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Tech leaders Gillian Muessig, Kelly Wright, Lisa Hammitt, and Jennifer Savage discuss barriers and opportunities for women in venture-backed startups. (GeekWire Photo / Monica Nickelsburg)

Underrepresentation of women in leadership is often cited as a driving factor behind the broader tech industry’s gender balance issues. The theory? If more women sat on corporate boards and wrote the checks, then more women would feel comfortable entering male-dominated fields and more female entrepreneurs would get funded.

But even though there is a growing body of research to show that increasing women in leadership roles makes good business sense, the market is not correcting itself, at least not very quickly. That begs the question, should regulators step in?

It’s a question that was raised Thursday during an event in Seattle that brought together women venture capitalists and executives to discuss opportunities and barriers in the venture capital world.

Create33, a “founder center” under the umbrella of Madrona Venture Group, hosted the event. Create33 Director Rebecca Lovell moderated a discussion with Lisa Hammit, vice president of data and artificial intelligence at Visa; Gillian Muessig, general partner at Outlines Venture Group; Jennifer Savage, Partner at Illuminate Ventures, and Kelly Wright, board director at Amperity, Even, and Fastly.

Tech leaders Rebecca Lovell, Gillian Muessig, Kelly Wright, Lisa Hammitt, and Jennifer Savage discuss barriers and opportunities for women in venture-backed startups.

Reports from First Round Capital and the Small Business Association indicate that companies with at least one woman founder yield better results for venture capital firms, though the picture becomes more complicated when measuring by metrics like valuations. Researchers at the Boston Consulting Group discovered female-founded companies generate more revenue than startups that only have men on their founding teams. In February, the Center for American Entrepreneurship (CAE) published a study asserting that women-founded companies perform at least as well as startups founded by men.

But despite this track record, women-founded companies accounted for just 16 percent of first venture capital financings between 2005-2017, according to the CAE study. This year, Silicon Valley Bank researchers found 63 percent of startups have no women on their board of directors and 47 percent have no women in leadership.

Regulators are starting to zero in on the slow progress toward gender parity across the tech industry — from startups to big public corporations.

The question of whether government should regulate diversity in tech is more than theoretical in California. In September, California enacted a landmark law that requires public companies domiciled in the state to have at least one woman director by 2019 and larger corporations will need to have three women on the board by 2021.

“Given all the special privileges that corporations have enjoyed for so long, it’s high time corporate boards include the people who constitute more than half of the ‘persons’ in America,” former California Gov. Jerry Brown wrote in his letter to the California State Senate.

California’s law will open up 692 board seats to women by 2021, according to an analysis by Bloomberg. If the rest of the nation followed California’s lead, it would amount to more than 3,000 board seats available to women, nearly a 75 percent increase.

During Thursday’s panel, Wright said that California’s board law is moving the needle. The former longtime Tableau executive noted that without a legal requirement, California’s big corporations were not making much progress on gender diversity among directors. She explained that California’s law actually started as a recommendation from the government, not a mandate.

“Unfortunately, over time, nothing happened,” she said. “There was no change.”

From Wright’s perspective, the power of California’s law — which governs some of the most powerful tech companies in the world — is the impact it’s having beyond the state’s borders. “It’s at least raised the conversation to the point where now people are actually looking at the data and looking at the facts, and we are starting to see some positive progress,” Wright said.

New Jersey and Massachusetts are considering similar laws. Legislators in Washington state, the West Coast’s other big tech hub, aren’t formally pursuing a board diversity law though that could change if the idea picks up steam. States are mirroring laws in a handful of European countries that require corporate boards to have women directors.

Seattle-based Amazon added two women to its board in February; it now has six men and five women on its 11-member board. Since 2014, fellow Seattle-area tech giant Microsoft has added four women to its 14-person board.

A research paper from 2016 found “evidence that firms with a larger fraction of female directors on their board have greater dividend payouts.”

But the tech leaders on the Create33 panel and other female board members GeekWire interviewed have mixed feelings about regulators mandating diversity quotas.

Muessig, who co-founded Moz and runs a venture fund that backs women-led startups, wondered if it was “thin thinking” to force this type of regulation companies.

“Government does this so often,” she said. “It’s a knee-jerk reaction to something that didn’t really solve the problem. I’m not against the idea … but I haven’t dug in deeply enough to say, is that really going to be the root of the problem or not?”

Flying Fish Partners co-founder Heather Redman is concerned that the narrow focus on corporate boards could actually hurt efforts to increase representation of women in other tech leadership roles.

“The data, so far, on how well the regulation works is kind of mixed,” she said in an interview with GeekWire. “One of the phenomenons that I’ve noticed is that we’re already seeing a lot of women retiring early from C-suite jobs instead of becoming CEO. The board path is becoming the easier path.”

Redman added, “If I had to pick where I would want to see women be, I would pick CEO all day long … the board does not have its fingers on the knobs.”

Several executives also expressed a begrudging acceptance of the mandate’s necessity.

“Frankly, I was disappointed that it had to be mandated,” said Nicole Piasecki, a Seattle executive who sits on several board seats, including Weyerhaeuser, in an interview with GeekWire. “I understand why it was mandated because progress wasn’t occurring.”

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