It’s no secret women-led companies have a significantly harder time securing venture-capital funding than their male counterparts. Katherine Hays, cofounder and CEO of ad-tech startup Vivoom, said it perfectly: “Sometimes I believe if I were a 21-year-old male in a hoodie, Vivoom would have been even more appealing to VCs.”
Numerous recent studies confirm these difficulties:
- “About 38 percent of new businesses in this country are started by women but only between 2 percent and 6 percent of those founders receive VC funding,” says Wharton Business School professor Ethan Mollick.
- “Companies with all-male management teams are over four times more likely to receive VC funding than businesses with even one woman on the team,” according to a 2014 study by Babson College.
While the gender disparity in venture capital is indisputable, the contributing factors and proposed solutions remain up for debate.
The VC decision-makers.
There is a demonstrated lack of diversity among venture capitalists. Early-stage investing long has been dominated by men, with very few women involved in the traditional model of networking, evaluating prospective investments and guiding portfolio companies.
Men constitute the vast majority of today’s VCs. That’s especially true for funds valued upward of $250 million: Only about 6 percent of those VC decision-makers are women. While these reports fail to reflect the presence of women in smaller VC firms, they still are indicative of the overall diversity problem within early-stage investing.
Wharton’s Ethan Mollick spells out why a predominantly male funding landscape can be (and has been) self-perpetuating: “If you share a gender, ethnicity or social background with someone else, you’re part of the same personal and professional network and are therefore more likely to [be inclined to want to work together].”
The VC capital process is highly dependent on networking, and there’s little objective data to guide early-stage investment. This means decisions easily are swayed by personal preference, implicit bias and status quo.
Still, the number of female funders is on the rise, and…