If you had to guess, what percentage of venture capitalist partners are women? Most people would guess around half, or maybe a figure between 20-30%. Try even lower: less than 12% of partner roles at accelerators and venture capitalist firms are held by women. While this statistic is relatively small in scope, it represents a broader pattern in partner and C-level positions at top firms and startups nationwide. Females are alarmingly absent from VC investing teams, boards of directors, and the growing population of entrepreneurs who receive funding.
Does this lack of women in leadership positions – especially at VC firms – hinder the entrepreneurial pursuits of female founders? Are female-led companies more successful, as some minority-oriented VCs claim? Per usual, the answer is a resounding “it’s complicated.” This is mostly due to a lack of data on female founders, as well as the difficulty with establishing causation, rather than just mere correlation. For example, many proponents of placing women in more leadership roles assert that companies with women on corporate boards have relatively higher pay for CEOs. In this case, the presence of women may be correlated to higher salaries, but it has not been proven to be the cause of them.
Despite the prevalent improper use of statistics, it is important to highlight some facts about female-led companies that receive funding from venture capitalists:
- While women typically fare better when using online crowdfunding platforms, only 10% of startups that raised Series A funding in 2014 were founded by females.
- 94% of decision makers at venture capital firms are male
The bottom line is that female entrepreneurs are operating in an environment where there is a severe lack of precedent and mentors. While being a female doesn’t bar men from investing in your company, startups that cater to women, mothers, or those interested in fashion may not be as easily received by overwhelmingly male investment firms as a startup geared toward men would be. Diversity consultant Joelle Emerson commented on the male-dominated VC firms in a CNN article: “All too often, [companies] use hiring practices that are ad hoc, subjective, and deeply influenced by bias.” Here, Emerson eloquently summarizes the tendency of individuals to hire people who are similar to themselves; males are more likely to hire males, which can lead to male-dominated investing teams and ultimately, a greater proportion of male entrepreneurs getting funded.
This phenomenon is perhaps most notoriously demonstrated by ABC’s hit series Shark Tank. When viewing the show, it’s relatively easy to see how the funding patterns change when female sharks Barbara Corcoran and Lori Grenier are featured in an episode. Though the show is undoubtedly a glamorized and not wholly realistic representation of how venture capitalism plays out, there is one important element of truth: the female sharks are more likely to invest in companies led by women. Rock Health founder and self-proclaimed Shark Tank fanatic Halle Tecco stated, “There is so much presumption that goes into an investment decision. It’s a bet on a founder’s ability to execute a vision, so implicit bias often creeps into an investor’s decision making. Studies show that men are judged on their potential, whereas women are judged on what they have already accomplished.”
This further reinforces the idea that when females pitch female-specific ventures to a VC that is mostly male, they may have trouble connecting with their potential investors and persuading them of the viability of their product or service. Thus, it would appear that lack of female founders receiving funding and the lack of female investors is highly cyclical.
Luckily, some firms are on the brink of changing that.
Female Founders Fund, along with other firms like Backstage Capital, seek to finance companies with female or minority founders. While many of the founders and startups that make the headlines are males in the technology industry, these VC’s are investing in successful, trendy companies that may not fit the Silicon Valley or tech startup mold. For example, Rockets of Awesome, a subscription apparel service that specializes in children’s clothing, received $19.5 million in funding – part of which was from the Female Founders Fund. Rockets of Awesome was launched by Rachel Blumenthal, the wife of Warby Parker founder Neil Blumenthal and an entrepreneur in her own right.
In addition, more and more male entrepreneurs and self-made millionaires are acknowledging that there is a huge, untapped market of female talent. In a 2015 Mashable interview, billionaire investor Chris Sacca describes just one of thousands of missed opportunities for VC firms because of the overwhelmingly male leadership:
“When Melody McCloskey was trying to convince people to invest in Style Seat, she was walking up and down Sand Hill road to a bunch of guys like me who pay $19.99 for a haircut and have no idea that some women spend hundreds of dollars per quarter to have their [hair] done and colored and braided and have extension[s]. When I finally got my head around that business, I was like this is a huge opportunity and no one else wearing blue shirts and khaki pants is paying attention to it. That’s a business run by a woman serving mostly women, half of whom are black women. That’s hard to raise money for and yet it’s a huge, huge business.”
While firms should not be induced to hire or fund more women simply by virtue of their gender, the attitude and culture in corporate America need to change. Luckily, some big players are starting to recognize that. So what can we do as college women? Perhaps the most impactful course of action would be to lead by example. Not every woman in business needs to be a budding entrepreneur or a visionary with a mission, but each one of us can seek to advise, mentor and network with those who are. Additionally, the rise of women entrepreneurs and VC’s need not come at the expense or detriment of males. Rather, the proliferation of women in these high-powered, successful positions will derive from a normalization of females as entrepreneurs. This will come in time, but also in our resilience, assertiveness and passionate commitment to furthering women’s participation in business.