This post was originally featured on CFO.com
We know the facts: women are still being paid less for doing the same job(although not as much less) and the number of female CEOs is on the rise (even if they’re still dwarfed by the number of men). It’s a catch-22: we’re stuck in our ways even though there’s been a significant amount of progress.
When I founded Bach Realty more than 30 years ago, it was an assuredly less progressive time. The perception of women in the workplace today is dramatically, improved. Still, there is much ground yet to cover.
When women entrepreneurs look at the divide in venture capital funding between the genders, they might get frustrated — and rightfully so. The truth is that women simply aren’t getting VC funding to the same degree as men, and when it comes to building a business, funding is fundamental.
Is this a case of institutionalized sexism, or is it a complex combination of different factors? Looking at the numbers can give us a clearer idea of why this gap exists, and what female entrepreneurs can do about it.
Consider this: in the Bay Area, more than 200 startups reached “Series A Funding” of between $3 and $15 million in the past year. Of those, fewer than 1 in 12 had a female CEO at the helm.
We know that there are more male CEOs than female CEOs, so does this explain the discrepancy? Not even close. Despite the fact that women make up 38% of new business owners in the United States, only about 4% get any sort of VC funding. Given such data, it may seem like a cut-and-dried case of sexism.
But the situation isn’t quite that simple. While the sexism characterization carries some truth, the irony is that the opposite is also true: Many female entrepreneurs may lack confidence in VCs, preferring to build businesses on their own savings. When The Kauffman Foundation surveyed 350 female tech startup leaders, four in five said they used personal savings to fund their operations.
One possibility is that women, whether by nature or nurture, are more prone to self-reliance and realistic thinking. We’re often better at creating lean, efficient organizations that are productive with few resources. We build small organizations that show both resourcefulness and ingenuity, the ability to do a lot with a little. And the numbers show it:Organizations with more female leaders are more profitable than those with mostly male leaders.
In this light, one reason women may be less likely to seek out VC funding is that we are less likely to need or want it. In turn, we’re less likely to receive it.
More likely it comes down to the industries where women are able to get their feet in the door. Silicon Valley, where there are many science and tech startups, is male-dominated, as are the VC firms that fund them. For a woman, this environment can be stifling, as the recent viral Google Memomade clear. This reality can alienate female would-be rising stars and jeopardize the relationship between female founders and their financial backers.
There is evidence to support this hypothesis. Studies have shown that when a VC has female partners, as opposed to males only, the success gap between male-led and female-led startups that such VCs fund virtually vanishes. Therefore, it’s safe to conclude that gender diversity matters on both ends if women are truly to be on equal footing.
Even worse, VCs can get turned off from the tight, efficient businesses women tend to create, and profitability alone, a focus of female leaders, doesn’t necessarily scream “growth” to investors. Additionally, just 6% of VCs are female, a disparity that creates a cultural divide between female founders and funding.
The Future of the Relationship
In the words of Jory des Jardins, cofounder of BlogHer, “VCs love founders whose aspirations are stratospheric,” according to the Forbes article linked to directly above. Female CEOs have been proven to be adept at creating and preserving something strong, but men appear more willing to take bold risks (and more likely to fail).
As women, we are conditioned to be less confident in our professional abilities. VCs favor confidence over competence, which men tend to exude with abandon.
So what’s the answer?
Women might consider taking a more growth-oriented (versus profit-oriented) mindset and taking more risks. Alternatively, they may want to find a VC firm willing to work with a company that’s focused on profits, or that has more women at the helm. Most importantly, promoting gender diversity should lead to gains for all.
I have a sneaky feeling that as women continue to push boundaries in Silicon Valley, finance, and the general business world, more gains will be made organically. If this is true, our answer has already been set in motion, and the VC gap is destined to grow smaller with each passing year.
