Sexism In The Venture Business? Sequoia’s Greg McAdoo Says VC Industry Is A “Meritocracy”

Just a day after a gender discrimination suit was filed against one of Silicon Valley's most storied firms Kleiner Perkins Caufield & Byers, an all-male panel of VCs at the TechCrunch Disrupt conference said that sexism isn't that much of an issue in the industry.

"This business is a meritocracy by and large," said Greg McAdoo, who is a partner at Sequoia Capital, noting that the firm has female partners. "I have no doubt that there are pockets of issues, because in humanity you're going to have that."

He added, "We look for folks who can help companies become great businesses over time and we don't ask a lot of questions about gender or what have you." Sequoia doesn't have any female partners on the U.S. side, but it does have some in China.

Yesterday, Ellen Pao, an investment partner with Kleiner Perkins sued her firm for sexual harassment and gender discrimination. We chronicled it in more detail here. In the suit, it basically says that Pao faced and eventually gave into sexual advances from another partner. When the relationship ended, the lawsuit said that partner retaliated against her professionally over several years. Kleiner Perkins has said the suit is without merit.

No one except for McAdoo answered the question about sexism from moderator and "The Facebook Effect" author David Kirkpatrick. The other panelists included CrunchFund's Michael Arrington, First Round's Josh Kopelman, Brooklyn Bridge Ventures' Charlie O'Donnell and Kleiner Perkins' Mike Abbott.

Abbott is very new to Kleiner Perkins and only came on last December from Twitter after many of the instances mentioned in Pao's suit allegedly happened. He couldn't comment on the suit. Kleiner has several prominent female partners including Mary Meeker and Aileen Lee, who recently started an early-stage fund.

Arrington has written a boatload about the "women in tech" issue but from a blogger's vantage point. Meanwhile, O'Donnell's dalliances with women in the New York tech scene have been exhaustively chronicled by Betabeat.

The panelists also talked about a few other big issues in the industry right now — namely the rise of Andreessen Horowitz and Y Combinator.

Andreessen Horowitz has ensconced itself into the top tier of venture firms over the last few years — an astonishingly fast rise for a firm so young. It's done this in part by saying that it's a "full service" firm that provides a lot more than just capital. It helps with recruiting and operations. But the panelists said every other good firm does this too. They just don't talk about it as much.

"Venture capital is a service-oriented business. They've been doing it for a long time. Sequoia has taken many companies from being founded to IPO," Arrington said. "What Andreessen is doing isn't new. They're just marketing themselves extremely well. If I were part of another firm, I would start thinking about marketing myself better and getting that message out."

The panelists also touched on Y Combinator's rise. The early-stage venture firm's next class is going to have more than 80 companies and the number of applications for every cycle has grown so quickly that admissions are now down to 2 percent. But that's also made its companies quite expensive to get into, with the average valuation cap for the last class being around $10 million.

"What they're doing for entrepreneurs is great," Kopelman said. "There are more and more companies being built. At the same time, venture capital industry is shrinking so we'll see some atrophy for many of these companies. But this is natural. If you can shrink a failure cycle from six years to one, then the entrepreneur gets six at-bats."

Arrington called out Sequoia for not investing in the last class — which was a prod to see if Y Combinator valuations are getting so high that they're dissuading even top-tier investors from going in. McAdoo said, "We have invested in a dozen YC companies over the years and a third of those rounds were done well after YC finished."

They also talked about Facebook's IPO last Friday and whether its performance with a more than 23 percent decline since opening at $42.05 a share will affect the industry negatively.

"I don't accept the premise of this question. The Facebook IPO is a 'disaster'?" Arrington said. "It's a PR disaster. We have a new $100 billion public company that's going to acquire all of the companies we're investing in."