What’s It Going to Take to Put Women on Equal Footing for VC Funding?

 In Funding, Venture Capital

When we talk about gender equality in 2018, it’s no longer a question of being politically correct.  We have plenty of data that shows that gender equality leads to better social outcomes, higher returns in business, and happier societies. We’ve made significant strides in cultural and societal norms, rates of women pursuing graduate degrees, and men are taking on more responsibility inside the home—freeing up women to pursue careers and education.  But women are still making less than men, approximately 80.5 cents to every $1 earned by a male, on average, and still can’t seem to get a slice of the VC funding pie—just 3% of all VC funding goes to women-led companies. What can we do to change this status quo?

Karlin Sloan is an author, an entrepreneur, and a well-known public speaker. She also happens to be a woman, but that’s not why her opinions on this issue matter. She leads a firm of hundreds of leadership consultants that train executives to perform better in their jobs.  She’s a native of California, the child of a professor and a teacher, and she’s a mother. All of these characteristics inform her expertise, yet she’s not defined by any particular one of them.  Her record of extraordinary success speaks for itself. “Our approach to life is defined by our socialization, our learnings, by our point of view and our mindset, and of course gender is part of that amalgamation of human experience.” Through her professional expertise, Karlin has developed some persuasive strategies on how we can advance gender equivalence.  Why should this be an objective? Simple, Karlin says: because companies with gender diversity at the leadership level are more likely to outperform their competition.

As a start, let’s quit pretending that unconscious bias doesn’t exist, that we don’t notice gender, race, or where someone went to school, and subsequently develop an impression of who they might be or how those factors might affect their success. If we pretend these differences don’t exist, it makes it harder to ensure we have a wide range of diversity of all types in our teams, or to incorporate diverse opportunities for individuals to engage and succeed. The same goes for choosing investments.  Portfolio diversity is not just about industry or instrument diversification, but also about consciously seeking out diverse entrepreneurs and businesses in which to invest. Research is also showing that it’s a strategy for financial outperformance. According to Credit Suisse’s Gender 3000 Study (2016), businesses with senior management teams that have at least 15% female representation earned an 18% higher ROE on average than those with less than 10% female senior management.

Regardless of how compelling the evidence is that gender diversity offers a competitive advantage, a blind study by Harvard, MIT, and Wharton School found that investors were more likely to award funding to ventures presented by males than females, despite the fact that the presentations and business ideas were identical. The recent data on start-up funding supports the findings of this study: just 17% of startups have a female co-founder, and of the $66.4 billion in VC funding awarded in 2016, a measly $1.5 billion went to female-founded companies. Faced with this environment, how can women position themselves to get more start-up funding? It’s up to investment professionals and educators to shake up this narrative by acknowledging those unconscious (or conscious) biases and putting women and men on equal footing.

Karlin suggests that rather than treating all women and men the same and expecting identical outcomes, we should consider approaches that are more inclusive for people from diverse backgrounds. Many young girls are socialized differently than young boys, including the way they are spoken to in utero or taught in schools. Acknowledging these differences and providing varied settings for entrepreneur pitches, such as adding a round table setting in addition to a shark tank, might give men and women a more level playing field.  As Karlin explains, “in a culture where women are taught from a very young age to be self-critical at every turn, I have seen a level of self-consciousness and fear in front of those who they perceive as power players, those that women think control their access to resources when they are in a pitch setting. The same women who are brilliant and commanding in a sit-down discussion can be awful in a confrontive pitch. Those women don’t come across as the excellent thinkers and leaders they are, because they can be daunted by a paradigm they weren’t socialized to succeed in.”

There are other strategies, too, including blind applications, defining objective success criteria, and getting more males to lead their male colleagues in the charge for gender equivalence. But by far, the most critical step is educating women and girls so that they are positioned to start businesses and advocate for themselves. This education could include training on entrepreneurship and public speaking from an early age to help women get more comfortable in competitive settings.

More investment leaders are applying a “gender lens” in their strategy and decisions; evaluating what inequities might exist and adapting to ensure that female entrepreneurs with growth organizations have access to the same funding resources as their male counterparts. Investing in a demographic that has lacked access to resources in the past can be incredibly powerful, and not just because it helps talented entrepreneurs overcome a previously insurmountable roadblock. Many female entrepreneurs are also driving positive impact for women and girls, either directly through their product or service, or indirectly in their employment and supply chain practices. Giving innovative female entrepreneurs an equal chance at venture capital funding is critical for investment dollars to achieve the maximum potential impact.  

Scarab Funds seeks out a diverse pool of investments that earn positive financial returns while having a positive environmental and/or social impact.  If you want to learn more, please contact us at investor@scarabfunds.com.

Karlin is the CEO of Sloan Group International and a member of the Investment Committee of Scarab Funds.

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