Data shows that in the United States last year, startups founded by women took less than 2 per cent of all venture capital investment. In the United Kingdom, women-founded startups received 6%. In the startup space, in other words, women who want to start or scale businesses face an uphill struggle to get the money they need to do so. And that’s to say nothing of the other barriers that women in business must face.
Things are changing. For the third year in a row, signatories to the UK government’s Investing in Women Code have outperformed the venture capital market. Organisations and initiatives have sprung up with the express intention of challenging the funding gap and directing resources towards women who need them. Dedicated funds, such as Backstage Capital, have emerged. The EU has set up support tools and networks to support women. There are also crowdfunding platforms, such as iFundWomen, which are focused on female entrepreneurs. And women are supporting each other in a number of ways, and finding means of overcoming the hurdles to funding.
But there’s still some way to go. And enormous benefits lie in waiting if we can reach equality on funding. According to a study by Alison Rose, CEO of The NatWest Group and The Rose Review, equal funding could bring €290 billion to the UK economy. Investors, too, will benefit from having a far greater diversity of portfolio companies, and from tapping into potential which, as it stands, they’re not taking advantage of.
The importance of awareness
So why is this? And what can we do about it? First, we need to recognise that one of the main reasons why women don’t receive the funding they should receive is because of everyday human cognitive biases that all of us share. One of these is that we tend to like people whom we perceive as being like ourselves. If someone looks, acts, and talks like us, we’re more likely to think of them positively. When the overwhelming majority of VC investors are male, and more than two-thirds are white males, we see how this fact of our psychology can be harmful. Increasing our awareness of this and other forms of unconscious bias is often the first step to creating change.
What female founders can do?
A big part of this is polishing your business plan and pitch. You never know when you might bump into someone relevant to your goal of getting funding, or find yourself with an opportunity at short notice. So it’s really important for women founders and entrepreneurs to get their pitch deck in the best shape possible. Is there a market for what you’re selling? How do you know? And is that market interested in what you’re saying? You need to show beyond a shadow of a doubt that your business plan will make money. That’s what will really make an investor’s ears prick up.
Changing the ecosystem
It goes without saying that structural change is much more effective than relying on individuals to circumvent systemic obstacles. The good news is that there are highly effective ways in which we can create structural change, alter the funding ecosystem and level the playing field. The most effective of these is by building new social networks and strengthening existing ones. As in almost every area of life, a strong social network is a big factor in individual success. In the context of funding, events, conferences, networking platforms and informal meetups and gatherings offer an incredible opportunity to mutually strengthen social networks, increase knowledge, learn from one another, and get introduced to investors.
Mentoring, too, is key. Providing more opportunities for mentorship across the ecosystem will have tangible benefits for female founders. The Women’s Startup Lab, which empowers founders to become strong leaders, is one way that formal mentoring and education can boost female leadership around the world.
Last thoughts
As more women get funded, change will accelerate. We’re already seeing more women moving into the VC and angel investor space and into the tech sector generally. We’re hearing more stories about female founders and females flourishing in tech and wider business. And events are growing all the time in size and sophistication. After years of enforced isolation, that’s an incredible appetite for people to get out there and be with others physically.
This is why we should be optimistic that we can challenge the funding gap successfully and make change happen. It’s also one more reason why female founders should persevere in trying to make their dreams a reality.
