Movers and Shakers: Deborah Farrington, Co-Founder and General Partner of StarVest Partners

By Melissa J. Anderson (New York City)

Deborah Farrington, Co-Founder and General Partner of StarVest Partners, said one of her key career themes has been an ability to take risks at the appropriate time and seize opportunities as they presented themselves.

She encouraged women to be more open to taking on new challenges when they arise – to walk through doorways when they are opened. “Don’t shy away from things. I think you’ll be surprised at how well you can do them,” she said.

Farrington is now a leading venture capitalist, and as one of only two women named on the Forbes Midas List of top tech investors this year, she is enthusiastic about getting more women into the field.

Taking on New Opportunities

Farrington began her career in Chase Manhattan’s global credit training program, with her first job at Chase, lending to small businesses. “It was very good preparation for venture, because small business is all about managing cash flow to survive,” she explained. Next, she pursued an MBA at Harvard Business School, and after graduating took a job at Merrill Lynch in investment banking.

When her husband, who worked for Salomon Brothers, was transferred to Hong Kong, Merrill Lynch was able to find a role for her in Hong Kong as well. “I was covering emerging markets in the ‘80s, which was all about high growth,” she said. Then, when they moved to Tokyo, she took a job as a securities analyst. “In Japan, at the time, they didn’t really know what to do with a female investment banker,” she explained. So, when Merrill asked, “How about being a securities analyst?” she responded “I can do that!”

She recalled, “It was the beginning of the Asian growth miracle, and I joined a Hong Kong merchant bank called Asia Oceanic Group in the late ‘80s. Our mandate was facilitating the flow of capital and technology between Asia and the US. That was my first exposure to private equity and to being  a principal instead of an agent and I loved it! I headed corporate finance in New York and then Hong Kong. Our firm started co-investing alongside our clients in tech companies which were just beginning to outsource to China from headquarters  in Hong Kong at the time.”

When she came back to New York, Farrington ran a small public company controlled by Asian Oceanic. “I said I’d never done that before, but I’d certainly give it a try!” she said with a laugh. “I then approached a group of friends from Harvard Business School about backing me to buy the public company I had been running. They declined, but invited me to join them and we started a multi-strategy private equity/venture group. We had a thesis about business services going on the web and made an investment and it did extremely well.” This was the first investment at what became Victory Ventures where she was CEO. And, she noted, the group eventually did end up buying the public company she had been running.

After four years, she decided that the time was right to start her own fund to invest in Internet-based business services and joined with three other partners in 1998 to start StarVest, which invests in software as a service, e-commerce, and internet marketing technologies.

She said, “Venture capital is by far the most interesting thing I’ve ever done. Every day part of my job is to think about what’s the next big thing in technology. And, a key part of the job of a venture capitalist is  to help guide and grow our companies, and work with CEOs, mentoring them and providing resources. The primary responsibility of a venture capitalist is to successfully exit our companies to send money back to our Limited Partner investors. This requires judgments about economic trends and opportunities for liquidity in the public IPO market and through mergers and acquisitions. Being an investment banker was good training for this. ”

Finally, she added, because the majority of StarVest’s investors are state and city pension funds, “We have an important fiduciary duty to provide investment returns to fund their pension obligations.”

Getting More Women into Venture

According to a recent survey by the National Venture Capital Association (NVCA) and Dow Jones VentureSource, only about 21 percent of the industry is female. According to Farrington, increasing the percentage of women in the field would yield important benefits.

First of all, she said, “You always have to think about who your customers are. With e-commerce and social media increasing steadily in importance as venture investments, at least half of your customers are going to be women. That alone is a reason for having more women go into venture.”

“Second, in my experience, women have a better ability to come to collective decisions. Men are more frequently confrontational, while women tend to be better collaborators. One of the things I always find important to making good decisions is bringing together a lot of different views and focusing on the best of those without pride of authorship. Women are particularly good at that, especially at the board level.”

“I’m often the only woman on a board, and I find myself asking the question where are we now and how can I edit and synthesize that in order to move forward?’” she added.

And third, she continued, “Getting as many views as possible into a room is important. Particularly in venture, it’s very important to have people who will look at things in a different way than the prevailing wisdom.”

Where are the women then? She answered, “This is something I have thought a lot about. I look at it in the historical context of finance. Waves of women went into different areas at different times. First, it was commercial banking in the early ‘70s, then investment banking in the ‘80s, then private equity in the ‘90s. As these areas expanded and became more mainstream, women turned to the opportunities as they became available, but there are always special challenges for the pioneers.”

She continued, “Venture came to the forefront in the late ‘90s and early 2000s with some of the huge wins like eBay, Intuit, salesforce.com and such, which tend to be technology oriented. But fewer women have a background in technology and engineering – and this is one challenge.”

“I have marveled at the opportunities afforded by each of the fields I’ve worked in, but especially venture. There’s so much going on right now. There’s so much value creation possible and I think this area is best able to be an engine for job creation by backing entrepreneurs, which is a particular challenge in our economy and now and very important for our society. In StarVest’s portfolio, the companies we’ve backed have created thousands of jobs. I want to make sure women are more aware of and can take advantage of and participate in these opportunities.”

She continued, “As women, it’s important that we guide our own destinies, gain financial independence, and contribute to and have a real voice in society and the economy. I think by having women more  involved in  more parts of the economy, it will create a better society by enabling all the best minds to be involved.”

Overcoming Challenges

Farrington said that one of the main barriers for women in getting into the field is just that: they don’t. “Venture has not done a particularly good job with outreach. I do think there are other ways for people to get involved in venture, for example my background in finance gave me expertise in analyzing business models.”

Besides an awareness issue, she said women can develop the expertise necessary for getting into venture by going into related fields that provide training, such as an investment banking analyst or developing expertise in the area of venture they’d like to participate in, such as e-commerce, technology product management or digital media.

And, she said, she wants the industry to realize the value that women bring to the venture conversation. “The field needs to recognize that women are additive to the firm and in the boardroom. I believe the dialogue in the boardroom is richer and better when women are involved.”

She continued, “The excellent returns generated from investing in social and digital media and ecommerce [where women are more concentrated] should do a lot to open the eyes of the men  at VC firms.” Farrington cited companies like Gilt and Birchbox, which were founded by women. “You want someone analyzing them from the customer’s, i.e. woman’s, eyes.”

“There are more women CEOs, and there need to be more women VCs too. It’s time to recognize that women are much more involved in some of the areas that these firms are making most of their money in,” she added.

In Her Personal Time

In her non-StarVest time, Farrington follows her two passions: women’s education and women’s economic empowerment.

“Most of my philanthropic activities revolve around these.” She is a board member of Opportunity International, a leading international microfinance institution that makes loans primarily to women, and traveled to Uganda in each of the last two summers for them with her 16 year old nephew, as well as to Nicaragua.

She is on the Investment Committee of her alma mater Smith College, and is a member of the Dean’s Visiting Committee at Harvard Business School, where she recently endowed a Fellowship for Women Entrepreneurs.

Farrington also loves sports with her favorites being running and yoga at least three times a week, as well as skiing, which she has done all her life. But most important of all to her is her family. She asked, “What would life be without the love of those close to you?”