The next generation of women venture capitalists are rising through the leadership ranks — though there are some caveats to consider.
A new survey looking at compensation for women in the venture industry this year found a higher concentration of women in lower-level firm positions than last year, representing around 43% of directors and principals but only 18% of general partners. Smaller funds tend to be more gender-diverse: Venture groups with less than $100 million in assets under management are more likely than larger firms to have a strong representation of women in high-ranking positions.
The share of women represented in director and principal positions significantly increased in the past two years — from 27% in 2020 to 32% in 2021 to 43% currently. At the same time, the share of women in higher-level positions, such as managing general partner or senior managing director, stands below 25% and has for the past two years.
This indicates that either there is a broken rung hindering the professional mobility of women in the venture workplace and/or that the representation of women at these senior levels is set to increase as more women are hired, mentored and given the opportunity to rise within these firms. Jody Thelander, the founder and CEO of the consulting firm that provided the analysis for the report published by First Republic Bank, hopes that this data signals an upcoming change in the industry.
“Right now, we’re seeing greater transparency into compensation, career paths and succession planning than ever before. And there’s a stronger mandate for D&I, both from the managing directors and their limited partners,” Thelander told TechCrunch. “As a result, more and more women are looking at venture as a serious career path, and that’s why we are seeing them start to show up more in these junior ranks.”
Plus, the report noted, smaller firms having a strong representation of women in high-level positions likely means that more women are branching out to launch their own firms. The share of women who are managing general partners at firms with less than $100 million AUM is 31%, compared to 14% at firms with $500 million or more AUM. Regardless of where a woman goes, however, the issue of fair and equitable pay is always a topic of discussion.
At larger AUM firms, women were paid more in line with their male counterparts this year, which is something also seen last year. However, the report found that the maximum total cash payment for male managing partners is much greater than that of their female counterparts.
At larger AUM firms, for example, the max payment senior men received was $5.2 million, compared to $3 million for women. At the lower ranks, the numbers are closer — $800,000 for male directors and principals, compared to $700,000 for women with the same title; $375,000 for male senior associates, compared to $400,000 for women with the same title. This shows it pays heavily to get ahead in venture, making the question of the broken rung even more imperative to sort.
“I think women GPs may have fewer GP allies at these [larger] firms and may unknowingly agree to lower comp structures,” Sara Zulkosky, the co-founder of Recast Capital, told TechCrunch. “Given the greater number of female investors at the midlevel, this could mean those midlevel women have more allies, leading to more in-line/higher carry at those levels.”
At smaller AUM firms, the max amount of cash women managing general partners received was $625,000, compared to $3 million for a man with the same title. That amount is significantly less than the max $1.58 million women managing general partners received last year, where their male counterparts still received $3 million. Here arises the possibility that, although women appear to be starting their own firms and are highly represented in senior positions at smaller firms, they are not paying themselves their market value, Thelander wrote in the report.
She proposed this could be because women are investing in the long “game of carried interest and reserving capital for future hires.” Thelander added that it is not uncommon for smaller AUM firms to have fewer compensation methods in place and that often women proceed toward such processes differently than their male counterparts.
Women “approach compensation with the mindset that there needs to be a tradeoff between base pay and carry, and that’s less common among men who start their own funds. Men take both,” Thelander said. “My note to women starting their own funds is that there doesn’t have to be a tradeoff. They can have both.”
Impressionism Capital founder Sydney Thomas noted in the report that lower compensation could also perhaps be tied to the fact that women-led venture firms raise less money than those founded by men, meaning there is less carried interest and cash to allocate to others. There are a few reasons for this, perhaps, with one being that LPs tell female GPs to raise micro funds.
At smaller AUM firms, the maximum portion of carried interest — also known as carry — a female managing general partner earned was 80%, compared to 93% for men with the same title. Similar to pay, the way men and women are compensated begins to diverge at the director and principal level, where, in this instance, men earned a max carry of 22.78%, whereas women earned 15%.
This is a significant gap compared to male and female senior associates, where the figures were closer: Men earned a max carry of 7.5% and women earned 8%. (At the managing general partner level, women had higher median carry percentages at the 50th and 75th percentile. At the director level and principal level, male median carry percentages were higher at both the 50th and 75th percentiles.)
The max carry female managing general partners earned at larger AUM firms stood at 35%, compared to 80% for their male counterparts. The gendered percentage difference is glaring, although, at a director and principal level, the reverse is basically true — female directors and principals earned a max carry of 11%, compared to 4% for their male counterparts.
In the senior associate roles at larger AUM firms, the percentages are quite similar, with the max carry for women and men standing at 2% and 1.6%, respectively. Zulkosky noted in the report that, in certain circumstances, women’s low carry percentages signal that they are perhaps splitting more of the economics among their team than their male counterparts. That goes back to the point Thelander made about women not taking it all for themselves.
“While I’ve anecdotally seen some progress toward more equitable compensation between male and female GPs, issues still exist,” Zulkosky said. “This appears to be reflected in the data, too.”
The numbers are indeed moving slowly, but they are moving. This report is good news, along with its transparency. From its current depths, the only place venture has to go is up.
“Those who currently hold lower-level positions in venture will be the next generation of VC,” Thelander said. “If this data is any indication, that means we’ll one day see a higher concentration of women at the top.”
Correction: An earlier version of this story misidentified the name of the bank that published the report.