Female founders under fire: Are women in the startup world being unfairly targeted?

Last fall, Audrey Gelman seemed to be on top of the business world—or at least one pale-pink corner of it. At 32 years old, the former political operative and well-connected New Yorker had raised more than $117 million in venture capital for the Wing, the upscale women’s club and coworking startup she had cofounded in 2016. Women from Los Angeles to London flocked to the Wing’s pastel-painted offices and star-studded events, where movie stars and presidential candidates alike talked about “asking for what you want” and “blazing your own trail.”

By September 2019, Gelman was celebrating her professional and personal triumphs by appearing, eight months pregnant and unquestionably powerful, on the cover of an issue of Inc. magazine devoted to female startup founders. “My hope is that women see this and feel the confidence to take greater professional risks, while also not shelving their dreams of becoming a mother and starting a family,” she told the Today show on the morning that the cover was released.

Then it started to crumble. Some Black customers were already sharing on social media and in the press the discomfort they sometimes felt at the Wing and its “majority-white” space. And in March, The New York Times Magazine published a long feature about what employees called the Wing’s “toxic culture,” including complaints about pay and scheduling for hourly workers and Wing managers’ poor handling of incidents, such as one in which a customer referred to Black and brown employees as “colored girls.” Then, as COVID-19 shut down the Wing’s physical locations and threw its business future into question, George Floyd’s killing by Minneapolis police sparked a national reckoning over racism—amplifying the voices of women who said the Wing had failed to live up to its feminist rhetoric of sisterhood for all. Current and former workers, including many laid off amid the pandemic, protested the company’s attempted response to the Black Lives Matter movement and Gelman’s leadership.

By mid-June, amid mounting pressure and scrutiny, Gelman stepped down as CEO. “Ultimately the prioritization of growth over culture came at the expense of women of color feeling empowered,” she later wrote on Instagram. “I didn’t live up to the values I set.”

Gelman’s fall from grace was dramatic—but not singular. Amid employee allegations of mismanagement or mistreatment—often amplified by the press—each of these founders has stepped down or been forced out of her company in the past 18 months: Tyler Haney of activewear startup Outdoor Voices; Steph Korey of luggage company Away; Christene Barberich of women’s digital publication Refinery29; Yael Aflalo of dressmaker and fashion brand Reformation; Jen Gotch of retailer Ban.do; Shannon Spanhake of workplace-benefits platform Cleo; and Nancy Lublin of mental-health platform Crisis Text Line.

While each ouster has its own twists and turns, there’s a lot that unites these companies and founders. All are fast-growing startups that emphasized feminist or socially driven missions. All have venture capital backing or have been sold to private owners. Most provide consumer-facing products. The vast majority were started by young, wealthy, white, or Asian founders who had become the celebrity faces of their businesses. And—some would argue, most crucially—all were founded by women.

To many in Silicon Valley, the toppling of so many of the industry’s most prominent female founders signals something much bigger and more disconcerting than the usual game of startup musical chairs. “There are very few women leaders who rise to the level where they get press and attention, and at some point, they’re all disappearing,” says Sara Mauskopf, the cofounder and CEO of Winnie, a San Francisco-based childcare platform that has raised $15.5 million. Throw in a slew of other female founders who remain atop their companies but who have faced pointed scrutiny of their management styles and cultures—including the CEOs of skin care startup Glossier, retailer Rent the Runway, dating app Bumble, and lingerie company ThirdLove—and it’s hard not to wonder, as Mauskopf does: “What the heck is going on? And why is this only happening to women?”

To understand the alarm expressed by Mauskopf and many of the 24 other founders, investors, executives, and startup employees who spoke to Fortune for this story, it helps to start with a big-picture view of the state of women-led startups. Female founders have a track record of success—one 2018 BCG study found that women-owned businesses earn twice as much revenue per dollar invested as male-owned businesses do—but the overwhelming majority of investors shun them. Women-only founding teams received only 2.6% of all venture capital invested in startups in 2019, with Black women receiving less than 0.3% of VC in 2018 and 2019. Women who do get funding raise about a third of the amount that men do, on average, and are less likely to raise subsequent rounds. They also retain less equity in their companies, thus ceding more control to the investors who have the power to fire or protect them.

Female founder-CEOs run only 4% of the “unicorn” startups valued at more than $1 billion, according to Crunchbase. Which means that, proportionally, these successful venture-backed female founders are even more rare than female Fortune 500 CEOs, who currently run 7.4% of the country’s largest companies.

2.6%

Share of total VC dollars going to companies with all-female founding teams

The pandemic, which has created an economic catastrophe for women writ large, has made this challenging situation still more difficult. In October, data firm PitchBook reported that VC funding for companies founded by women dropped to $434 million in the third quarter, its lowest level in three years—and about 1% of the $37.8 billion invested in all startups during the same period.

Investors and entrepreneurs say the current global uncertainty has reinforced the insular, pattern-matching nature of venture capital, in which 88% of those making investing decisions are male and male-founded companies are seen as the default “safe” bet. “In a time of stress, there are people who are just falling back to pattern recognition and their standard operating behavior” of investing in male founders, says Pam Kostka, a veteran Silicon Valley executive who now runs All Raise, a nonprofit devoted to female VCs and founders.

These trends, married with the cascade of high-profile founder ousters, are fueling a growing debate among startup industry insiders over whether female founders are facing a backlash—one that makes them more subject to public scrutiny and, ultimately, more likely to be forced out of their companies than their male counterparts.

“There’s absolutely a double standard for women,” says Alex West Steinman, the cofounder and CEO of the Coven, a ­Minneapolis-based women’s coworking startup. “We do walk around with a target on our backs, and people are looking for us to fail.” There’s copious social science research—and widespread real-world experience—that agrees. Women in the business world face what’s been dubbed the “double bind,” which penalizes them for “unfeminine” behaviors that are expected and often applauded in male leaders. One 2007 study led by a New York University researcher found that when two managers were described using identical personality traits but different genders, “women are decidedly more disliked” and “are found to be less desirable as bosses.” Where male leaders are seen as strong, determined, and decisive, women who behave the same way are judged to be aggressive, abrasive, or strident.

What the heck is going on? And why is this only happening to women?

Sara Mauskopf, cofounder and CEO, Winnie

Still, not everyone sees a gender backlash at startups. “Being a founder is so hard, but the playing field felt relatively fair,” says Alexa von Tobel, who at age 31 sold her financial planning startup, LearnVest, to Northwestern Mutual and who now runs her own early stage venture capital firm, Inspired Capital. Naysayers dispute the idea that, as Mauskopf put it, such falls from grace “happen only to women,” pointing to the high-profile exits of WeWork cofounder Adam Neumann and Uber cofounder Travis Kalanick, and the more recent departure of Nikola founder Trevor Milton. Meanwhile, employees have complained this year in the press, on social media, and in a couple of lawsuits about the leadership of and workplace cultures created by the male founder-CEOs of companies including Pinterest, Everlane, and Carta (all of whom have, at least thus far, retained their jobs).

“Culture is top of mind for anybody interviewing now,” says Jennifer Fitzgerald, the cofounder and CEO of Policygenius, whose insurance company has raised more than $162 million from private investors. She argues that when workers criticize CEOs on social media or in the press, it’s “less of a gender thing and more that there’s just a shorter fuse and a bigger public platform, and a lower tolerance for it among employees.”

The reality of the situation may—not surprisingly—be a little more nuanced. In many of these cases, it’s worth asking whether the female founder in question helped set the very traps she walked into. Outdoor Voices founder Tyler Haney, for example, started her Instagram-friendly activewear company in 2014 and within five years raised more than $60 million. She seems to have been reading from the same playbook as Gelman, sitting for multiple magazine covers, participating in a long 2019 New Yorker profile that anointed her the “brand’s best model,” and announcing her pregnancy that July on Good Morning America with her own message of feminist empowerment: “As a young female founder and CEO, it’s so cool to show that you don’t have to choose career or family.”

But in February, while still on maternity leave, Haney revealed she was leaving the company. Soon after came the reports that under her watch, Outdoor Voices had been burning through cash, delaying store openings, and losing seasoned executives. Employees complained, anonymously, to BuzzFeed News that having come to work for a young female founder one called “so inspiring,” they instead found Haney presiding over a dysfunctional culture of favoritism.

Haney, who returned to a diminished role at Outdoor Voices, has acknowledged in an interview with Inc. that the brand “definitely pulled that [female founder] narrative out when it suited us … We really leaned into that story to grow this thing, and we became press darlings. But that’s all great until it’s not, because we also made ourselves targets.”

Like Haney and Gelman, many of the female entrepreneurs who have resigned or come under criticism recently founded consumer-oriented brands and became the very public faces of their companies in a way that’s more common if you’re selling leggings than, say, cloud-based enterprise software. These businesses often “get more press, because they’re more relatable to the general reader,” says Theresia Gouw, founding partner of Acrew Capital. “That can cut both ways.” And while there are certainly women who start hard-tech companies, they are in the minority: Last year, 30% of the VC investments in retail and consumer companies went to startups with at least one female founder, according to data from PitchBook and All Raise. Among tech startups, that share drops to 19%.

30%

Share of VC investment in retail and consumer startups with a female founder

The retail/consumer space is a crowded one, so embracing the idea of founder as star and adopting a marketing message that preaches feminist uplift has been one way for women-led startups to cut through the noise. But it also publicly ties female founders to their companies’ failings, especially around promises of creating better spaces for underrepresented customers and employees. “It’s a very, very difficult territory to walk, to build a unicorn-scale business based on feminism. To be seen as inauthentic around that is dangerous,” says Catherine Connors, a serial entrepreneur who’s currently the CEO of the League of Badass Women, a networking startup.

Several entrepreneurs told me that this sort of founder-centric, by-women-for-women marketing is often a mandate from the VCs who invest in startups—forcing founders to choose between pitching their startups as another girly lifestyle business or not getting funding at all. “We’re the pink portfolio,” Connors says. “The assumption is that we’ll use femininity and access to the female customer for the bottom line—and to get to the $1 billion exit.”

Mauskopf says that while she and her female cofounder were raising money for their software platform, one potential investor asked why they “weren’t out there in the press more” and asked if they could try “to build a brand like TheSkimm”—a media company with little in common with Winnie, aside from its being founded by two women. “We just need people to use Winnie,” Mauskopf says. “They don’t need to care about me or my cofounder.”

Which brings us to the tech industry’s love/hate relationship with the press. Many in the startup ecosystem blame reporters for building up young, photogenic female founders only to eventually tear them down. And it’s true that the rise of these women has been partially enabled by business publications including Fortune and by the largely female journalists who cover women in business, including me. (Before joining Fortune, I edited the Inc. package on female founders tied to Gelman’s pregnant cover photo.) It’s also our responsibility to report on the failings of these companies—but when a woman is in charge, such reporting often draws accusations of bias or clickbait.

In December 2019, after the Verge reported on intense and “bullying” Slack messages that Away CEO Steph Korey sent to employees late at night and her expectations that they cancel holiday vacations to work, Korey briefly stepped down. This summer she hit back on Instagram: “The incentive isn’t to report what’s happening. It’s to write things that will be shared on social media,” she wrote. “Why are women being targeted specifically? Because readers find their takedowns even juicier.”

Korey, who in January returned as co-CEO and in October stepped back again, declined to comment. But many startup insiders argue that male leaders get away with similar demanding behavior—or worse—all the time. (See also Elon Musk, Fortune’s 2020 Businessperson of the Year.) “The dirty secret is that being in a growth-stage company, it’s not for everyone. And a lot of these companies have problematic cultures,” says Leslie Feinzaig, founder of the Female Founders Alliance, a startup community.

Instead, the rare women who secure significant VC money—whether they opt to lean in to the idea or not—are inevitably put on what All Raise’s Kostka calls “the perfection pedestal,” closely scrutinized by media, workers, and investors. With that spotlight comes the visceral fear that they could be next.

“Every time there’s a teardown, I get text messages from female founders that are just like, ‘What the hell?’ And, ‘When is it going to be me?’” says Vanessa Larco, a partner at venture capital firm NEA. “It’s scary—and it’s just not fair.”

Even some of the startup employees whose complaints have led to founder resignations acknowledge that they expect more from female founders—in part because the few who do reach the “perfection pedestal” tend to be privileged white women who often promise that their business will be the one to finally provide better opportunities to the Black and brown hourly workers they employ.

“Women are a lot more harshly held accountable. That’s part of being a woman in a male-dominated society,” says Leslieann Elle Santiago, a former assistant store manager at Reformation who is a Black-identifying Puerto Rican. “But they have a responsibility to create businesses that are not only for white women.”

The anti-racist reckoning of 2020 has both accelerated the female founder backlash and provided more of a window into how the gender double standard plays out. Direct comparisons between male- and female-led companies aren’t easy to make, but the case of Reformation comes close. Founded by former model Yael Aflalo, the “sustainable fashion” startup is a celebrity favorite that in 2019 claimed it was on track to post more than $150 million in revenue. Last July, Aflalo sold a majority stake to private equity firm Permira Advisers, telling the New York Times that her company catered to “a powerful customer who wants to be both brand- and style-conscious but also be a good person.”

But in June, after Reformation expressed social media support for Black Lives Matter, Santiago responded fiercely on Instagram, alleging that Aflalo had treated Black employees with “disgust” and denied them professional opportunities, including promotions and travel, that were offered to white Reformation employees. A week later, after Aflalo apologized and said she had “failed all of you,” she resigned as CEO. (Reformation says a third-party investigation later cleared Aflalo of being “racist”; she remains on the board.)

The outcome was a bit different at Everlane, another venture-backed retailer that promises “radical transparency” and that this summer also faced employee allegations that it had allowed anti-Black language and behavior. In June, cofounder and CEO Michael Preysman acknowledged on Instagram that he had “fallen short of addressing issues of institutional racism both inside the company and in how we present ourselves to the world.” He remained CEO and, three months later, LVMH-backed private equity giant L Catterton led a new $85 million investment in the company.

Preysman—like Pinterest’s Ben Silbermann and Carta’s Henry Ward, both of whom have also weathered allegations of discrimination this year—is proof that male founders who rely on marketing that touts their companies’ social missions are also vulnerable to damaging charges of hypocrisy. But unlike Aflalo, none faced significant consequences.

4%

Share of startups valued at $1 billion or more run by female founder CEOs

“Female founders 100% deserve to be removed from their posts for horrific behavior, but the fact that there are no repercussions for men who are running these companies is crazy,” says Ifeoma Ozoma, a former Pinterest public policy manager whose claims of racism have been widely reported. “I can’t imagine a situation where a woman in Ben’s position would still be there.” (A Pinterest spokesperson says the company is conducting an independent review of its culture.)

The two men most often trotted out to refute claims that women founders are more likely to be ousted are former Uber CEO Travis Kalanick and former WeWork CEO Adam Neumann. Both were pushed out of their companies in the midst of reports of bad behavior, but only after months or years of being able to shrug off the allegations—and amid circumstances that went beyond claims of “toxic culture” or employee mistreatment. Kalanick, whose company was the subject of well-chronicled regulatory and customer complaints by 2014, didn’t step down as CEO until 2017, months after former employee Susan Fowler’s blog post about the company’s rampant sexual harassment went viral. At WeWork, a stalled IPO did what internal and external reports of Neumann’s hard-partying leadership and fostering of a “frat-boy culture” couldn’t, and WeWork’s board finally pushed him out in September 2019. (Uber did not respond to a request for comment; WeWork declined to comment.)

The cases of Kalanick and Neumann are a harsh reminder that it takes more than some bad press and a soured public opinion to fire a founder. Ultimately, the most power to purge or protect lies with investors, especially those who make up the company’s board of directors. “Boards do have an accountability and a responsibility here,” says All Raise’s Kostka. “There’s just a different standard. When something does happen, it seems like they will allow more evidence and more time for a man.”

Further complicating the issue is the question of how much control a founder has managed to retain after selling stakes to investors. Both Kalanick and Neumann maintained controlling stakes in their companies throughout fundraising, from investors willing to grant “founder-friendly” terms that few women say they feel able to ask for. (According to a study last year, the average female founder owns 48¢ in equity for every dollar owned by a male founder.) That means the bias women face while raising money­ can come back to bite them later by placing them at the mercy of their board.

For many of those watching the female-founder shakeout, the real question is what comes next. Investors have a long history of giving disgraced men—including Kalanick, who has raised more than $700 million for his new venture, CloudKitchens—another shot. But while some of the women who have left their CEO roles in the past 18 months have rejoined their companies in some less influential form, none have yet moved on to their next big thing.

And none would speak on the record, expressing fear and fragility about how closely they now know they’re being watched. “This is not just a ‘dust off your pants’ experience. It’s really psychologically scarring,” says one founder who was forced to resign from her company.

While this founder wasn’t ready to discuss her next move, she, like many of the other women who have spent their careers trying to navigate a system stacked against them, says she’s worried about the long-term implications of her public downfall. If women leaders come to be seen as a risky bet for funders, what little money is going their way could dry up. And then there’s the effect on would-be entrepreneurs themselves.

“Is watching all of this go down this ­massive deterrent for women to start companies?” this founder asks. “They’re watching all these other women and wondering: ‘If that’s the price of admission, why do I want to do it?’” 

A version of this article appears in the December 2020/January 2021 issue of Fortune with the headline, “Female founders under fire: It’s hot in the spotlight.”