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Why is it So Damn Hard for Female Founders to Get Venture Capital?

You’ve likely heard the sad statistic: less than 3% of total venture capital distributed in 2018 went to female-led companies. That fact hits home for female founders every day...women who, despite pouring every ounce of their ambition, talent, time, and passion into their companies, scale back their dreams and their companies, or shutter them entirely, when they cannot land that elusive capital.

Theories abound for why it’s so frustratingly, relentlessly, mind-numbingly difficult for a female-led company to obtain funding. Let’s look at a few.

There’s the Old Boys’ Club.

According to a 2018 NVCA-Deloitte Human Capital Survey, 86% of partners in American VC investment firms are men. Men own the Benjamins, and they overwhelming put them into other men’s companies. Remember that in 2019, the uncontrolled gender gap in the US showed women earning .79 to a man’s $1.00. It bears repeating: Men have the money. And they like giving it to people who look and act like them.

There’s confidence...or the lack thereof.

The Wharton School conducted a study in which a vocational aptitude test was given to male and female subjects. The women slightly outperformed the men. When asked, “How well do you think you did?”, men said they did better and women said they did worse than they actually did. And not just by a small margin. When asked to rate themselves on a 100-point scale, men weighed in at an average of 61. Women? 45. Even though the women actually did better, they rated themselves, on average, 15 points lower than the men rated themselves.

Which leads to…false adjustment.

Imagine a male VC investor listening to a woman’s pitch. In his head, he knows that “people” (in reality, men) tend to overestimate themselves. Therefore, he’s calculating that into his formulations as he listens to the pitch. What he doesn’t realize is that women tend to underestimate themselves. So he’s discounting an already discounted position!

And to make it worse, consider this.

A study from S&P Global Market Intelligence found that during a TechCrunch Startup Battlefield competition, men were consistently asked more questions that would highlight potential gains, while women were asked more questions that brought the focus to potential losses and/or risk mitigation. So women, who are already much more likely to understate positive performance, are more frequently asked questions during pitches that put the focus on the negative.

Yes. The cards are stacked against female founders seeking venture capital.

So what can we do? Next week, we’ll take a look at some strategies, as well as some alternatives, to explore.

Come back. It won’t be this depressing next time…pinky promise!

Founder in the News

Lori Barzvi, founder of Love, Lori, is donating a percentage of profits from her line of footcare products to 911 Health Watch, an organization dedicated to ensuring our nation remembers and cares for the heroes and survivors of 9/11.

This mission is meaningful to Lori, who lost her brother, Guy, in the terrorist attacks. The siblings had shared a heartfelt conversation about the importance of doing what you love the night before Guy died. As Lori worked through her grief, she returned to that conversation again and again, and ultimately launched Love, Lori.

What a way to give back!

 

Katelyn Murphy-McCarthy

Katelyn is a writer and editor specializing in creative nonfiction. She comes from a long line of entrepreneurs, and loves hearing and sharing the stories of women who are making a difference
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1 comment

  • Thank you for this. I’m trying to head a start-up in a Southern state, and raising capital is incredibly challenging. The “good ol’boys” say to me (literally), “Oh, well, I raised $3 million right there on Main Street in Greenville. Just go out and do it.” — That was in response to a direct request to a professional liaison for a few personal introductions. Me? I have to prove it’s not just me, but that I have a team of men with me. The goal posts move each time. “Love what you’re doing. Let me know when you’ve raised $100,000 from friends.” It’s so frustrating. Good thing there’s wine.
    Catherine

    Catherine Watt

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