“Change is happening”: Inside real estate tech’s race to diversify their boards

Of 47 US proptech firms that have raised $100M or more, 14 startups have at least one woman on the board. But six have done so since September 2019

After WeWork’s botched IPO, real estate startups have learned to add women to their boards.
After WeWork’s botched IPO, real estate startups have learned to add women to their boards. (Illustration by Paul Dilakian)

As president of Ten-X Commercial from January 2019 to April 2020, Maureen Waters participated in an important quarterly ritual. Every three months, she helped to convene a meeting of the company’s board — an all-male group that included two of the auction website’s founders and three representatives of its private equity owners.

Maureen Waters, Metaprop

Maureen Waters, MetaProp

But even as president, she had no voting power. “At one point, we talked about outside advisors,” recalled Waters, who said the limited number of board seats made it difficult. “To add folks, you’d have to go change the [company’s] charter.”

That all changed in May when data giant CoStar scooped up Ten-X for $190 million. But such is the conundrum facing women seeking board seats in male-dominated corporate America.

Among public companies, women hold just 21.5 percent of board seats, according to Equilar, a governance-data firm. The number is far lower — between 7 percent and 9 percent — among private companies, where board seats tend to be limited to founders and backers.

But following landmark legislation in California, which requires public companies to have women on their boards, that’s starting to change. For real estate startups, blowback after WeWork tried to go public with an all-male board imparted another important lesson. In recent months, a slew of proptech firms have appointed women as independent directors, including Compass, Opendoor, Procore, States Title, and Blend.

Of 47 U.S. proptech firms that have raised $100 million or more, 14 startups — or 30 percent — have at least one woman on the board, according to Pitchbook. But six of them only added their first female board member since September 2019.

Mary Hogan Preusse, Industrious

Mary Hogan Preusse, Industrious

Most recently, the flex-office space provider Industrious named real estate veteran Mary Hogan Preusse to its board, and the WeWork competitor has been interviewing investment banks ahead of a potential IPO next year.

It’s not just about optics.

“You’re going to be a better business with a governance structure that has a diversity of voices, period,” said Industrious CEO Jamie Hodari, referencing the numerous studies that link board diversity to better performance. “If it took three months or three years to find the right board member,” he said, “it needed to be a woman.”

Last year, research published by the Harvard Business Review found diversity alone doesn’t create outcomes, but a company’s “egalitarian culture” and willingness to integrate diverse skills and insights does.

Jay Roberts, CEO of hospitality startup Domio, put it this way: “Hiring in your own image, you get the same ideas.”

Limited candidates

Even by Wall Street standards, startups face an uphill battle when it comes to diversifying its leadership ranks, chiefly because VCs often take a seat on the company board in exchange for financial backing.

In the early years of your business, your board is your investors and you’re subject to whatever demographic, gender, and racial and ethnic background your investors happen to be.
Jamie Hodari, Industrious

“Investors haven’t historically been diverse,” said Shannon Gordon, CEO of the Board List, an organization that connects companies with female board candidates. Sixty-five percent of startups don’t have a female partner, according to All Raise, a nonprofit aimed at diversifying the tech world.

Clelia Peters, Warburg Realty; RealtyBain Capital Ventures

Clelia Peters, Warburg Realty; RealtyBain Capital Ventures

In proptech, the issue is compounded by the dearth of women in leadership roles in real estate. “It’s a more limited pool of candidates with sector-specific expertise,” said Clelia Peters, president of Warburg Realty and a venture partner at Bain Capital Ventures.

Compared to real estate, though, the tech sector has felt more pressure to diversify its ranks. In 2017, Zillow appointed April Underwood, a Slack executive, as its first female board member. The same year, Redfin joined a group of venture capital funds in calling for startups to add independent board seats earlier in the life of companies. In 2018, Airbnb appointed former American Express CEO Kenneth Chenault, who is black, as its first independent board member. A few months later, Ann Mather, former CFO of Pixar Studios, became the first woman on Airbnb’s board.

Kenneth Chenault (Getty)

Kenneth Chenault (Getty)

But there’s still a long runway for growth.

Waters, who recently became a partner at proptech fund MetaProp, said she’s actively looking for a board position and feels like she doesn’t have as much access to corporate boards because she’s a woman. She previously served on the board of Cushman & Wakefield, in the early aughts, which she said was possible because it had 20 or 25 seats at the time. “The ones that have come to me, they’ve been more nonprofit and startup boards, rather than corporate boards,” she said.

Hodari said he knew he couldn’t leave things to chance when he began searching for a woman to join the board nine months ago. First, he went to Industrious’ all-male board and made the case for adding an independent seat. “Our board is all men right now and that’s unsustainable and not OK,” he recalled saying, “There’s no way to rectify that but to actively go out and recruit board members.”

In retrospect, he said he wishes he would have done so sooner. “In the early years of your business,” he said, “your board is your investors and you’re subject to whatever demographic, gender, and racial and ethnic background your investors happen to be.”

Legislative ‘halo’ effect

A confluence of factors, including the #MeToo movement, ignited calls for gender diversity in corporate America. Then in 2018, California’s legislation that required public companies to have at least one woman on the board sparked a rush to fill those seats.

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“The change is happening,” said Jana Rich, an executive recruiter and founder of Rich Talent Group, a San Francisco firm that’s one of several focused on promoting leadership diversity. “‘I don’t know any great candidates’ isn’t a viable excuse.”

Gordon said the California law had a “halo” effect. Today, three-quarters of Board List searches come from private companies, she said, noting that many are also taking cues from Goldman Sachs, which said in January 2020 that it would not take a company public unless it had one “diverse” board member. “The reality is, these institutional investors wield an enormous amount of power,” she said.

Elisa Steele, Procore

Elisa Steele, Procore

Procore, a construction-tech startup founded in 2003, named two women to its board this year after tapping Goldman Sachs for a planned IPO. (Elisa Steele, a software executive, joined in February, followed by Nanci Caldwell, an HR executive, in April.) Ultimately, Procore shelved the public offering after raising $150 million at a $5 billion valuation in May.

Gordon said business leaders aren’t just checking off boxes; a growing number want to enlist advice from diverse voices. “To not have your customer base represented in the boardroom is a pretty fast pass to having a blind spot on your board,” she said.

According to Peters, there’s been a change in mindset among founders. “For a lot of progressive, younger CEOs, even if they’re male, they genuinely care about this issue,” she said. A board seat isn’t just a resume-builder, she said, but a way to add different points of view to the company. “The board plays a meaningful role in the strategy and trajectory of earlier-stage companies.”

There’s also the specter of WeWork, which didn’t have a single female board member when it filed its prospectus in August 2019. A month later, it hastily appointed Frances Frei, a Harvard professor known for fixing corporate cultures, as an independent director. (The IPO and board seat never materialized.)

Other SoftBank-backed firms have since followed suit. In October 2019, Opendoor named Carrie Wheeler, a former partner at TPG Capital, to its board. Compass added Pamela Thomas-Graham, a banking and media exec, and Eileen Murray, co-CEO of Bridgewater. In June, Compass further fueled IPO chatter after it advertised a job for a securities attorney.

“Any company that’s rapidly growing now and is on a trajectory to IPO feels like it’s something they need to proactively think” about said Peters, “as opposed to doing it right before they drop their prospectus.”

Karen Richardson, States Title

Karen Richardson, States Title

States Title, a four-year-old title insurance startup that recently raised $123 million, added software executive Karen Richardson to its board in September. At the time, CEO Max Simkoff cited her “knowledge of big company governance.”

Other startups say they’re also taking concerted steps to diversify their boards. “I’m looking for people who have excelled in their careers, that’s my first filter,” said Domio’s Roberts, who is Asian and was raised by a single mother. “To me, there’s no color and no bias toward men or women.”

The racial diversity test

In recent weeks, calls for racial diversity gained intensity after the killing of George Floyd, a black man who died after a police officer pressed his knee against his neck for nearly nine minutes. Amid protests over racism and police brutality, real estate leaders promised action.

I think to some degree, people are operating around the idea of doing the right thing. Some of it is fear, the fear of looking bad. The real test will be in six months.
Jana Rich, Rich Talent Group

SoftBank announced a $100 million fund to invest in entrepreneurs of color, and Compass made a commitment that there must be at least one black person on teams “directly advising” the brokerage.

Speaking on CNBC in June, CEO Robert Reffkin called for systemic change and expanded economic opportunity. He said 40 percent of Compass’ board is black and 40 percent are women. “We worked hard for that,” he said.

Reffkin praised Goldman Sachs — his former employer — for taking a stand to promote women on boards, but said he hopes black professionals are supported in the same way. “I would love to see one of the banks come out and take a stand around diversity of color, in addition to gender,” he said.

Among 10 major tech companies, an average of 2.7 percent of executives are black, The Information reported this week. The numbers range from 1 percent at companies like Apple and Microsoft to 6 percent at Airbnb and Slack, according to an analysis of filings with the U.S. Equal Employment Opportunity Commission.

Rich, the executive recruiter, said interest in diverse board candidates spiked in early June as business leaders in corporate America promised change in the wake of Floyd’s death. “I had five conversations this week alone,” she said. “I think to some degree, people are operating around the idea of doing the right thing. Some of it is fear, the fear of looking bad. The real test will be in six months.”

Airbnb is one company making a long-term commitment.

On June 18, Airbnb committed to making sure that 20 percent of its board and executive team are people of color by the end of 2021. It also plans to establish specific recruitment and retention goals to be met by 2025. And executive team members will need to come up with detailed diversity plans in the coming months.

“Airbnb’s mission is to create a world where anyone can belong anywhere. Discrimination and bias directly contravene our mission,” the company said in a blog post. “We have steadily seen the percentage of employees from underrepresented populations increase, but this progress has been too slow.”

In a similar vein, Hodari said the diversity of his team is just as important – if not more important – than the composition of the board. Industrious’ workforce is 65 percent white and 35 percent non-white, he said, a number he aims to balance out.

“A push for greater board diversity is a really salutary, beneficial trend,” he said. “But I sometimes see it as almost a stand-in or a replacement for pushing harder on diversity in the actual workforce of the company itself. That’s harder, and it’s not solvable with a single hire.”

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