In the coming year, venture capitalists will invest upwards of $85 billion in startups. Who will get the money? If history is any judge, the vast majority of VC funds will go male founders (and most likely white male founds).
According to Pitchbook, an M&A, private equity, and VC database, in 2017, only 2.2 percent of VC funds went to companies run by women. Less than 1 percent went to women of color. At the same time, all-male teams of founders got 79 percent of that pot. (Of the remaining 19 percent, 12 percent went to mixed-gender teams, and 7 percent went to teams of whom Pitchbook was unable to confirm gender.)
The truth is that female entrepreneurs have a more difficult time convincing investors that they are worth the financial risk. Just like everyone else, investors have biases. They are used to seeing white male CEOs, and they assume that future successful CEOs will look like those who came before them. In short, representation matters.
For that matter, the pool of VC investors lacks diversity. According to a 2016 National Venture Capital Association-Deloitte study, only 2 percent of VC investors are black, 1 percent are Latino and 15 percent are Asian/Pacific Islander. And just 15 percent of investment professionals are women.
Of course, there are many smart, hard-working, and talented women who are more than capable of running a successful start-up. This International Women’s Day, we’d like to look at some ideas for supporting these women in their entrepreneurship.
Research shows that networking with other professionals helps to accelerate entrepreneurial endeavors. Why? Because it exposes the entrepreneur to new ideas and knowledge. Many business leaders learn best from their peers. So if you have any ideas or expertise to share, join a networking group and start sharing.
Regardless of the industry, feedback is essential to growth and improvement. But for female entrepreneurs who are in the early stages of marketing their businesses, feedback can also give them validation for all their hard work.
Sometimes, people just need to hear that their idea makes sense and why. Entrepreneurs are no different. It’s a lot easier to keep working toward a goal–especially one that might not pay off for a couple years–when you have some positive reinforcement.
Women in business often say that their male bosses ignore their ideas. You’ve probably heard the common trope. When a woman in a meeting makes a suggestion, no one notices. But when a man says the same thing a moment later, everyone loves “his” idea.
The same might be said for women entrepreneurs pitching VCs, especially if they are pitching a business idea that addresses women-specific problems. If the VCs are mostly male, they may not relate to the problem. Therefore, they can’t see the need for a business to address it.
Whether you’re a man or a woman, if you hear a woman make a good suggestion, amplify her. The other professionals in the room may ignore her, but you can change that with just a few words.
“I think Sharon has a good suggestion. I’d like her to share more about it.” Others are less likely to ignore suggestions when more than one person voice them.
Again, men and women can both do this. If you are successful in your career, why not mentor a woman who is just starting out? Introduce her to your professional circle and advocate for her with bosses, clients, or investors. Coach her through important career decisions. You’ve already carved the path, so let someone else follow behind you.
As we noted above, we could use more diversity among investors. We especially need women of color in this position. If you are a woman regardless of your race or ethnicity, consider becoming a venture capitalist.
Women VCs can relate to the problems faced by women. Because of that, these investors can also see the business growth potential for startups that deal with these issues.
Aim to use 50 percent of your investment money to fund women-owned startups. If a woman sends you a pitch deck or a business model that you don’t immediately see value in, don’t just dismiss it. Ask her to meet with you and offer ideas for how to improve the pitch. Tell her what you’re looking for and how she can get your money.
Many female entrepreneurs are fantastic at leveraging social media to market their businesses. You can help them gain a wider reach. When women share links to their businesses, you can like, comment, and share. This lets everyone else on your friends list see the post too. You might help a friend boost her income!
No matter your gender or race, we can all help a female colleague or entrepreneur take steps to grow her successful business.