Investment in all-female founding start-ups is almost non-existent. At least, that is according to Atomico’s ‘State of European Tech’ reports of 2018 and 2019. Last year, just 8% of venture capital money went to teams composed of female-only members. This was a fourfold improvement over 2018’s two per cent.
The picture is worse when applied directly to the United Kingdom. Last year, a British Business Bank report determined that, for every pound invested in venture capital firms, less than a penny went to all-female teams. Only an additional 10p went to ‘mixed’ teams with at least one woman involved — while the lion’s share, 89p, went straight to male-only teams.
A small presence, and a large gap
This huge discrepancy is the lesser-known gender-investment gap, a smaller part of the bigger gender-pay gap. The main reason is probably down to the fact that there are so few women-led businesses to start with. The total number of female venture capitalists is pegged at somewhere around 13%. Venture capital firms are still overwhelmingly male-dominated, and therefore, arenas where anti-female unconscious biases are allowed to run unchecked.
A study conducted by the Lulea University of Technology revealed that financiers often develop different attitudes when it comes to addressing women instead of men, and these attitudes are reinforced by negative stereotypes of women in general.
The study found that women were more likely to be dismissed as “too young” or “inexperienced”. Whereas younger men were looked upon favourably as up-and-coming “promising” stars. This polarization between the sexes may represent wider societal expectations of what a successful entrepreneur looks like. It is the view that men “look” like successful venture capitalists, to the disadvantage of women.
Unsurprisingly, the same study also found that women, even when successful, were offered less funding than men. Women were also denied financing on a more frequent basis.
Overturning our unconscious biases
The World Economic Forum has stressed the importance of gender diversity, and especially in senior roles, many times when it comes to venture capital firms. But the problem is deeper than just seniority. In the UK, about half of all investment teams have no women participants at all, on any level.
It is time to seek more balance in management teams; to boost the visible presence of women. Only then can the image of a successful female entrepreneur become ‘normal’. Venture capital firms and investors can make a huge difference by taking up a deliberate role as agents promoting change.
In some respects, the drive towards change is already underway. The World Economic Forum has established its own pool of women-only funds. It has similar schemes in place for other entrepreneurs that are under-represented and not ‘normalised’. The idea that men — and men only — have what it takes to be successful needs to be left in the history books, no matter how much they look like the world’s wealthiest billionaires.
Other options for females
Helping investors overcome their unconscious biases is one way forward, but not the only one. Venture capital money can come from other avenues. For example, with proper networking, and with the forging of relationships with the right people at the right time, female venture capitalists can secure funds from individuals who see the promise and determination in such a project. This is known informally as the ‘angel investor’ method.
Crowd-funding is another option that, in theory, doesn’t require extensive networking and relationship building — placing it at the opposite end to angel investing. Between the two extremes are ‘university incubators’, referring to commercial companies that have links to universities. These links can be invaluable for female student entrepreneurs, even after they have graduated.
The future for female entrepreneurship
Looking forward, the future looks not exactly promising but improving. More research is being done to uncover just how the gender-investment gap came into being. Such as this Oxford Brookes University study that put it down to a lack of women mentors to “show the way” and “develop networks” for other women. In this one instance, the OBU is now developing an ‘entrepreneurial pathway’ for women.
So we can expect things to get moving, but progress is criminally slow. At the current rate of change, the World Economic Forum has estimated that it could be another 250 years before the gender-investment gap is closed completely.
But if the need for more diversity is not enough of an incentive, perhaps the financial incentive will be. For example, a study conducted by First Round Capital unveiled that companies with a woman at the helm performed 63% better than all-male founding teams. Now, nit-pickers will argue about the size of the sample size. But regardless, there is a sure-fire shift in how women as entrepreneurs are being perceived by wider society. Along with a growing recognition that companies don’t just “get by” with female leads. They prosper.
This article was written by Eliza Cochrane of Webster Wheelchairs, a company that supplies wheelchairs, rollators, and other disability-friendly equipment to companies and health services in the UK.