, Mittal said. Workplace culture is more malleable at smaller start-ups which can have an easier time becoming more inclusive than the likes of Google and Facebook which already have large, sprawling workforces.

FundersClub, the firm that conducted the study, is itself not diverse — about 30% of its employees are women.

“It’s a complicated topic," Mittal said. "It’s something I’ve never been comfortable with and I realize that we’re a part of this bigger problem. It’s a work in progress for us.”

More USA TODAY coverage of inclusion and diversity in technology

Contributing: Jessica Guynn

Follow USA TODAY technology reporter Rachel Sandler @rachsandl on Twitter.