Astia: Knocking Down the Hurdles for Women-Led Startups
Quick: Name the Bay Area startup accelerator where 60 percent of the companies go on to get acquired or win funding within 12 months of graduating, and where the 220 companies that have participated since 2003 have raised, in total, nearly a billion dollars in venture funding.
If you answered Y Combinator, you’re wrong. In fact, the group I’m talking about couldn’t be more different from the Silicon Valley venture incubator, which is pretty much a den of 22-year-old guys who dropped out of Stanford with dreams of becoming the next Mark Zuckerberg.
The real answer is Astia, and it’s probably the world’s most successful organization promoting women-led technology startups. I’ve been waiting for months for a chance to write about this non-profit. Not so much because of what it’s doing to combat the startup world’s structural and cultural biases against women—although that’s incredibly important—but because of its phenomenal success rate. Any organization that’s churning out this many high-growth companies is doing something right, and deserves the attention of entrepreneurs and investors everywhere. Just glance over this partial list of Astia’s alumnae:
BioVantage Resources, Golden, CO—Sue Kunz, CEO. Algae-based bioremediation for municipal, industrial, and agricultural wastewater. Winner of 2010 Cleantech Open Sustainability Award.
Blurb Books, San Francisco—Eileen Gittins, founder, president, and CEO. Photo book publishing service. Turned profitable after just three years in business; earned $45 million in revenues in 2009.
DNA Direct, San Francisco—Ryan Phelan, founder and president. Acquired in February 2010 by Medco Health Solutions.
Formotus, Bellevue, WA—Adriana Neagu, co-founder and CEO. Mobile business forms for Android, iOS, and Windows Mobile devices. Winner of numerous achievement and innovator-of-the-year awards.
LearnVest, New York—Alexa von Tobel, founder and CEO. Personal financial management tools and education for women. Raised $4.5 million from Accel Partners in April 2010.
Napo Pharmaceuticals, San Francisco—Lisa Conte, CEO and founder. Developing drugs for chronic diarrhea and Type II diabetes. Raised $24 million in a 2006 IPO on the London Stock Exchange.
Ocimum Biosolutions, Hyderabad, India—Anu Acharya, founder and CEO. Genomic diagnostics outsourcing. Ranked by Deloitte as the fourth-fastest-growing technology company in India.
Scout Labs, San Francisco—Jennifer Zeszut, CEO. Social media monitoring technology. Acquired by Lithium Technologies in May 2010.
There’s a lot of firepower in this lineup (and even more if you check out the full list of past Astia clients). There’s also a lot of variety: you don’t see too many cleantech, pharmaceuticals, or publishing companies coming out of Y Combinator.
In two recent meetings with Astia CEO Sharon Vosmek, I’ve learned a lot about how the organization works and how it’s different from most of the other accelerators around the United States. If you asked me to boil down Astia’s secret to one word, I guess it would be “community.” The Astia experience doesn’t end after the program’s two-month period of intense mentorship. Astia admits new companies not just based on their potential to get funded and grow exponentially, but on the likelihood that their leaders will give back later on by mentoring the next generation of Astia startups.
“We are, at the end of the day, a network of individuals,” says Vosmek. “The model is built on give-back and the notion of rich relationships.”
In fact, one of the two “dirty little secrets” about Astia, Vosmek says, is that it’s partly patterned after the microlending phenomenon in developing countries, where committees of community members, not bank executives or NGO officials, decide who gets a loan. (Vosmek’s graduate work at the University of Wisconsin focused on international microenterprise. Incidentally, she says women qualify for microloans at a much higher rate than men: they’re considered to be more reliable.)
The other dirty little secret? That when Vosmek rebooted Astia after becoming CEO in 2007 (more on that in a moment), she paid close attention to the experiences of her husband, Timothy McClarren. Currently chief architect at San Francisco-based Idle Games, McClarren was one of the first software engineers hired by Netscape in 1994. He left Netscape in 1998 “with one of the most robust networks you can imagine,” Vosmek says, “and whenever he came up with an idea after that, he could raise whatever money he needed to.”
Vosmek says this showed her that raising startup funding is not a matter of “how good is your slide deck, or how slick are you on stage. It’s can you find the right introduction and the right relationship.” And in a world where the relationships that lead to investments are almost always between men—only 10 percent of venture investments go to companies with female CEOs—Vosmek is determined to even out the balance. “I would like to see half of all high-growth CEOs be women,” she says. “If we are 50 percent of PhDs and MBAs, we should also be present and participating in these positions of innovation and wealth creation and real leadership.”
Astia was born in 1999 as the Women’s Technology Cluster, a project of the Three Guineas Fund, established by former Cisco Systems chief marketing officer Catherine Muther to foster economic opportunities for girls and women. When Vosmek was promoted from chief operating officer to CEO in 2007, one of the first things she did was change its name. While most rebrandings are cosmetic, Vosmek says this one had some interesting rationale behind it.
First of all, by the late 2000s, the Women’s Technology Cluster was no longer just about women: half of the mentors active in the group were men. Also, it was no longer just about technology, in the commonly used sense of information technology: it had grown to embrace companies working in cleantech, media, and “anything venture-backable,” Vosmek says. And finally, it wasn’t really a cluster, a term sometimes used for incubators with resident startup companies.
“It was important to find a name that men could embrace and that was about an inclusive environment,” says Vosmek. “Astia,” a feminized version of the Latin astrum, for star, fit nicely with the group’s aspirational mission. (Astia is also a genus of Australian jumping spiders, but Vosmek says she didn’t find out about that meaning until it was too late.)
Astia’s official mission is threefold: to ensure access to capital for women-led companies, to boost the chances that the client companies that do raise capital will achieve high growth, and to develop the executive leadership skills of the women on the companies’ founding teams. In each area, Vosmek says, the market has “hidden hurdles or unique hurdles for women-led companies.”
In the area of leadership, for example, women entrepreneurs often need help developing a sense of personal confidence that’s separate from whether their businesses are succeeding or failing. Men, it seems, are more easily able to shrug off failure, or at least project fearlessness. “Where there is a huge gender difference in the market is that men will fail along the way and find personal success in that business failure,” Vosmek says. “If they raise $20 million and their business doesn’t go anywhere, they can go back to the same investor and still raise money. We make sure that women carve out that kind of personal success on their business journey.”
Companies are screened for Astia by a committee of 10 to 20 entrepreneurs and investors, many of whom previously participated in Astia. Those invited to join are asked to pay a $5,000 participation fee and to donate a 1 percent equity stake. The fee used to be lower, but Vosmek discovered that the more Astia charged, the higher the caliber of the companies that applied. “When we charged enough, people really showed up and were really committed to it, and their success rate really took off,” she says.
The fees, by the way, provide about a third of Astia’s revenue. Another third comes from corporate sponsorships from the likes of AOL, Microsoft, and the law firm Fenwick & West. The final third comes from philanthropic donations; the Kauffman Foundation is a major donor. (With support from those organizations and a few more—the Althea Foundation, Moss Adams, and Silicon Valley Bank—Astia committed last week, as part of the White House’s Startup America initiative, to double the number of entrepreneurs it serves every year.)
The formal Astia program begins with a rigorous, week-long indoctrination program focused on both company-building and networking skills. “I hate the phrase boot camp, but that’s what it is,” Vosmek says. All sessions are led by experienced entrepreneurs from Astia’s network. The main point of the week is to build relationships.
After that, each company gets paired with a quartet of advisors: an investor, an experienced executive, a technologist, and a legal, accounting, or sales expert, depending on the company’s needs. For the next two months, the companies stay in constant touch with their advisors, who are also expected to call on their wider networks to help the companies make key connections. “We call them ‘advisors’ rather than ‘mentors’ because they certainly teach, but we also expect them to open doors to their networks, invest in the companies if appropriate, and do business with the companies,” Vosmek says.
The program ends with an investor forum where companies make pitches before an audience of venture and individual investors—the equivalent of “Demo Day” at incubators like TechStars or Y Combinator. Then the companies go their own way. “But the exciting thing is that the relationship goes on for the life of the company,” says Vosmek. “We appoint ambassadors, again volunteers from the community, who check in monthly and find out what other advisors the company might need. We keep adding experts as the business grows and its needs change. What we’re really proud of is that we are able to deliver meaningful support all along the way.”
The proof of the Astia approach is in the funding. As I said at the top, 60 percent of the admitted companies secure venture financing or exit though an acquisition within one year of joining. “We think that’s unparalleled in the market,” says Vosmek. “Y Combinator has that level of success, but they also have a fund.”
Unlike true venture incubators in the Y Combinator or TechStars mode, Astia doesn’t have cash to hand out to startups. The main benefits are training, advice, and a really great Rolodex. The differences are deliberate. In fact, if you ask Vosmek whether she thinks Y Combinator ought to be putting half its money into women-led startups, she says that would be beside the point. The whole venture incubator model, she thinks, is wrong for women.
“Number one, most incubators require you to be on site, at least part of the time, for several months,” she points out. “Vivek Wadhwa has done research to show that the average entrepreneur is 35 and has 1.2 children. I don’t know many adults with children that will relocate to an incubator with the Y Combinator model. Society doesn’t support that yet, so that women can up and move for three months.”
In addition, the weekly guest lectures and networking dinners that are a hallmark of programs like Y Combinator aren’t as meaningful for women, Vosmek says. “Women are very different. We won’t prioritize a networking event on our calendar, but we will prioritize something that provides business value,” she says. In fact, Astia stopped holding networking events several years ago for this exact reason, with the exception of its annual awards dinner, Vosmek says.
Finally, the equity stake of six percent or more that most venture incubators demand in return for a $15,000 to $20,000 stipend is seen by many women as a very expensive proposition. “The terms of engagement for most incubators are problematic for most women entrepreneurs,” Vosmek says. “I think they believe they can find better terms.”
This kind of stinginess may serve women-led companies well as they evolve. Research by Cindy Padnos, the founding partner at Illuminate Ventures, a women-focused venture firm in Oakland, CA, shows that firms owned or led by women grew at five times the rate of the average new firm between 1997 and 2006. Firms with women in top management positions earned a 35 percent higher return on investment than firms with all-male management.
Judging by that data, it’s a wonder more investors aren’t reserving funds for women-led companies, or at least demanding that early-stage startups add women to their teams. But that may not happen until venture capital firms have more women partners. And there won’t be more women VCs until there are more successful women entrepreneurs ready to make the switch.
Astia is working on that—not just here in the Bay Area but in New York, London, and India, where passionate women entrepreneurs have volunteered to lead local versions of the program. Vosmek says she thinks gender equality is achievable in the high-growth startup world over the next decade. “I am firmly committed to the idea that Astia should not need to exist in 10 years,” she says. “I believe it’s possible.”
The more companies that go through the Astia program, in fact, the faster things could change. Vosmek points back to her husband’s experience after leaving Netscape. “For this core group, just because they could say they were early engineers at Netscape, so many doors were opened for them. Not in any way to diminish that, but a great deal of that is who you know, and do you know them in a way that they will invest in you. We are just now getting a generation of women who have that pedigree.”