Sexism and Silicon Valley: Women can't raise cash and now we have one more reason why

• Last year male entrepreneurs received $58.2 billion in venture capital. Women received 2.5% of that.
• Women fear a backlash: men following a 'Mike Pence' rule and avoiding women founders.
• Some women entrepreneurs advise raising capital in other ways.

SAN FRANCISCO —When Jen O'Neal was raising money for her travel start-up two years ago, she was invited to pitch to all the partners and associates at a prominent Silicon Valley venture capital firm. 

The conference table was huge and the slides for her presentation were projected onto a massive screen. As she began to address the room, she glanced around. Four women, none of them investing partners, were all squeezed into small chairs against the side wall. 

"I don't think I fully appreciated the expression 'to have a seat at the table' until that day," says O'Neal, CEO of Tripping.com, which crawls the Web for vacation property and home-sharing listings and has raised $55 million in venture capital.

Yet that's the reality in Silicon Valley, where men control the power and the purse: Very few women get a seat on either side of the table. 

Industry studies for years have documented the sizable gender gap in funding start-ups. The common explanation for women raising a sliver of the financing essential to the growth of Facebook, Google and Uber is that venture capitalists tend to back entrepreneurs who have succeeded before or who fit a certain mold. Think Mark Zuckerberg or Larry Page: Young and geeky, white or Asian male, often in jeans and T-shirt, who dreamed up an idea while banging out the code in a dorm room or garage. 

In recent weeks, another explanation has emerged: A pattern of suggestive remarks and sexual propositions, casual misogyny, groping and assaults that is too often a part of the capital-raising process for women.  

Women have come forward to describe the sexual advances that come with negotiating financing, jobs and partnerships — and retaliation, such as an abrupt end to the business conversation if they rebuff a sexual come-on. They recall interviews with investors that quickly show they’re not taken seriously, or situations that make clear they’re outsiders who need to prove themselves far more than men do.   

Hanna Aase, founder and CEO of video-profile platform Wonderloop, recalls sessions pitching investors for capital that often resulted in more pick-up lines than term sheets.

"The second question I get after 'What do you do?' is 'What do you do for fun?'" she says. "The third investor question: 'Do you like being called Hannah Montana?'" 

Some women have thrown up their hands, frustrated by years of pitches that go nowhere or quickly segue into invitations for a late-night drink. A small but growing number of women are forming women-only investment networks, or raising starter capital in other ways.

With venture capital's big money bro-culture behavior coming to light, there’s a new fear, mingled with the relief: That, in reaction, male financiers will avoid women founders altogether. There’s talk of some men following the "Mike Pence rule," referring to the vice president's comment years ago that he does not eat alone with any women other than his wife. 

Lisa Curtis, founder and CEO of food start-up Kuli Kuli, says she has already heard of investors canceling meetings with female founders and she's worried. "I think that's the wrong reaction," Curtis says. 

Gaining access to the capital, counsel and contacts they need to turn a big idea into the next big thing is already tough enough, women say.

When Tripping.com’s O'Neal walks into the room, she says she's usually the only woman in it. In hundreds of pitch meetings, she has only ever encountered a handful of female venture capitalists. 

Chrissa McFarlane, founder and CEO of Atlanta-based start-up Patientory.com, which uses blockchain to secure digital health records, says when she was trying to raise seed money in Silicon Valley, she was the only African-American woman — and the only African American period — anywhere in sight. She says she's sure she would have had more luck landing an investment had she been a white or Asian man in a hoodie.

Even as women — and women of color — scale corporate ranks, the number of female investing partners at venture capital firms is shrinking. In 1999, 10% of the partners were women. By 2014, it was 6%. Many top venture capital firms in Silicon Valley don't have a single female investing partner. And, when they do, many female investors feel so heavily scrutinized for taking risks on other women that they limit how frequently they make those investments. 

That's a significant challenge for women, who are starting their own tech companies in greater numbers even as the funding gap between male- and female-led start-ups keeps widening. Last year male entrepreneurs received $58.2 billion in venture capital. Women received $1.5 billion, or just 2.5%, according to PitchBook.

None of the most highly valued tech start-ups, called unicorns, has a female chief executive, though studies show that companies with female leadership perform better than those with male leadership. According to venture firm First Round Capital, its investments in companies with at least one female founder performed 63% better than the all-male founder teams.

Until recently, bringing home some big returns has insulated venture capital from criticism over the lopsided demographics of investments. But being outed for sexist and discriminatory behavior is drawing troubling parallels to the "boom-boom room" era of Wall Street in the 1980s and 1990s.

So far, the uproar has prompted the resignations of two investors who purportedly used their positions to make unwanted sexual advances to women. This week, Ignition Partners, a venture firm in Bellevue, Wash., said it asked for a partner's resignation after a complaint of misconduct.

Several women who are trying to raise money for their start-ups told USA TODAY they are still too fearful of reprisals to publicly complain about inappropriate behavior. But more women are speaking out about their experiences.

'Don't complain, don't talk about it'

Melinda Epler, founder and CEO of Change Catalyst, a group that promotes diversity in the tech industry, says she scrapped her plans to open an accelerator for women-led companies shortly after meeting with a potential investor and diversity ally at a coffee shop. 

He moved his hand close to hers, let his knee brush against hers and advised her that male investors would find her attractive and she should say nothing when they spoke to her or touched her in inappropriate ways. "Don't complain, don't talk about it," he said. "Because investors talk to each other, you'll be blacklisted and you'll never be able to raise money." 

Some investors and trade groups are exploring ways to stamp out this sort of behavior. LinkedIn founder and venture capitalist Reid Hoffman has called on venture capitalists to sign a decency pledge. Sallie Krawcheck, the Wall Street veteran who is now CEO and founder of digital investment platform for women Ellevest, says they should sign a funding pledge instead. 

Women say they can't always be sure lacking a Y chromosome is the reason they don't land funding, but they know the playing field is far from equal. It takes them longer to secure funding and the checks are frequently smaller, the valuations lower.  

Research shows that women seeking funding are asked very different questions than men (about risks versus prospects) and are held to higher standards (judged on what they have already achieved versus what they have the potential to achieve), both of which affect how much, if any, capital they receive. A study in Sweden found that venture capitalists describe male entrepreneurs as "young and promising" and female entrepreneurs as "young and inexperienced." 

If they are pitching a product targeted at women, female founders frequently get told: "I'll check with my wife." 

Related:

Start-up investor Dave McClure resigns from 500 Startups

Venture capital is overwhelmingly white and male

It's still common for women to be mistaken for someone's assistant and asked to fetch coffee when they arrive to pitch a start-up — or to be ignored. In the early years of her company, O'Neal says she prepared the pitch decks and led the pitch meetings but investors only addressed her male co-founder. He'd shake his head, point at her and say: "You should ask the CEO that question." 

Unlike men, women say they have to strike the right balance during these presentations. They can't come off too aggressive (then they are labeled a "bitch") or too soft (then they couldn't possibly run a billion-dollar corporation). 

Wonderloop’s Aase says business meeting questions often turn to probing talk of her personal life.  

"You must have other needs than work," they say to her. "What does your boyfriend say about you traveling for work so much?" they ask. She eventually raised $350,000 from private investors and angel investors.

So many men behaving badly — even ones who publicly claim to support women in technology — has driven some women to seek alternative forms of funding. 

Change Catalyst’s Epler, who went on to start conferences and career fairs that promote inclusion in the tech industry, says she frequently advises women and underrepresented minorities not to waste their time trying to raise money from venture capitalists. 

Carmen Benitez, founder and managing director of a Singapore tech start-up called Fetch Plus, says she's one tech entrepreneur who no longer bothers. 

Benitez was delighted while working in an incubator to meet two well-known American investors. She says they dangled the potential of funding to get her to socialize with them. Months later when no funding came through, she cut ties. "It was all part of their game,” she says. 

In 2014, Lisa Wang met with a Silicon Valley venture firm to seek funding for her on-demand, late-night munchies delivery service Fooze. The partners mistook her as the assistant to her chief operating officer, who was an older man. 

An angel investor who expressed interest in Fooze invited her to drinks. When she arrived for the meeting, she found herself at a dance club where business wasn't discussed. At 2 AM when the investor pressured her to take him back to her place, she refused. She never heard from him again with the exception of one terse text message. 

Eventually Wang decided to ditch her pursuit of venture funding. Fooze was eventually sold to a serial entrepreneur on the East Coast this year for an undisclosed sum.  Today Wang runs SheWorx, a collective of 20,000 female entrepreneurs trying to close the funding gap. 

What's alarming to Wang and others: That funding gap could have lasting consequences. The nation's booming tech sector is the 21st century's gold rush, forging companies and fortunes for decades to come. 

There's plenty of risk in maintaining status quo for venture capitalists as well, warns diversity advocate and venture capitalist Freada Kapor Klein. With rapidly shifting demographics, neglecting to fund businesses started by women and people of color could significantly undercut returns for venture capital firms, she says.

"There are going to be more and more women, more women of color and more men of color who are going to be founders. The employees and consumers of those businesses, even if we are just talking in the U.S., are increasingly people of color," Klein says. "Unless (venture capitalists) have diversity at the table, they are going to miss out on a huge opportunity."

Take Curtis. The first time she raised money, a seed round, for Kuli Kuli, it took nearly a year. She says potential investors kept writing her off. 

"It's hard to put your finger on it. Is this why somebody said no versus something else? I am pretty sure no male investors were consciously saying, 'We turned down this venture because she was a woman.' But fundraising for my seed round was hard," she said. "It felt like I had to be twice as good." 

The second time around, her company that makes powders, bars, teas and energy shots out of plant protein from the moringa tree had gained traction with health conscious consumers. Products were on store shelves, sales had surpassed $1 million. In a matter of several months, she raised $4.25 million. 

"I think once I could point to a lot of outside credible factors, it definitely got easier," Curtis said. "It gets easier regardless of your gender." 

More USA TODAY coverage of inclusion and diversity in tech