Elaine Stead & her scandal: how it’s impacted venture capital, technology, and the Australian economy.

‘The biggest challenge is that all of the criticism of me is public and all the support is private.’

The scandal that happened to Elaine Stead and Blue Sky Alternative Investments is the stuff of case studies you read about in business school which you pray you will never have to go through.

I am not here to talk about the specifics of what happened to Blue Sky Alternative Investments (that has already been covered in-depth enough by ABC, The Australian Financial Review, and smartcompany.com to name a few); I am here to talk about why the focus on Elaine in all of this is bad for venture capital, bad for technology companies, and ultimately, bad for the Australian economy.

There are very few women in technology and professional investment; and even fewer at the director level. This means that those who fight their way to positions of influence are under much more scrutiny than their male peers, so are viewed as representatives of their entire gender.

This can have an accelerated social impact when they succeed (see Melanie Perkins, co-founder of duo-unicorn Canva); but the sword cuts both ways; and a public failure has a heavy negative impact on the perceived competence of women in technology for years after the fact (see Elizabeth Holmes, one of the most evil con-women in the history of business and founder of pseudo-company Theranos).

Venture Capital

Elaine was always advertised as an experiment of Australian Venture Capital. She came from a scientific background with a history of commercializing emerging technologies and excellent communication skills, as evidenced by her popular blog. Arguably, this makes her more qualified to be a fund manager for a technology-centered VC than someone with a conventional degree in finance. Because of her uniqueness, any of her major breakthroughs would be mainstream news; however, with the misfortune that befell Blue Sky, the narrative has now become that it’s not worth taking a risk on women from non-traditional VC backgrounds. This will inevitably result in a more risk-averse Australian VC sector and more barriers for women to enter finance.

Technology

The bias against female technology entrepreneurs from institutional investors is already well documented (as of 2018, only 2.2% of USA Venture Capital finance went to female founders). The greatest argument against this bias has recently come from the Harvard Business Review (2019); where it was proven that technology founding teams with at least one female member had a 63% higher chance of success than male-only teams. Only women and allies in positions of power as professional investors have to ability to reverse this counter-profit prejudice. With so few women in these positions, even the loss of one has a negative ripple effect on the entire technology ecosystem.

Australian economy

The reality is that Aussie VCs are at least two decades behind the major technology finance capitals of the world (Singapore, New York, San Francisco, Berlin). With the ever-increasing property snowball occurring in the Australian economy alongside increasing pressure to shut down investments into the resources sector; the time to diversify portfolios into high risk business ventures is now or face the reality of a recession soon. Individuals like Elaine were rapidly professionalizing the VC and technology sectors and starting to bring them in line to compete on a global scale. Only bringing in experimental and competent individuals from different industries like Elaine, (alongside federal visa overhauls), is going to fix the problem. The wider narrative around Elaine is that experimentation is bad; diversity is bad; and women are bad. The longer this national mentality exists, the harder it is going to be to establish Australia as a globally leading economic powerhouse (no easy task, considering that the national population is only 24.6 million; 1/3rd the size of the UK’s population, and 1/13th the size of the USA’s).

The backlash against Elaine appears to be fierce because, as spectators, we know that this sort of event could happen to any of us. As an attractive and intelligent high-flyer, it always hits us harder when the mighty fall because we want our role models to be immune to the terrifying chaos of life. Like ourselves, businesses are at the mercy of the fates and there are times when the events dictating our lives are completely out of our control. I am reminded of the phrase, ‘good luck won’t make your business, but bad luck will destroy it.’

Elaine Stead has had a hugely positive and real impact for women in technology and venture capital. She personally financed my first major business networking trip when I arrived in Australia and coached me to be investment-ready as a serious technology entrepreneur.

I hope that more people will come out publicly with their stories of the positive impact Elaine Stead has had on their lives and careers, because I know there are many.

It’s particularly important for us all to remember in the midst of the Blue Sky Alternative Investments scandal that careers aren’t made in moments; careers are made in lifetimes.