Today’s lesson in the everlasting class of being a female founder in tech — women hold 85% of the purchasing power, while we only make up 20% of all startup founders. The logic of this eludes me continuously.
So when I say that the narrative of women in business has to change, I mean that we have to do something about it now.
One of the first lessons all women in tech learn is that we have to fight tooth and nail for something men get on a silver platter. Building a startup from the ground up is not a walk in the park, especially when people refuse to give you even the most simple help — investment.
But that’s fine. We fought for everything else, so we can fight for equality in the tech field as well. As a mother of six and a female founder, I work hard on changing the narrative for men and women both on a small, everyday scale and a bigger, business one.
Changing our narrative demands that we change the way venture capitalists operate and make decisions, which means fighting against stereotypes, bias, and shifting the overall mindset.
Boosting Female Entrepreneurship
The issue of investment gender disparity is a cruel reality in which women live.
The next Bill Gates will be a woman. There’s no question about it. She’s already out there, with her ideas, problem-solving savvy, and exceptional business skills cocked and ready. She’ll revolutionize the tech world and change our reality. The only problem is, she can’t find investors. Why?
Because only a small percentage of investor money goes towards women-led startups. Men consistently outperform women when it comes to raising capital for their business. Women-led startups make for only 20% of venture-capital-backed companies.
In fact, in 2019, only 6.8% of all venture capital deals were closed with all-women teams. Today, it is three times more likely that a women-led startup receives funding than ten or twenty years ago. However, at the same time, five all-male teams will receive investments before an all-female team receives one.
Many companies don’t even have a single woman in their upper management teams. That means that not only do women have more trouble finding funding for their startups, but they also can’t shoulder their way to the boards of male-founded companies.
The number of companies that have women in the driving seat has doubled in the past five years. We are expected to own around 40% of registered businesses in the entire world. And yet that doesn’t make finding funding any easier.
There’s been a measly 2.7% increase in female funding in 2019. So it’s safe to say that, while the gender funding gap is closing, it isn’t doing so fast enough.
Women Hold 85% of Purchasing Power…
It is no secret that women are good with money. It’s what we do. We are the pillars of strength and the driving force behind prosperous households. As many as 85% of all purchasing decisions are made or influenced by women.
It’s expected that women will control over 43 trillion dollars of global consumer spending by the end of 2020. With such high purchasing power, it’s only logical to assume that the other side of the coin would also be female-focused.
But it isn’t.
…And Yet Only 20% of Startups Are Female-Led
The glaring disparity when it comes to funding might indicate that male-led startups are simply more lucrative. Perhaps men have better ideas and business plans? Or are they simply better at turning an invested dollar into a dollar of profit?
None of this is true.
Women-Led Startups Perform 63% Better Than Male-Led Ones
For every dollar invested, a female-led startup will return around 78 cents. At the same time, a male-led one will only return 31 cents. That means that women-led startups are more likely to turn an invested dollar into a dollar of revenue.
All-female startups generate less investment but are more likely to generate profit. And yet, the entire investment field is biased against women. If you’re a female looking for an investor, you’ll be asked about plans for loss prevention and risks and safety. Your male counterparts, in turn, will be asked about plans for growing the business.
So while investors look at all-male startups like they are the golden geese of business, they look at women in tech as a potential liability. This bias leaves investors without trillions of dollars of potential profit on the table and women with such scarce investment opportunities.
Why Investing in Women-Led Startups Is the Right Move
Although there are promising signs of progress when it comes to funding all-female startups, women still have a long way to go. The fight for the seat at the table in the infamous “boys club” is ongoing.
Trillions of Dollars Are up for Grabs
Venture capitalists are the decision-makers who shape our future. They are the ones who decide which new products and services hit the market and reach consumers.
Some might say they’ve done a fine job so far. The tech industry is thriving. However, by leaving half of the population on the bench, we’re diminishing our chances of winning the game we’re playing.
Not to mention, by leaving women out and dismissing their startup ideas and business plans as too risky or not worth it, they are basically saying No, thank you to enormous potential earnings. That decision influences and shapes not only the status and position of women in business but also the financial market.
Women-Led Companies Can Satisfy Women Consumers (Who Hold the Majority of the Purchasing Power)
Let’s face it — leaving money on the table is never the right decision. Studies show that a staggering 91% of women say that advertisers don’t understand their needs. In other words, most women think that the products and services that venture capitalists support aren’t placed on the market for them.
Why is that? Could it be because there practically aren’t any women decision-makers on the teams that not only make the products but also later advertise them?
Investing in all-female startups is a no-lose situation. We can do more with less money, and we can generate more significant profits than men.
What’s more, what venture capitalists fail to see in most cases is that all-female startups can offer them a competitive advantage. Because we know that we’ll have to fight for a seat at the table, we address potential issues, risks, losses, and market inefficiency from the get-go. Our startups are the exact type of calculated risk that VCs are looking for.
Women Fighting for Women
Here’s the kicker — female VCs know this. That’s why female founders turn to all-female venture capital firms such as the Female Founders Fund and SoGal Ventures that are doing their best to crush the gender disparity and diversify the business.
If a VC firm has at least one female founder, it’s 2.5 times more likely to invest in female-led startups. Women have always fought for themselves and each other, so this doesn’t surprise anyone.
However, although female-led VC firms do make a difference when it comes to closing the gender gap in funding, there’s still only around 10% of female decision-makers in the field of venture capitalism.
Here’s another scary number — 74% of VC firms in the United States have no female investors. If we follow the logic that male VCs are more often than not biased against female-led start-ups, that means that three-quarters of investment firms won’t pick up female-led startups because they deem them “too risky.”
Closing the Gender Gap in Funding
Changing the narrative of women in business isn’t something that will happen overnight. It also isn’t something that’s exclusively a “female” problem. By overlooking all-female startups, investors are cheating themselves out of millions and millions of dollars.
So while we may not solve our problem with the lack of funding, we can do something about the investment gender disparity in general. We can work together on changing the dated, obsolete views that are plaguing our community.
Be a Part of the Change
Do you want to be a leader in your field? Are you dreaming of an all-female team that will soar to the highest peaks of the tech field? So do I. Women are natural trailblazers. We can pave the way for those who come after us and change the reality of women in tech.
The fact that we hold the majority of the purchasing power means something. We can use this to our advantage, but we have to work together.
So join our groundbreaking movement and be a pioneer. Stay tuned for more lessons in being a female founder to find out how YOU can help yourself and others!