Brianne West
June 19, 2024
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Ahh, International Women’s Day. A tribute to social, economic, cultural and political achievements of women. And, a call to address ongoing issues of discrimination, bias and injustice.
Especially when multiple aspects of marginalised identity intersect across gender, race and sexuality.
It’s also a day where women around the world are, unfortunately, still asked to speak for free, to offer up their experiences.
Today, I write about the disappointing disparity in start-up funding for women that still exists and doesn’t seem to be going anywhere.
Globally, female-founded organisations receive just 1.9% of venture capital (VC) funding globally. Female founders of colour have an even worse rate at just 0.34%. And only 8% goes to start-ups with a mixed-gender founding team.
This leaves the vast majority - 89% - going to male-only teams.
What’s worse, is despite the social progress we’ve made on some fronts, this number is the 30-year average. It’s not improving.
In Aotearoa, it’s much better.
Here, 11% of funding goes to women. That figure is provided by the amazing duo of Theresa Gattung and Jenny Rudd, in the research report they commissioned called ‘The Gender Investment Gap’.
Wait, sorry, did I say much better?
Pretty grim isn’t it? Considering women start nearly half - 49% - of start-ups.
Immediately people assume this means companies led exclusively by men must perform better.
Venture capital and private equity firms are run by analysts and numbers people, who look beyond things like gender, so men must create better businesses?
Studies prove otherwise.
Women founders produce $0.78c in revenue for every dollar of investment. Men? $0.31c. Yes, that’s more than double. Another study showed women-led companies performed 63% better than all-male teams and another that women-led teams generate a 35% greater return on investment.
So, why aren’t the investment stats starting to reflect this?
Firstly, VC funds predominantly (but not exclusively) invest in male-dominated fields, like tech. Secondly, the VC world itself is also male dominated. Studies show that bias (whether unconscious or conscious) leads VC funds to prefer pitches from male entrepreneurs, even when that pitch is identical to one presented by a woman (a Harvard study assessed this exact scenario).
In a world where men are considered to be better with money, (despite yep, you guessed it, statistics proving otherwise), VC funds that are led by men receive 10 times the investment of female-led ones.
The grim reality is the funnel for women to become those cheque-writers essentially doesn’t exist - so this problem isn’t going anywhere anytime soon.
And yes, there are funds set up by women, to support women. This is wonderful. But start-ups that raise funds or grants from organisations that are specifically for women are now finding themselves penalised in future rounds.
This bias suggests that those funds were given out of a ‘kindness’ (historically, not something a VC fund is known for), simply because the founder was a woman. So they are finding themselves even less likely to get more traditional investment in that second round.
Now, before everyone gets excited and starts calling me out for hating men in the comments, let’s be clear. I didn’t make these statistics up. They’re sourced from places like Deloitte, Forbes, Harvard and so on. And those studies were run by men.
And at the end of the day, this isn’t, or at least shouldn’t be, an ‘us versus them’ conversation.
Today’s start-ups are massive contributors to our future economy, society and environment. I think it’s safe to say we urgently need all the smart, diverse thinkers and doers to bring their ideas to market.
A BCG report extensively referenced suggests that if women entrepreneurs were given the same investment opportunities as their male counterparts, global GDP could increase 3%-6%, potentially enhancing the global economy by as much as $5 trillion each year.
So, how do we ensure women have the same access and opportunity?
We need to talk openly, and often, without resorting to slinging insults on the internet. It was incredibly refreshing to have had a disagreement with a male commenter over on TikTok recently, in an exchange that was respectful and based on facts.
Typically, discussions about this and similar topics are full of vitriol because it is seen as ‘us versus them’. It doesn’t need to be this way. We all benefit when the start-up community does well.
As a country, we need not-for-profit and public sector backing focused on early-stage female entrepreneurs. As individuals, we can celebrate the success of women who successfully launch their businesses and give them a platform as role models to inspire others.
Let’s also dismantle stereotypes through our conversations and internal beliefs.
The Global Entrepreneurship Monitor (GEM) found businesses started by women can be pigeon-holed as ‘not right for outside funding’ if they’re not in high-tech sectors, seen as lacking potential to scale, export and get to IPO (initial public offering) stage. But this is a false narrative, especially if we consider the many overblown valuations and investments in tech start-ups in recent years.
Bias is there, whether we overtly think about it or not – we all have them, built from the world around us. But when we know better, we do better right? And the many statistics I’ve shown here (and the plentiful more should you search for them) show that we need to do better.
Women need to back themselves too. I mentor and work with women entrepreneurs, and the most common scenario is them sharing a limiting belief in their own skill as if its fact, then demonstrate their total ability to nail whatever they’ve just disparaged. And yes, I’m told I do this myself sometimes. But let’s stop.
Finally, we need to champion successful female entrepreneurs and their financial success more.
To start to challenge that belief within so many of us, that women don’t make good business people.
We know it’s not true, so let’s start dismantling this myth once and for all.
