6 Funding Challenges Facing Female Entrepreneurs
The proportion of women in the workplace has exploded. The Economist named the economic success of women as one of the most remarkable revolutions of the past 50 years. Wait for it……women now contribute more than $3 trillion to the economy and own over 36 percent of all businesses. Companies with female founders have performed 63 percent better than their all-male counterparts and have received higher valuations.
In spite of these incredible statistics, startups with women founders received only 2 percent of the entire venture capital funding last year. While funding is always a walk across the tightrope, women seem to struggle much harder. Here are a few reasons why:
1. We ask different questions.
The unconscious bias between men and women has been hard to quantify until the Harvard Business Review team decided to analyze conversations of VC decision-making conversations behind closed doors. After analyzing 125 applications and nearly 36 hours of decision-making time, the team concluded that potential male founders were questioned along the lines of the “potential of growth” and “future possibilities” of the venture they were pitching. (Statistics: Entrepreneur)
Conversely, the questioning of the female founders centered around being cautious with money and the associated risks. This distinction in use of language led to a different perception of each group, thereby leading to a much lower success rate for the women founders.
2. Venture Capital Groups are Good Old Boys Clubs.
The ecosystem in the VC world is built around networks — the number of contacts you can reach out to for support. Women’s networks suffer because women tend to be more conscious of work-life balance and bear a greater share of child-care or parent responsibility.
The biggest advantage men have in this arena? The VC community is predominantly male. Communities tend to look out for their own.
3. The traditional profile of a “successful entrepreneur” is male.
According to Candida Brush, a professor of entrepreneurship at Babson College, one of the reasons women don’t receive funding is that the generic profile of the successful entrepreneur is almost always male. When asked to picture the image of a successful male, Brush’s students require more than 6 attempts to get to a successful female entrepreneur. It is always a Steve Jobs or Mark Zuckerberg before an Arianna Huffington or Sara Blakely, which may be the cause for an unconscious slant against female entrepreneurs approaching venture capitalists.
4. Women tend to be a bit more tentative – and it does not serve them well.
Amanda Brown, executive director of the National Women’s Business Council, states that the issues of funding for female-owned companies mirror the chicken-and-egg problem. According to Brown, women tend to bootstrap longer, and that dents their credit scores.
Since obtaining a loan with a bad credit score is more difficult, bootstrapping stifles growth because cash is infused into the company at a much slower rate. This creates an image of the female entrepreneur being unsuccessful by comparison.
5. Women must endure the long-term power differential.
The recent spotlight on the #MeToo campaigns has helped articulate a problem women are much more likely to face. Being a venture capitalist places men in a position of power that could help them get away with indignities against women, without as much as a dent to their reputations or their businesses, placing women in vulnerable positions.
6. Women lack a tribe in the VC World.
There aren’t enough VC firms with women to help women founders feel understood. Men funding women founders are more open to funding companies by women that provide “girl services” — like women’s clothes or baby stuff after “checking with their wives.” How many men would ever hear that? The battle gets that much harder when pitching for tech ideas.