Arianna Huffington spoke this week in New York to a crowd of entrepreneurs and admirers at CNBC's Iconic Tour about her business successes and failures, and why neither matter unless you're getting a good eight hour sleep.
Huffington, former Editor-in-Chief of The Huffington Post, left the post last year in a move that shocked the global media. A serial entrepreneur, she wanted to move on and create a website that focused solely on health and wellness, which would in turn take the form of Thrive Global. Speaking about her entrepreneurial pursuits, Huffington bore a serious smile for much of her talk with CNBC's Andrew Sorkin. While Sorkin tried unambiguously to elucidate the failures and mistakes Huffington had made throughout her years as an entrepreneur, from investments to hiring faux-pas, she effortlessly bounced off all negativity to provide solid, positive advice for those aspiring entrepreneurs in the crowd. Hire well, nap well, and don't let a mistake (or multiple mistakes) get in the way of future success. Below are our five takeaways from the talk that you can watch here.
Of the 75 people at Thrive Global, not one got into their position without first facing down the eponymous Huffington herself. While building her team, as with everyone, she's very careful to hire people that ultimately she wants to work with, rather than needing to work with. One of her pet peeves are people that talk behind their co-workers backs, so she tries to eliminate them from the process early on. Her favorite interview question is "Where do you see yourself in five years?" because, you can then identify where their heart is and whether or not they view the job as a stepping stone rather than a permanent, long-term position. She also advises to "only interview when you're recharged," otherwise, there's no telling who might hire in a half-awake state.
Don't view failure as a problem
"I have an interesting relationship to risk and failure," Huffington began, before telling the crowd that it was her mother who instilled this sense of security with failure rather than against it - for, she insists, it's the failures that make a business. "Failure is not the opposite of success, it's a stepping stone to success," she said nodding to the start-ups that fail because of their inability to look beyond a bump or a setback in their road. Although she couldn't (or wouldn't) recall many of her failures for the hungry crowd, she was very humble about the fact that all of her mistakes had made her businesses that much richer today.
Andrew Sorkin and Arianna Huffington. Iconic Tour 2017
Don't hire brilliant jerks
"The no dumb jerks rule is easy, the harder rule is no brilliant jerks," Huffington remonstrated with Sorkin, continuing, "often you come across people who are brilliant who you know are going to be great, but you know they are going to be toxic for the culture." She is completely opposed to the culture of "top performers" whereby a singular person excelling in their position can often be detrimental to the team because of a pompous and/or braggadocios attitude that inevitably creates a muddied team atmosphere. #teamwork is a Huffington essential.
There is no age limit to entrepreneurship
Huffington at 66, posited that when you're older, in fact, "it's a great time to launch something new." Having the opportunity to start over with Thrive Global, she positively jumped, knowing that her name was on the door at The Huffington Post, and all too aware of how often media start-ups fail. Her age was not a factor at all, and incidentally it is this, and her years of experience that she attributes to how well Thrive Global is doing today.
Sleep is essential to success
Huffington was adamant about this one above all. Sleep, she said, was a prominent factor to her success, and she is currently hoping to extend this Huffpo/Thrive Global ethos into her involvement with Uber. Ironically, it was announced at press time today that Travis Kalanick, who Huffington spoke of at the talk as needing meditation and help getting into a meditation cycle, is indeed stepping down from his position as Uber CEO,
The nap rooms that The Huffington Post became famous for years ago, are going to be as common as conference rooms soon, Huffington believes. Nap rooms and meditation rooms, she posits, are essential to boost productivity and help alleviate workplace stress because you can remove yourself from the office environment, from emails and phone calls in order to "recharge" and recuperate before returning to tackle the rest of your workload.
Huffington said that it was "amazing" how differently Kalanick would make decisions after he'd had a decent night of sleep, and a happier CEO would correspond to a happy company. Would it be so bold as to attribute Huffington's sleepy influence to Kalanick's stepping down? Who knows..
Amid the mainstream conversation about inclusion and justice in the workplace, otherwise known as #MeToo, a Silicon Valley venture capital fund considered how they can be more inclusive of the women, minority, and LGBTQ entrepreneurial communities.
Their solution? Ask the CEOs they currently fund to promise to hire senior-level employees from diverse backgrounds.
Lightspeed Venture Partners, a venture capital fund that has investments with blockbuster startups such as The Honest Company, Affirm, and HQ Trivia, has asked its portfolio company CEOs to sign a “side letter" affirming their commitment to consider women and other underrepresented groups for senior jobs and new spots on their board of directors.
Can making pledges— or even hiring a C-Suite level employee to manage diversity efforts— really make an impact on the funding gap for multicultural women-led companies?
Many experts say it's going to take systemic change, not letters of intent.
It is well reported that the amount of investment going to multicultural women-led companies is incongruous to the entrepreneurial landscape and the performance of their businesses. Between 2007 and 2016, there was an increase of 2.8 million companies owned by women of color. Nearly eight out of every 10 new women-owned firms launched since 2007 has been started by a woman of color yet, these businesses receive an abysmal 0.2 percent of all funding. Amanda Johnson and KJ Miller, founders of Mented cosmetics, were just the 15th and 16th Black women in history to raise $1M in the fall of 2017.
The multicultural women who do defeat the odds to get funded receive significantly less than male founders. The average startup founded by a Black woman raises only $36,000 in venture funding, while the average failed startup founded by a White man raises $1.3M before going out of business.
The implicit and explicit bias not only impacts individual multicultural female founders, it could be stifling innovation. For example, companies with above-average diversity on their management teams reported innovation revenue as 45 percent of total revenue compared to just 26 percent of total revenue at companies with below-average management diversity. That means nearly half the revenue of companies with more diverse leadership comes from products and services launched in the past three years.
In our economy today, venture capital is responsible for funding the work of our most innovative companies. Venture capital-backed U.S. companies include some of the most innovative companies in the world. In 2013, VC-backed companies account for a 42 percent of the R&D spending by U.S. public companies.
With a wealth of multicultural women entrepreneurs and evidence to support the performance of diverse companies, why does this funding gap persist?
According to Kristin Hull, founder of Oakland-based Nia Impact Capital and Nia Community, many traditional investors consider women or minority-led businesses as a category in their portfolio, like gaming tech or consumer packaged good. Hull, who focuses on building portfolios where financial returns and social impact work hand-in-hand, argues gender and ethnicity are not a business category and investors who dedicate a specific percent of their portfolio to diverse companies are the ones missing out.
“We are doing this backwards," says Hull. “Adding diverse, women-run companies actually de-risks an investment portfolio."
Hull points to research that has found women are more likely to seek outside help when a company is headed for trouble and operate businesses with less debt on average. What's more, a study conducted by First Round Capital concluded that founding teams including a woman outperform their all-male peers by 63 percent.
Ximena Hardstock, a 43-year-old immigrant from Chile experienced this bias first hand before she raised $5.1M for her tech startup. “How do you get an investor to notice you and take you seriously?" says Hardstock. “White men from Harvard have a track record and investors are all looking for entrepreneurs that fit the Zuckerberg mold. But a woman from Chile with an accent who started a technology company? There is no track record for that and this is a problem so many women of color face."
Hardstock came to the U.S. from the suburbs of Santiago when she was just 20-years-old. Alone with no family or connections in the U.S., Hardstock worked as a cleaning lady, a bartender, and a nanny before she began teaching and working in education. “I had a lot of ideas and Chile is still a very conservative country," she says. “Most women become housewives but I wanted to do something different. So, I moved to the U.S."
Hardstock went on to earn a Ph.D. in policy studies, served as vice president of Advocacy for National StudentsFirst and worked as a member of Washington DC mayor Adrian Fenty's cabinet. Her experience working in both education and government exposed her to a need to simplify the process of connecting lawmakers with their constituents. As a result, Hardstock founded Phone2Action, a digital advocacy company that enables organizations and individual citizens to connect with policymakers via email, Twitter, Alexa and Facebook using their mobile phones.
Because venture capital and private equity are not necessarily meritocracies, Hardstock initially struggled to get in an audience with the right investors despite her company's growth potential, her experience, and her education. In fact, it wasn't until she won a competition at SXSW in 2015 that she could get an audience with a serious venture capitalist.
While it may seem like symptoms of a bygone era, both Hardstock and Hull say the path to investor relationships is forged in places where many women of diverse backgrounds are not – ivy league organizations, golf courses and late night post-board meeting cocktails attended mostly by White men of means.
The history of venture capital has never been very balanced, according to Aubrey Blanche, global head of diversity at Atlassian software development company and co-founder of Sycamore, an organization aiming to fix the VC funding gap for underrepresented founders. “White and Asian men have built the venture system and for generations have been seeking out people like themselves to invest in."
Personal and professional networks are critical for founders to connect with investors, but many multicultural women don't have access to the networks their White peers have. According to a study conducted by PRRI, the average White person has one friend who is Black, Latino, Asian, mixed race, and other races. This common situation makes getting that all important warm introduction to established VCs very challenging for multicultural women founders.
“Is the ecosystem of your network equivalent to your net worth? Absolutely," says Hardstock. “For us, we have to build our own ecosystem and recreate what happens on the golf courses and at the Harvard reunions."
To Hardstock's point, most multicultural women with entrepreneurial aspirations lack that Ivy League network. According to reporting published in The New York Times, Black students make up just nine percent of the freshmen at Ivy League schools but 15 percent of college-age Americans. This gap has been largely unchanged since 1980.
While notable female investors such as Arlan Hamilton, Joanne Wilson, and Kathryn Finney are actively working to close the funding gap for women of color, only seven percent of current senior investing partners at the top 100 venture firms are women. Less than three percent of VC funds have Black and Latinx investment partners. Without an influential network, Hardstock and entrepreneurs like her are left screaming for a seat at the table.
When Black, Latina, and Asian women founders do get in the room with the right investors, they have to work harder to get the investors to relate to their products and services. “Entrepreneurs solve problems they understand," says Blanche. “When multicultural women entrepreneurs present their businesses to a homogenous group of male investors who may not be equipped to understand the idea, they may pass on an amazing business."
Take, for example, the founders of Haute Hijab or LOLA. Founders of both successful startups would have to explain the market for their services to a table occupied mostly by men who may never have considered that Muslim women want more convenient access to fashion and have never considered women might prefer to purchase organic tampons.
This lack of familiarity typically means reduced funding for women and a host of other consequences.
As one recent study pointed out, even the way investors frame questions to women can impact funding. According to the Harvard Business Review, female founders are often asked “prevention-oriented" questions focused on safety, responsibility, security, and vigilance. Male founders, on the other hand, are often asked questions focused on hopes, achievement, advancement, and ideals.
When all of these factors are considered, a side letter may not be enough to begin to close the funding gap.
Both Blanche and Hull say real change can be made by democratizing information and education on impact investing. Both women say educating investors and MBA candidates about impact investing is the best way to overcome current bias.
Blanche's organization, Sycamore, produces a newsletter for new angel investors who want to help close the funding gap while making money in the process. Hull's firm has an internship program for multicultural girls from Oakland to expose them to the worlds of investing, entrepreneurship, business leadership, and financial literacy.
“I'm excited about the changes I see," says Blanche. “I see more firm employing the Rooney Law on an institutional level, an increase in smaller firms looking at underserved communities, and the democratization of institutional funding."
Hull adds that as long as multi-cultural women-led firms continue to show returns and outperform or perform on par with companies founded by White men, the investor community will rethink their portfolio strategies.
This piece was originally published in 2018.