In July 2017, Crunchbase News dove into gender inequalities in startup fundraising. And our own Gené Teare updated us on the state of funding for women-founded startups in January in our 2017 report on women. The gist? The investment gap hasn’t budged.
According to her report, the percentage of venture-backed, women-founded companies has remained at 17 percent globally since 2012. She also found that venture amounts in female-only founded startups since 2012 remained at three percent of all venture dollars in 2017, while male-only founded teams raised 86 percent of all venture funding last year.
Why aren’t women being funded? And why is the number of women founded companies so much lower than that of male-founded companies?
Misogyny is a pervasive issue in the startup world, where many different aspects of the gender issue—lack of women in STEM, the gender pay gap, and sexual assault—collide.
According to Harvard Business Review, inherent biases in the startup interview process brought on by gender stereotypes have plagued the industry, creating funding imbalances. Furthermore, women have dealt with frequent incidents of sexual harassment and blatant sexism in the world of tech during fundraising and while working at venture firms.
We see this phenomenon in the imbalance of power and money in venture funding. Women represent far less of the leadership roles than men in large venture capital firms—according to Forbes, only 6 percent of venture capitalists were women in 2016. The unequal number of women in VC renders the meager amount of funding that women-founded startups receive predictable.
If women in venture capital were equal in power and number to men, one would hopefully presume that the inherent biases toward women would shift. In an equal environment, unacceptable behavior may be less prevalent and the consequences for such behavior more severe.
According to a survey of 92 founders and investors conducted by company data sourcing service Baloonr, when respondents were asked how to address the gender dynamics in the founder-VC relationship, 34.5 percent responded that women should be placed in leadership roles. An additional 20.7 percent responded that feedback and community were important to that process.
In light of this data, we took a look at groups which have made considerable efforts to begin to solve the problem of inequity in fundraising and venture, many of which are comprised of women VCs who have experienced the types of biases and behavior detailed above.
Below we have included three of those women-founded venture funds that were created with the specific purpose of funding and promoting diverse startups. These are but a small sampling of women in venture who are striving to better the industry by being present in decision making processes and helping other women entrepreneurs do the same.
Chloe Capital was founded in 2017 by Kathryn Cartini, Erica O’Brian, and Elisa Miller-Out who, after having an exit from a software company she co-founded, decided to shift to venture capitalism.
“We came together around a shared mission of wanting to accelerate solutions to the gender and diversity gap in tech entrepreneurship and venture capital,” Miller-Out told Crunchbase News.
Their mission to build a more diverse body of tech and venture capital was further motivated by the statistical data surrounding that lack of diversity.
“The stats show that diverse teams perform better financially,” Miller-Out explained in an email. “But with less than 1 percent of venture capital funding going to female founders of color, most of the industry is still overlooking this incredible growth opportunity.”
The fund makes a concerted effort to invest in startups with at least one person who identifies as female and Miller-Out expressed that the team is consciously inclusive of other underrepresented groups.
“Our accelerator program last year featured teams from the African American, LatinX and Asian American communities and our first investment, Mi Padrino is a mixed race, mixed gender team from Michigan,” Miller-Out told Crunchbase News.
MiPadrino CEO and founder Kim Gamez told Crunchbase News that she was pregnant with her daughter Lucy during her fundraising journey.
“Being the only woman, in itself, is intimidating while pitching to large groups of rich men. Trying to defend a start up’s growing business model, and a baby bump… is even harder,” she wrote.
After pitching to countless firms, she turned to Chloe Capital. Based in Upstate New York, the firm connects with universities and innovation programs in the area to find the best startup opportunities.
“They understand women and the magical dance that we play to balance work and home,” Gamex explained. “It’s this recipe for success that makes female entrepreneurs succeed, and it’s what puts Chloe Capital a step ahead of the rest.”
True Wealth Ventures
Texas-based True Wealth Ventures invests in companies in high growth markets that primarily serve women. The firm is interested in investing in companies based in Texas with businesses and customers that are committed to environmental sustainability and human health, citing that women make up 85 percent of consumer purchase decisions and 80 percent of healthcare decisions.
Founding partner Sara Brand decided that she wanted to start True Wealth Ventures back in 2014 and by July 2016 it had conducted its first close.
“I knew the financial outperformance of companies with more women in leadership, being the executive sponsor of the global women’s forum at my Fortune 500 tech company,” Brand told Crunchbase News in an email.
She realized that she had never met another woman in venture capital, despite having been in VC previously.
“There was no other venture capital fund in the state of Texas or surrounding region with a gender lens,” Brand explained. “All the data said it was a complete economic blind spot with financial outperformance metrics.”
As far as women being deterred from joining the venture world, she believes that there is work to be done. For instance, unconscious biases like asking women “protection” questions versus “promotion” questions are detrimental to the funding of women-founded companies.
While she believes VCs are making a concerted effort to include women in their leadership, she says that the sheer size of the ecosystems and institutions with unconscious biases will make executing the necessary changes very difficult and slow.
Furthermore, Brand noted research that shows that women are also prone to assimilation in these environments.
“It is not men, but culture against female founders. I think it is going to take funds like True Wealth Ventures that have a proactive gender diversity investment strategy to overcome the unconscious bias and leverage this blind spot in the economy.”
Pocket Sun and her co-founder Elizabeth Galbut are working to combat the lack of capital for women by starting the first female-led millennial venture capital firm investing in diverse companies. SoGal Ventures invests in pre-Seed to Series A stage diverse founding teams in the U.S. and Asia. Their fifty portfolio investments range from SWAAY, a women-focused digital publication, to Lovevery, a baby company.
Sun and Galbut decided to start a fund for diverse startups in 2015.
“It was after the Ellen Pao case, which, for the first time, brought significant attention to the diversity issue in VC,” Sun told Crunchbase News. “We saw a huge blue ocean of investment opportunities that were undercapitalized and undervalued, and it’s still the case three years later.”
In speaking about large VC firms hiring women Sun was straightforward.
“I don’t see much effort being made or meaningful actions being taken at large VC firms besides signing pledges. The best known large VC shops usually have one trophy female partner, which is not cool,” she wrote. However, she does acknowledge that even those efforts can be helpful. “Even just one woman makes all the difference. It suddenly broadens your scope and perspective in a multi-fold way. There needs to be so much more of this.”
With SoGal, Sun believes that with its focused, concerted approach to changing the inequalities of venture and fundraising the firm can influence diversity dynamics in ways that those large VC firms have not.
“One piece of advice I received that propelled me to start SoGal Ventures Existing players who benefit from the old paradigm will not change for your benefit.” she wrote to Crunchbase News. “If you wait for them to be different, good luck and wait another decade or two. But instead, you can be a pioneer, take a leap of faith, and lead by action.”
Illustration: Li-Anne Dias
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