Culture & Lifestyle / #PressForProgress: Why Do VCs Support Men Over Women Entrepreneurs (And How We Can Change It)

#PressForProgress: Why Do VCs Support Men Over Women Entrepreneurs (And How We Can Change It)

Culture & Lifestyle Jul 16, 2018

The choice to go out on your own and start your own business is becoming more and more popular vocational choice, women-founded startups are woefully behind in terms of attracting much-needed funding.  Why is that? Why do VCs support men over women entrepreneurs? We take a look at the jaw-dropping numbers and what we can do to change the current patriarchal mindset.  

Does anyone you know have a fabulous and innovative idea?

Probably.

The tricky part is getting that brainchild out of a home office or garage and out into the world as it requires more than perseverance, bravery, and passion. Quite frankly, these types of ventures require funding more traditional financial institutions are less likely to take a risk on bankrolling.

That’s where venture capitalists (VC) come in.

 

What is venture capitalism anyway?

To put it simply, a “venture capitalist is an investor who either provides capital to startup ventures or supports small companies that wish to expand but do[es] not have access to equities markets.” Typically, venture capitalists “invest in new businesses with high potential for growth but also an amount of risk substantial enough to scare off banks.”

 

Why Do VCs Support Men Over Women Entrepreneurs
Why Do VCs Support Men Over Women Entrepreneurs: Venture capitalism in a nutshell. Photo Credit: www.tearsheet.co

 

In general, how are women involved in this industry?

The world of venture capitalism can be supremely beneficial for entrepreneurs who are looking to put themselves and their brilliant concepts out there. However, within this industry, women only make up about “8% of partners at top VC firms and only 10% of all ventures capitalists.” This, in turn, has a ripple effect on who receives funding, as male entrepreneurs are often favoured by male venture capitalists. In fact, according to PR Web, out of the $85 billion USD doled out by venture capitalists in 2017, only approximately $1.9 billion USD or 2.2% of those monies went to female entrepreneurs. It is important to acknowledge that these numbers improved since 2016, where only $1.4 billion or 1.9% of venture capital was awarded to women-led start-ups.

However, the discrepancy between male and female funding still illustrates that there is a discrepancy in who is allowed top decision-making roles, which is impacts how venture capital is dispersed. This imbalance is further highlighted by the fact that when female and male entrepreneurs go to bat for crowdfunding, which provides a more level playing field, women often come out on top.

 

Why Do VCs Support Men Over Women Entrepreneurs
Why Do VCs Support Men Over Women Entrepreneurs: Women are highly capable, they just need to be treated as such. Photo Credit: www.change.org

 

For instance, PR Web notes that “female-led campaigns are 32% more successful than male-led ones, with success rates of 22% and 17%, respectively. Women even performed better in traditionally male-dominated sectors, achieving a 13% success rate to males’ 10% in technology and a 16% success rate to males’ 9% in digital technology.” Meanwhile, it was also discovered that females “…  are 13% more likely to “procure equal funding as their male counterparts for the exact venture when trying to fundraise.”

 

How do women in venture capitalism and entrepreneurial roles fare in India?

On a more micro-level, in South Asia, the representation of women as venture capitalists and entrepreneurs, while promising, is still quite limited. For instance, Delhi, India came in at 49th place (there were only 54 countries in the running), in terms of being recognized as a country that fosters the success of women as entrepreneurs. To provide perspective, in India, female-founded companies represent just 6.7% of businesses. Meanwhile, for every 10 male venture capitalists in India, there is just one female.

These results are jarring, to say the least, which begs the question: what makes it so much more difficult for South Asian women, specifically those in India, to find success within venture capitalism?

Truth is, according to Entrepreneur India, there are many factors that coincide to curtail a woman’s success in venture capitalism, but the following are the most relevant:

  • Culture: Women are often expected to play a larger role in the household, especially when they are married, which limits their ability to increase their entrepreneurial experience and knowledge. This further hinders women as they are sometimes forced to make sacrifices to balance their career and family. For example, for some women in this field, their “… peak career and your family demands … all intercede at the same point, which is not necessarily [the case] for men.”
  • Role Models: Evidently, there are too few women who can serve as role models within the venture capitalist industry in India with just “7% of women [as] partners at top 100 VC firms.” This lack of representation and ability to identify with successful Indian women in venture capitalism operates as a deterrent and makes entering the industry less appealing or do-able.

 

Why Do VCs Support Men Over Women Entrepreneurs
Why Do VCs Support Men Over Women Entrepreneurs: While entrepreneurial women are underrepresented in India, there are still many heavy hitters who refused to believe they couldn’t have it all including (Top L-R): Shivani Siroya, Manisha Raisinghani, Shradha Sharma; (Center L-R): Swati Bhargava, Nidhi Agarwal, Pranshu Bhandari;  (Bottom L-R): Vani Kola, Richa Kar Photo Credit: www.knowstartup.com 

 

Overall, these statistics ultimately demonstrate that “VC firms that invest almost exclusively in male-led companies aren’t just doing a disservice to women, but they may be limiting their own return on investment.”

 

What’s next for female entrepreneurs and venture capitalists?

Monica Eaton-Cardone, COO and Co-Founder of Chargebacks911 and CIO of Global Risk Technologies, believes more needs to be done to broaden the opportunities for women within this male-dominated industry. For example, according to PR Web, Eaton-Cardone outlines that the following commitments are crucial for venture capitalist firms to make moving forward:

 

Why Do VCs Support Men Over Women Entrepreneurs
:Why Do VCs Support Men Over Women Entrepreneurs: Monica Eaton-Cardone seems to understand the importance of empowering young entrepreneurs, but also how women are a key part of this conversation. Photo Credit: www.inspirery.com

 

  • Commit to meet with female entrepreneurs.
  • Allocate a set amount to invest in female-led businesses, which can help you break male-centric investing habits and seek out promising new opportunities.
  • Appoint more women to decision-making positions in funds, which can help overcome the usual male-funding bias and promote a more diverse portfolio.
  • Provide constructive feedback to female entrepreneurs if you opt not to fund them, which can help them fine-tune their pitch, improve their business plan or come back with an even better product.”

That being said, Fortune highlights that when women are in positions are power, it is more likely that they will invest in other women. What’s more is that businesses with a minimum of one female in the head-honcho seat “…over a 10-year period…performed better than those with all-male founders.” As well, having more women as venture capitalists investing in female-founders allows the gender gap to be less pronounced, while simultaneously diversifying the type of entrepreneurs and ideas that are being invested in. This further serves to empower women as they are more likely to feel hopeful about their prospect of success in what has predominantly been a ‘boys club’ due to having powerful female role models and success stories to look up to and identify with.

 

Why Do VCs Support Men Over Women Entrepreneurs
Why Do VCs Support Men Over Women Entrepreneurs: The comparison between male and female venture capitalists and how entrepreneurs are ultimately affected illustrates the existence of a sexist bias within the industry that cannot remain unchecked. Photo Credit: www.forsythunitedway.org

 

The fact is, it is time to #pressforprogress for women in positions of power, such as entrepreneurs and those within the venture capitalist ecosystem in order to invest in the change that is desperately required to shake up the patriarchal fabric of our society, for the better.

 

Main Image Photo Credit: www.bulletin.co

Devika Goberdhan

Devika Goberdhan

Author

Devika (@goberdhan.devika) is an MA graduate who specialized in Political Science at York University. Her passion and research throughout her graduate studies pushed her to learn about and unpack hot button issues. Thus, since starting ANOKHI in 2016, she has written extensively about many challengi...

COMMENTS

Newsletter Sign Up

Subscribe to our FREE newsletter for all of the latest news, articles, and videos delivered directly to your inbox each day!