Despite the growing number of female entrepreneurs, the start-up world is still a boy’s club—one where millions of dollars are required for entry.
Harvard Business Review found that female entrepreneurs receive only about 2% of all venture funding, despite owning 38% of the businesses in the country. Although Spanx’s Sarah Blakely and Glossier’s Emily Weiss have forged a path for female founders to turn their ideas into multibillion-dollar companies, the ideas of countless women still never make it out of the boardroom.
From the office to the boardroom, gender bias continues to plague the start-up industry. TechCrunch reports less than3% of all venture capital (VC) investment went to women-led companies, and only one-fifth of U.S. VC went to startups with at least one woman on the founder team in 2019. In terms of overall amount of money invested, Forbes reported that In 2018, male founders raised $109 billion in VC funding in the U.S., while female founders only managed to raise $2.86 billion.
Unfortunately, this statistic has not changed much. Although more and more females are stepping into entrepreneurial roles, they struggle to secure funding to grow their businesses. The longevity of start-ups is directly correlated with funding, which means that not only are women-led companies in the minority, but also they are caught in a self-reinforcing cycle of gender bias. If female-run companies have a harder time getting funding, then those companies will be less likely to succeed, which will only reinforce the stereotype that women do not run them as well.
Even on the popular show Shark Tank, gender bias is apparent. Not only are women underrepresented on the show, but also they secure less deals than their male counterparts.
According to the Columbia Journal of Gender and Law, men are evaluated based on their potential, whereas women are evaluated based on their past achievements. In turn, women are held to a much higher standard than men where gender biases are exacerbated. Moreover, women often appearing as more likely to underestimate their value and make concessions sooner.
Female venture capitalists unsurprisingly supported female founders at higher rates than male-run VCs. According to Forbes, female VCs are twice as likely as their male counterparts to fund women-run businesses, but this is a double edged sword with an unintended consequence. Henceforth, that as the female-run companies go on to seek alter rounds of funding, other VCs suspect that they receive special treatment initially and therefore distrust the viability of the product or service.
Yes, that means that when females invest in other female businesses at disproportionate rates, it gives the impression of gender bias—undermining the perception that the female run businesses warrant the investment in the first place.
However, Forbes reported that the male founders were equally likely to receive future funding regardless of whether their first-round funding came from male or female VCs.
However, what does this mean for the future of gender equity in venture capital?
First, women need to take proactive steps to assert themselves in business negotiations and be aware that they back down much more frequently compared to their male counterparts. At the same time, men need to be aware of their gender biases and feel more comfortable investing with, working for, and taking constructive feedback from females.
Women who are strong-willed and outspoken should not be perceived as hotheaded, irrational and masculine, nor should women conform to societal perceptions of femininity as meek, quiet, and easily swayed.
I wonder if female founders are facing increased discrimination because their products are inherently female. What about the founders who have male-focused products, are their chances better? It’s worth analyzing how well female start ups actually perform in the marketplace compared to those run by men and whether these statistics vary based on the type of product and consumer demographic. I am also eager to research the characteristics of successful female-led start-ups so that women can emphasize these when they make their pitches.
Venture capitalists have much to gain from investing in women-led companies as women bring unique, valuable perspectives and skill sets to the business world. While we, as a society, still have a long way to go to fully understand gender discrimination, today’s successful female founders have made important strides for tomorrow’s future female leaders.
