When we talk about achieving gender parity, we have to broaden our scope beyond the obvious gaps, like the pay gap, and consider a lesser known – but equally important – gap: the funding gap.
Numbers don’t lie.
Currently, only 2% of all VC funding goes to women-led startups, despite the disproportionate impact that women have on driving wealth. Change begins with asking the right questions. Most importantly: How do we make equity equitable? For the answer, let’s go straight to the source. Here is what I learned from powerhouse female funders and founders.
There is Power in the Pack
I always say a woman alone has power; collectively we have impact. We know that when women are at the table, they’re twice as likely to invest in women founders than their male counterparts. The truth is that channeling the power of the pack is how we’ll change the equation and close the funding gap.
This is where my dear friend Liz Heller, currently managing partner at memBrain, comes in. Liz has made it her mission to serve as a global connector for change makers and industry leaders. As an entrepreneur and investor herself, she hosts regular events dedicated to bringing women in finance, founding, and funding together to network and collaborate.
“There simply isn’t enough communication among women in wealth,” said Liz. “The key is to create more opportunities where we feel safe to gather and share our knowledge, ideas, best practices, and resources. Whether you’re a VC, a founder, or an executive, we’re better together.”
It’s clear that the reason our algorithm is out of balance is because there are not enough women writing checks. Venture capital has historically been a male dominated industry, with 95.5% of U.S. VC firms reporting majority male decision-makers. The question should not be: Why is only 2% of VC funding going to female founders? The question should be: Why are only 16% of decision-makers at VC firms women?
Ultimately, you need to bring a pack to break the pattern. Equality is a choice, and unconscious bias is just an excuse. If you use the word ‘unconscious,’ you are conscious. Once aware, what are you going to do? VC firms need to hire and promote more diverse partners. Period. That is how you solve the algorithm for equality™.
Women Drive Wealth
Another trailblazing friend of mine, Divya Gokulnath, co-founder and director of BYJU’S, an educational tech company, and one of India’s most successful female startup entrepreneurs, recently shared a concept with me that I’m obsessed with.
It’s called the 20-60 Rule.
Essentially, women may represent only 20-30% of a room, but they make up 60% of the voice. As Divya says, “We don’t just want a seat at the table. We want to drive an agenda. And we are cognizant that we are the minority, so we work twice as hard to leave a meaningful impact and ensure that our ideas are heard.”
This rule speaks directly to the mindset shift that needs to happen to tackle the funding gap. Rather than looking at the quantity of funding allocated to female founders, let’s focus on how women are delivering on that money.
The fact is: female founded startups outperform their male counterparts, generating 63% more value and twice as much per dollar invested. One study concluded that VCs could have made an additional $85 million over five years if they’d integrated a gender lens into their investment decisions. These are the types of numbers that should be making headlines.
Let’s make the invisible visible. When we shine a light on the dominant role that women play in driving wealth, the business case for adding the female factor into the equation becomes undeniable. We want strong financial returns, don’t we? So, what’s the issue? Stop leaving money on the table by overlooking female founders.
The Pitch Process is Broken
According to Janet Kang, managing partner at Mach49, female founders are at a disadvantage from the outset. If we want better VC outcomes and more gender balance in entrepreneurship, Janet argues the best place to start addressing inequalities is during the pitch process.
In fact, the funding gap runs so deep that studies have actually found that VCs pose different types of questions to male versus female entrepreneurs. Whereas they tend to ask men (promotion) questions about the potential for gains, they tend to ask women (prevention) questions about the potential for losses.
These nuances matter, and the solution is two-fold. Yes, VCs need to drive more balanced Q&A sessions. But, Janet notes that, in the meantime, women entrepreneurs can also practice flipping the script, so they are prepared to answer certain questions in a more favorable light.
“One tactic I’ve used very successfully is to take a prevention question and turn that around into a growth response,” said Janet. For example, instead of responding to a question about how long it’s going to take her to break even, Janet will talk about her monetization strategy and all the great milestones she’s achieved.
In the end, fixing the funding gap isn’t about retrofitting the past. Let’s work together to intentionally design a new, more inclusive VC model. Success boils down to creating a venture ecosystem where differences are viewed as strengths and everyone is welcome at the table. Once we achieve this, we will create a future where equity truly is equitable.
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