To all the female founders out there, toiling away nights and weekends, turning a spark of an idea into a huge business, sacrificing your free time, finances and friendships for the emotional roller coaster of trying to build something out of nothing and make an impact on the world.
You are doing one of the hardest but most admirable things we can imagine.
You deserve your fair share.
We’re not telling you to lean in, mentor other women or shatter the glass ceiling. Yes, these are important, but hey, you’re doing the best you can and probably have enough on your plate. Our recommendation is simple: please take what you deserve. And more importantly, the tech ecosystem needs to support you in doing so.
We recently partnered with Carta to go beyond anecdote and understand the cold, hard facts around the ownership gap. The full report is a must read for everyone in the tech industry and has many eye opening stats about just how deep the divide runs. We were saddened when we saw the numbers. But do you know what made us incredibly angry? When we saw that overall, female founders own 5% of startup equity, while male founders own 64%. Of course there are fewer female founders than male founders, but even on a normalized basis, the average female founder owns just 48 cents for every dollar her male founder colleague owns.
Bottom line for female entrepreneurs: Same role, same sacrifices, but less than half the equity.
There is so much talk about the income gap between men and women, but let’s be honest: equity is what matters. Ownership drives wealth creation, wealth drives the ability to invest and build new ventures, and all of this creates power, influence, and concentrated wealth.
The equity gap is much more pronounced than the income gap. 20% of income earners hold 77% of the wealth, while Carta found 20% of equity holders own 96% of total equity value.
Ownership is what drives wealth and women are systematically marginalized when it comes to one of the biggest wealth generators of our time: startup equity.
According to Carta, only 20% of cap table millionaires are women, and that stat falls to 12% for hundred millionaires. Of the 20% wealthiest equity holders, only 9% are women. The New York Times reported earlier this year on how Lyft’s IPO made the same circle of men rich, again.
Although this equity gap occurs at every level, founders hold over 2x the equity value of all other employees combined. Therefore, in order to close the gap, we must start by normalizing equity compensation for female founders.
We have some hypotheses about why this gap exists. Silicon Valley’s history is rich with examples of male networks opening their wallets for each other, creating a virtuous cycle of support. It happens in alumni networks of Google, PayPal, Facebook and many others. When we were students at Stanford Business School, we saw our male classmates investing in each other’s moonshot ideas. Even without much capital, they established their track records and credibility. The women in our class for the most part weren’t playing that game — the culture wasn’t there.
Without a robust ecosystem to support female founders, many are underfunded from the start. We saw this in Jane VC’s study earlier this year, which found that early stage female founders raise $0.37 for every $1.00 that male founders raise. With less access to funding, female founders may be forced to sell more of their companies early on, diluting their equity more than their male peers.
There are other potential reasons female founders own less equity. They may give up more to recruit top employees or advisors. It could be that they are not in the right roles to maximize equity (e.g., CMO vs. CEO or CTO).
Although we don’t fully understand the reasons behind this gap, one thing is clear — female founders must feel enabled to take their fair share. Thanks to Carta and others for demystifying equity topics, female founders now have benchmarks they can share with VC investors, board members and employees and feel more emboldened to ask for what they deserve.
But the burden shouldn’t lie on female founder’s shoulders. Instead, all of us in the tech ecosystem must take responsibility and proactively work to evolve the model. We must recognize and challenge our biases, particularly around female founders. We must absorb the data and share it with our founders and partners. We must support founders who ask for their worth and proactively offer them equity incentives they deserve. We must embrace our individual responsibilities in closing the equity gap and seek out partners who do the same.
A fix won’t happen overnight and more data is needed to get to root causes. But if we want to see long term change in the tech world, we have to make sure women are benefitting from their fair share. If we have any hope at changing this equation, we must start by closing the equity gap between male and female founders. Only then will women truly have a seat at the table.