Bain Capital Ventures sponsored the inaugural Boston Women’s Venture Capital Summit this year. The $80 billion company, most known for being founded by Mitt Romney and investing in Dunkin’ Donuts and Staples, is trying to create a more progressive image.

Several partners from Bain appeared on panels and attested to the fact that there are too few women and not enough diversity in venture capital. They also talked about the fact that there were incredible startups, CEOs, and networking opportunities at the summit. They simply didn’t know about them before, they echoed.

Around the same time, former governor of Massachusetts, Deval Patrick, was named director of investments for social business at Bain. He’s the first black man to become a managing director there, and wants to use his position to invest in companies that do some good for the world.

As Bain employees touted these achievements, Sheryl Marshall, who founded the summit, smiled politely. She applauded the move, but the firm doesn’t have a single female partner. Never has.

“Congratulations Governor Patrick, a great social impact would be to insure that some women make partner at Bain Capital,” she tweeted afterwards.

That’s just one moment in this exhausting saga for Marshall, who has been in the venture capital business since the dot-com boom. Advocating for gender equality in 2015 is, frankly, frustrating. It’s a problem that persists all over the world, in every corner of every industry, and yet lately it’s become particularly glaring in what is often touted as the economy’s most progressive sector: technology.

And the fuel that powers the tech industry is venture capital.

Ugly numbers

In late 2014, Massachusetts-based Babson College released a study as part of its Diana Project that examined the state of women in venture capital. The research has been widely quoted because the statistics are so staggering.

The Babson study analyzed about 7,000 companies that received venture funding in the US. In 1999, the number of women partners in venture capital firms was 10%. Today, it is 6%.

And even though women-led venture-backed companies earn 12% more revenue than male-led companies, only 2.7% of venture-backed companies from 2011 to 2013 had female CEOs.

What’s more, only 4.2% of VC senior partners–the decision-makers at the firms–are women, according to a 2014 Fortune research report.

There’s been a similar narrative in the tech industry, and it’s been well publicized over the past several years. Female computer science majors have dropped from 37% in the 1980s to 18% in 2011. The percentage of women in computing professions dropped from 35% in 1990 to 26% by 2013. Only 11% of the senior executive positions at public companies in Silicon Valley are held by women.

To a certain extent, the lack of females in STEM careers can be explained easier than in venture capital. There’s obviously an engineering pipeline issue, and the problem starts very young, because of the lack of exposure to math, science, and engineering; unconscious bias from parents, colleagues, and teachers; very few female peers in computer science courses in high school and college; and persistent cultural stereotypes. The combination of all these factors leads many women to avoid STEM.

The other problem is that those who do make it up the ranks in the technology industry leave it in droves mid-career–at a rate of 45%, according to recent research from the Center for Talent Innovation.

However, the narrative is changing, spurred by organizations like Lean In, Girls Who Code, the Anita Borg Institute, the National Center for Women & Information Technology, and many more.

Broadly speaking, women have made tremendous strides in many areas all over the world in the last few decades, from politics–including the possibility of the first female presidential candidate for a major US political party in 2016–to law and medicine, to international policy, education, and the nonprofit sector.

“The one place that women have not achieved the power they should is anything with leverage of money,” Marshall said.

Women are beginning to crack the glass ceiling in the financial sector, but there are still only a smattering of female central bankers, and one study showed that only a third of financial advisors are women.

Then we come to venture capital. In 2000, there were just over 1,000 venture capital firms. In 2012, that number decreased to 462. Meanwhile, in 2013, almost $30 billion was invested in almost 4,000 venture deals, about a $4 billion increase from the year prior.

So there’s more money flowing, and yet the number of funded companies with women-led teams is at an all-time low.

It’s not for lack of education. According to statistics from various US government agencies and the Center for American Progress, women make up 50.8% of the US population, 47% of the US workforce, 52% of professional workforce, and 59% of the college-educated, entry-level workforce. That last stat makes sense since women earn 60% of all undergraduate and graduate degrees. They also earn 44% of master’s degrees in business and management and 37% of MBA degrees.

Women are also starting a lot of businesses. Between 1997 and 2014, the number of businesses in the US increased by 47%, while women-owned businesses increased by 68%.

And according to CrunchBase, which recently analyzed more than 14,000 US-based startups, the number of female founders has steadily increased in the last five years. In 2009, 9.5% of startups had at least one female founder, but by 2014 it had almost doubled, reaching 18%.

Yet, women still only make up 14.6% of executive officers, 4.6% of Fortune 500 CEOs, and 16.9% of board members at Fortune 500 companies.

In the financial services sector–territory where VC operates–women comprise 54.2% of the labor force, while only 12.4% of the executive officers and 18.3% of the boards of directors are women. But, these numbers are still far higher than the 6% of women that are partners in VC firms.

All of this helps put in perspective why the tech and venture industries are under scrutiny to defend the reasons for the low numbers of women in their ranks. What happened in the last two decades that caused these two spheres to regress on gender equality? Even Candy Brush, who led the Babson College study, was left with more questions than answers.

“It’s not that they’re even hitting a ceiling,” she said. “They’re just not getting in the door.”

The bottlenecks

Throughout the last year, women in technology have stepped up to tell their stories of sexual harassment, overt gender bias, poor maternity leave policies, and unfair salary negotiations.

There are official and unofficial campaigns among women in the tech industry, all based around “asking for more” when it comes to salaries, raises, mentors, fair policies, and STEM education. The conversation has led to many initiatives, like more summits and conferences, and online media attention like Twitter chats and ad campaigns. Sheryl Sandberg and other leaders are tackling issues like women doing more “office housework,” or why women stay quiet in meetings.

While the call for gender equality has grown louder, the stories women have told haven’t been enough to drive change. When Ellen Pao lost her case against Kleiner Perkins Caufield & Byers after failing to convince a jury of sexual discrimination against her, it was a defeat for women in the industry and champions of gender equality. For many women, the discrimination Pao faced at the male-dominated firm was glaringly obvious–her claims that the firm did not promote her to partner because of gender (male colleagues with similar performance were promoted ahead of her), and that she was purposely left out of business and networking events because she was a woman, appeared to give her a strong case.

But to many–and obviously, to the jury–none of her examples were clear enough. The discrimination in Pao’s case was quiet, dismissed. It was, perhaps at times, unconscious bias. Her case brought to light the fact that most gender bias in the venture capital and tech industries is often very subtle. It’s ingrained in the culture, and it takes effort to avoid falling into those patterns.

“On Sand Hill Road, [we’ve] watched this transformation, and talked about this because it’s become more apparent,” said John Balen, a general partner at Canaan Partners. “You have to look in the mirror to see what’s going on.”

It’s a process that has really just begun, he added. There are more women-led companies, more inclusive support networks, and more educated, wealthy women becoming investors, so the foundation for change is taking shape.

Still, Marshall said, “The dialogue needs to be louder. Much louder.”

Venture capital and the network that surrounds it has always been predominantly male. Women are missing from the conversation starting in college (i.e., not included in enough entrepreneurship clubs, networking events, or business schools). Balen added that this type of culture has prevailed since the schools began. On top of that, it’s hard to dictate people’s norms–their micro groups, the roots of where they come from, what they’re comfortable with.

“It has to be a conscious effort to break that cycle,” he said.

The problem is cyclical, and it can’t be fixed by just tackling one aspect of the system. Venture partners come from a select few places: former CEOs, executives at other firms, grooming investors from the inside, or poaching from other firms. It takes a long time to move up the ladder, as venture requires many years of experience.

According to Brush, “The pathways to becoming a VC are through your college [or] work network, or by having a successful exit, you have the possibility to move into the VC firm that funded you. If only 2.7% of companies have women CEOs, and only 15% of companies [that received venture capital investment] have one woman on the team–this suggests a small pipeline.”

The overarching question, then, is where are the bottlenecks? And the answer is exceptionally complicated–there are several.

The exceptions

Venture capital has been through boom and bust cycles since the mid-20th century. Considering how it began–wealthy, white males investing their private equity into businesses–it shouldn’t be a surprise that the industry has run the course it has.

There is some historical context worth noting here. In the past 15 years–the years that the number of female venture partners dropped from 10% to 6%–there were two major financial meltdowns. The first was the dot-com bust in 2000 and the second was the global financial crisis in 2008.

It’s important to remember those macro conditions when we look at the decline. In both instances, venture capital firms had to downsize or delay investments. Most firms were already small in size, and venture partnerships take many years to build, so the last ones in–women and minorities in this case–were most often the first ones out. As a result, much of the diversity that firms added from 1995 to 2000, as they grew, quickly vanished.

Since most venture capital funds have a fixed life of 10 years, and partners stay on for at least that long, it means the pace of change is incredibly slow. That’s not an excuse, but it is critical information that is easy to overlook.

Another important macro trend throughout the last two decades was that as the internet developed and technology use spread, most venture money went to tech companies like Google, Salesforce, and Facebook. What mattered most was having a technological edge. That’s changing, but some venture firms still treat funding deals like they did in the dot-com boom. More specifically, many investors still require a technical co-founder, like a software engineer, to be on the team of a company they’re investing in.

“Right then and there, because just by numbers there are fewer software engineers who are female, if you’re going to make technological co-founder a requirement, you’re definitively going to fund more male teams,” said Charlie O’Donnell, founder and partner at Brooklyn Bridge Ventures. “That’s the pool you’re picking from.”

Certainly there’s a case for technical co-founders, but technology is now easier to build than it ever was. There are more developers and coders. Team members are easier to find, he added, and sustainable businesses can be built with lightweight technology.

Today, more people are leveraging technologies to build new types of companies in areas like digital health, food tech, or e-commerce–the goal is to disrupt other industries, rather than build out tech.

“The next generation of companies and opportunities is not on technology-focused frameworks, but building new entire industries and companies,” Balen said. “That’s open to anyone with great business expertise and leadership skills.”

Both Balen and O’Donnell have some of the highest percentages of funding women-led startups. Neither of them said it’s a conscious decision, but they do have strategies that may differ from traditional venture firms. For O’Donnell, it comes down to three key factors when he’s investing.

1. He does not require that technical co-founder.
2. He looks for founders more experienced in their industries–not 22-year-olds straight out of Y Combinator.
3. He looks for co-founders who are collaborative and more willing to share the spotlight and workload rather than take all the credit.

Both men are exceptions to the rule, in practice and in the fact they are open to discussing it. But as Balen noted, it “should be an exception when there isn’t a diverse team building a company.”

Equality as a business opportunity

About five years ago, on a rainy Saturday morning after their 25th Harvard Business School reunion, Edith Dorsen and her co-founder, Monica Dodi, met with a group of investment and finance professionals to talk about venture capital. They wanted to focus on a more risk-intelligent approach to the industry, after the core technology was developed and the company was capital efficient. What they came up with turned into Women’s Venture Capital Fund.

“We got into this because we saw there was really an untapped opportunity with a focus on women entrepreneurs,” Dorsen said. “Gender inclusive teams are better able to compete in the market, and therefore those companies will perform better financially. It’s a real opportunity that others have not fully grasped to make good returns.”

The first five companies Women’s Venture Capital Fund invested in had a female CEO and a male co-founder.

Statistics show that venture capital firms with women partners are more than twice as likely (34% compared to 13%) to invest in companies with a woman on the executive team, and more than three times as likely (58% vs. 15%) to invest in companies with women CEOs.

Women-led companies are more profitable, more diverse, and have a better chance of success. According to the Babson research, companies with a woman on the executive team were 64% more likely to have higher valuations at first funding and and almost 50% more likely to have it at last funding. Women-led tech companies are more capital efficient and earn 35% higher return on investment, according to a 2013 report from an online survey by researchers from the Kaufman Foundation and Duke and Stanford Universities.

Other studies have also shown that women-led companies are performing better in ROI. In a study done over a 12-year period, trading platform Quantopian found that women CEOs in the Fortune 1000 drive three times the returns of the average S&P 500 company, in which 95% of the CEOs are men.

“You’re going to start to see a lot more exits and large companies founded by women,” said Anu Duggal, founder of Female Founders Fund (sometimes cheekily called “F Cubed”).

Duggal started her fund in 2013 in New York City, which is a huge part of her strategy to change the narrative. True, venture capital started in the Valley, she said, but New York offers more industries to disrupt, and more funds.

“We’re definitely going to see a lot of innovation [here],” she said.

Duggal wants to make sure the world knows it’s missing out on these types of companies, and she has data to back it up. In January 2015, Female Founders Fund released a study that showed in 2013 in New York, only one out of 58 companies in Series A rounds of funding were female founded. In 2014, there were 12 out of 90.

“My view is that it’s changing and getting better and more entrepreneurs in [the] ecosystem, which will naturally lead to more getting venture-funded,” Duggal said.

Duggal said she visits the Valley from New York once a quarter and meets with the top VC funds there. She sees positive reactions, signs of shifting attitudes, she said. Thinking big and taking in venture capital money is a huge liability that comes with a lot of responsibility, so picking the right companies is key. You have to show they’re growing and attracting capital, she added. And she’s doing that with her portfolio.

“The whole idea behind the fund is to build a networking platform that takes advantage of that. It’s a lot less about the industry and more just about an opportunity that I see,” Duggal said. “My belief is that it will continue to evolve.”

With F Cubed, Duggal is creating a network of women–and men–of support, and that’s leading to her finding the most innovative founders and ideas.

“Investing in the right founders with big ideas that are truly disruptive is what I’m betting on,” Duggal said. “A lot of women start small businesses that don’t necessarily need venture capital, and that’s great if you can be profitable and support your lifestyle. What I’m betting on is the big ones.”

Bombastic bias

A study by Paul Gompers, a Harvard Business School professor who testified at Pao’s trial, showed that 77% of venture firms have never had a female investor. It also found gender bias in informal mentoring systems as well as in attitudes of entrepreneurs results in the lack of success for women in this industry, and much of that has to do with the lack of contribution from male colleagues.

Everyone has biases. And in venture, much of the bias comes from what a founder is expected to act like when they’re pitching. For instance, O’Donnell said, “aggression” is often a valued quality. And if you measure aggression by how big the founder’s projected revenue is, men are more likely to put forward bold forecasts, whereas women tend to present more realistic–even conservative–potential outcomes.

The problem comes, he said, when investors don’t account for that. Given two pitches of two companies with the same potential, many venture capitalists will take the one who spouts off the huge numbers. A 2014 study by Harvard Business School showed that “male entrepreneurs were 60% more likely to achieve pitch competition success than were female entrepreneurs.”

Dorsen of Women’s Venture Capital Fund has spent many years studying these trends. “So much of venture today is investor conferences with bells and whistles and music and pounding on the chest. There’s no correlation between people who do well on the stage, and people who build successful companies,” she said. “Women, including myself, [will] not beat on their chests and are more likely to be more thoughtful and balanced in their approach. What I’ve learned and what I would pass on is sell a little harder.”

The Harvard study had a second part that dug deeper into potential gender bias among investors. The researchers only allowed participating venture capitalists to hear the voice of the entrepreneur over the slides of the pitch they were viewing. They heard male and female versions of the exact same presentations, but had no visuals of who was talking.

When the investors were asked to choose a company, 68% of them chose to fund men. Only 31% chose women.

O’Donnell said he knows of people in the Valley who unabashedly choose men over women when it comes to funding. But, he added, “I don’t think that happens that often, but of course I say that being the bald white guy who is in venture and male, and you really can’t say that.”

There’s also an issue with investors, Dorsen said, in terms of hiring people they went to school with, or who their families interact with, or who come from their own backgrounds.

“This is relatively high-risk business, and there’s a certain comfort–I think there’s almost a seductive [element] or comfort when you bring in colleagues or invest capital in those most familiar to you,” she said.

Again, most venture capital firms are relatively small, and partners don’t often leave their positions. So to drive change at that level, the biggest firms have to start bringing in women, training junior partners to move up the ranks because there is such a huge learning curve in the business.

Several years ago, Cindy Padnos wrote a white paper on the high performance rates of women entrepreneurs. Padnos is the founder of Illuminate Ventures, a $20 million fund for enterprise software technologies. She spent years as an entrepreneur before moving into the VC world, and worked with some of the biggest firms in Silicon Valley before striking out on her own.

One look at her advisory council will show that, yes, she has a variety of exceptionally experienced investors, but it’s also one of the most diverse boards in the industry, and she’s worked hard to make sure it stays that way. More than half of her advisors are women, and most members are active in philanthropic work and mentoring programs.

Her approach starts with education and mentoring. Getting more women in internships before they enter the workforce is key, Padnos said. Illuminate has an intern program, with anywhere from six to eight interns working at the firm at any given time, and half of them are women.

“They have to be exposed to it and see other people succeeded at it [and] feel like they can emulate,” she said. “For me it was meaningful to have a few women as well as men who were encouraging me to launch my firm and just see other women VCs successful at it.”

As for investors, they need to expect that women entrepreneurs aren’t going to inflate their numbers or pretend they’re something they’re not, she said.

“The more we can educate investors on how to work with women entrepreneurs and understand their psyche and persona, that can be helpful,” she said.

Meanwhile, more women-led venture firms, started by female angel investors, entrepreneurs, or partners at other firms are cropping up. Many of them are micro VC funds, meant for initial investment into companies to get them off the ground. But in general, these new funds are taking unique approaches to funding and mentoring, so that more women have more opportunities to control money.

“Over the next few years, there will be a sea change,” Dorsen said. “The genie is out of the bottle here, and I think all folks working in VC today, and individual investors, and in tech–ignore it at your own peril.”

Great advice

Aditi Maliwal remembers the exact moment she realized she wanted to be a venture capitalist. It was after she took an entrepreneurship course as an undergrad at Stanford, where she caught the tech industry bug.

Before she graduated, Maliwal arranged a meeting with her professor, Heidi Roizen, a successful entrepreneur and venture capitalist, to chat about how to make moves toward a career in the industry. But the only way she could get the meeting was to drive to Roizen’s house and take a 20-minute walk with Roizen and her dogs.

As they went up and down the hills of the neighborhood, Roizen told Maliwal she needed to go into investment banking, learn the fundamentals and the strategies she wouldn’t be able to learn in school, and come back and talk to her in a year and a half. Then, she would try to help her find a path into venture capital.

Maliwal took the advice. A year and a half later, she returned for another 20-minute walk and told Roizen exactly why she was ready for the VC industry based on the foundation she’d gained in banking.

“The best and most important lesson I’ve always learned from her is when you want something, go in and ask for it. Don’t just go in and say give me everything you can give me; a lot of these people don’t have very much time,” Maliwal said. “I had 20 minutes on a hill. Make the most of 20 minutes on the hill. Know what you’re going to ask.”

Maliwal is one of the lucky ones. She got great advice from a mentor and a role model, and it was the turning point in her career. For women interested in technology, the choices for mentors are limited. And in venture capital, the pickings are even slimmer. The fact that Maliwal had the opportunity to find a female venture capitalist–and particularly, one that was a partner at a leading firm–as a mentor has made all the difference.

Maliwal is now an investment professional at Crosslink Capital, a Silicon Valley firm. She is often the only woman in meetings, but she is one of two women at the firm. She said she feels comfortable among the male partners there, and they’ve talked about the Pao trial and related issues multiple times. She also has a group of female venture capitalists in the area, and they talk regularly.

“There’s similarities [with us] which is that [these] women are extremely driven and extremely smart and doing really well, but how do you get to the next level?” Maliwal said. “I think it comes with confidence. And confidence comes from a nurturing environment. If you don’t feel it inside, the environment needs to help nurture that. If you don’t have that environment, you feel stunted, like you aren’t going to perform because you suddenly lack confidence or are not worthy of asking questions.”

There is a rapid growth in the number of fellowships, boot camps, and events for women to learn how to better invest and build out support networks. There has been a huge rise in conferences focused on women’s empowerment in business, and social media has been a powerful megaphone for feminism and empowering women (even as incidents such as “GamerGate” have shined a spotlight on how hostile the online world can be toward women).

While many of the events mentioned above are specifically for women in the tech, finance, and venture industries, there is also an increase in support for independently wealthy women. One of the fastest growing areas for women is in angel investing, and angel investments increased by about 8% to reach almost $25 billion in 2014.

In early March 2015, six former and current female Twitter employees started #angels, which they announced on Medium. The #angels group is not technically a fund, but an investment group, where women collaborate but invest separately. Their primary mission is to become a new support network, built by women who come from varying backgrounds but all have deep knowledge of investing in tech companies.

Another example is the Pipeline Fellowship, a boot camp for angel investors, started by Natalia Oberti Noguera, who wanted to create a safe space for women to learn about the industry. They come from a variety of industries, demographics, and psychographics. All of the participants are women, but the speakers and mentors are both male and female.

“I’m interested in integrating our Pipeline Fellows into the established networks versus creating a silo. It’s a both-and versus an either-or,” Oberti Noguera said. “We still need women to become partners at this male-led or predominantly white [establishment]. If we don’t, a lot of these places where the money is aren’t going to diversify, and it’s going to be harder to support diversity.”

The potential bombshell

To cause a paradigm shift in the self-perpetuating culture of tech and venture capital, it will take change at every level, from the grassroots where companies start all the way up where the money begins to flow. And part of that conversation–perhaps a part that is too often overlooked–could involve public pensions, the investment funds for retired Americans that are the largest single source of funds flowing into venture capital, according to a Dow Jones Private Equity Analyst Sources of Capital survey.

For years before working in venture, O’Donnell worked at General Motors’ Asset Management, where he said he was surrounded by women accountable for a lot of the money.

“I always find it sort of weird that the VC partner world is elevated to this position… We put it on a pedestal, so we count the jobs of partners at VC firms higher than we count the people who put billions of dollars to work across these funds,” he said.

Marshall also said she’s heard rumblings in the industry about forward-thinking pensions that are starting to take a stance on the gender issue in the industry, but of course, only time will tell if that will develop into a standard practice. If it does, such a move could force venture capital firms to fast track their gender equality efforts if they want to continue to get money from their largest source of investments.

“This could be the catalyst that sets the bomb off,” Marshall said.

As the money trickles down, transparency becomes even more critical. And lately, the tech and venture industries are being pressured to be more open with their data, whether that’s by showing employee diversity stats, environmental practices, or where they spend their money.

For example, earlier this year, CrunchBase started including the gender of founders in its database, a simple but telling move. And Y Combinator, which has given the likes of Airbnb and Dropbox their start, is releasing its gender data more frequently. In the current batch of startups, 23% of the companies that applied and were interviewed had a female founder, and 22% of the companies it funded had a female founder. And that’s progress. It’s not necessarily pretty. But it is a start.

“Creating diversity in a firm needs to be intentional and strategic, a need to get out of normal networks and seek out partners/analysts/participants in the firms that are not homogeneous,” Brush said.

It means starting conversations to increase awareness. It means providing unconscious bias training to fight hidden prejudices, or even getting certified by a third party for gender equality efforts. It means confronting this problem head on and looking at all pressure points of the system.

“Fundamentally, women need to see this is a welcoming business environment to work in,” Padnos said. “The more women we have launching firms, building firms, and being managing partners, I think the more attractive it’s going to be to women.”

Women-focused venture funds will probably never rival firms like Bain Capital or Andreessen Horowitz in the near future. But, as technology pervades every single industry, it’s going to be impossible to keep the tech industry running the way it has been. A more diverse set of brains and voices is needed to succeed in an increasingly diverse world.

In order to thrive, both engineering and business need more women to participate. And both of those pipelines will lead to more women starting tech companies. Then, they make successful exits. They become angel investors or venture capitalists. And then they give back in mentoring other women in the industry.

Leaving out half of the population is leaving out half of the ideas, and they’re ideas that the world needs. More diverse founding teams, employees, and board members is good for the bottom line.

Cover photo image credit: iStockphoto/RyanKing999