Dissecting the Gender Gap in Venture Capital
It’s still an old boys’ club
The wage gap is data-backed and recognized at large these days. Women continue to make less than men in equivalent positions and race widens that gap further.
If women systematically make less in the workplace, it would make sense for them to take charge and build positions for themselves where they have access to leadership roles and fair wages. Entrepreneurship is a logical path towards freeing oneself of the current systematic confines.
Unfortunately, it really isn’t a clear path forward for most women.
The Gender Gap in Entrepreneurship
Only 17% of startups had a female founder in 2017, according to Tech Crunch. This number has remained the same since 2012.
In addition to founding more startups, men also start their ventures earlier in life, 40% of men begin before age 35 verses 33% of women. Further, 8% of men got started before age 25 verses 3% of women. This is likely attributed to women being expected to focus majority of their attention on managing a household and rearing children earlier in life.
The Gender Gap in Venture Capital
Comprising less than 1/5 of entrepreneurs to begin with, women are already set at an unfair disadvantage for raising capital. Yet, it gets worse.
Female founders received $1.9 billion of the $85 billion invested by venture capitalists in 2017. That’s a measly 2%.
There are many factors contributing to this gap. One of the largest is the lack of female venture capitalists. Tech Crunch found that among the top 100 venture firms, the percentage of women partners grew to 8% — from 7% — in 2017. With that, women now hold 15% of partner roles at accelerators and corporate venture firms.
Investors are less likely to take a chance on someone they cannot relate to, thus female entrepreneurs are going to have a hard time finding someone who relates to them when majority of venture capitalists are male.
Further contributing factors come from female entrepreneurs themselves. Being more risk adverse, women are likely to seek less in funding than their male counterparts. This is only made worse as women statistically get a quarter of the financing requested verses men who get half.
Additionally, women are more likely than men to accept a no. To quote Samara Mejia Hernandez of MATH Partners,
“I always tell women to keep coming back if someone says no. Men we don’t have to tell.”
Closing the Gap
It’s easy to push off the inequality as a pipeline problem. However, saying it’s a pipeline problem is essentially saying it’s not my problem. What we should focus on instead is diversifying our own networks and providing a platform to people who are under represented.
The benefits to diversity in teams — especially at the leadership level — has been extensively documented. According to First Round Capital, female founders’ companies out-performed their male peers’ by 63% in terms of creating value for investors. However, this gets lost in persistent under representation. If women have comprised 7% of the venture capitalist industry for decades, women must not belong in venture capital. If only 17% of startups have female founders, women must not belong in leadership roles.
These are narratives that need to be challenged with experimental initiatives to drive industry change.
