The Venture Capital Wage Gap Has Been Continually Compounded For Businesswomen

Women founders seeking venture funding may feel like they are playing against a stacked-deck, and this most certainly appears to be the case.

Since 2005 only 9.7% of venture funding went to firms with at least one female founder, according to pitchbook.com data.

The study also detailed regional differences: The mid-Atlantic and New England have the highest percentages of VC-backed companies with at least one female founder. They lie at 12.4% and 10.6% respectively, while the West coast takes the lead with deals involving female founders; about 900 or 10% of the deals flow out, a total of over 9,000 VC deals.

However, anyway the numbers are cut, venture funding deal flow looks bleak for women founders.

Lean Startup founder Steve Blank has blogged about this problem before.

He tried to address the question one female founder posed to him “Why is it so hard for a woman to still get taken seriously by a venture capitalist?”

Even Blank seemed to skirt the issue in his blog post, choosing to focus on the differences between the venture funding scene he observed in New York City versus the Silicon Valley.

He notes that the NYC venture landscape looks more promising for women, based on his impressions visiting some NYC co-working spaces and teaching his Lean Launch Pad course at the Columbia Startup Lab.

Blank concluded that perhaps women founders in NYC had more credible experience in business sectors with a large presence there: Media, Fashion, Finance and Real Estate. He then passed what he characterized as a “gender neutral VC credibility bar.”  But his analysis and conclusions were underwhelming.

Last year’s panel at The Milken Institute Global Conference in Los Angeles took a much more direct line of questioning about female founder funding issues. On Tuesday 5/3/16, five female founders, including Jessica Alba of Honest Company and Susan Feldman of One King’s Lane, took the stage to talk about the state of women and entrepreneurship.

As the panelist explained the reasons for founding their businesses, a common thread began to appear. Each took a distinctly feminine view of an unmet need they experienced and a corresponding business opportunity.

Alba explained that she founded Honest Company because as a new mom she could not find reliable baby products.

Feldman noted that One King’s Lane was started because she could not find great furniture and housewares online, supported by in-person complementary design consultation.

Panel moderator Rick Smith of Crosscut Ventures asked the panelists how they convinced male venture capitalists to provide funding for their businesses.

Alexandra Wilkis Wilson who co-founded Gilt and Glamsquad said, “Investors are typically going to invest in companies and industries that they inherently understand… It is harder for men to do that with a female-focused company.”

She went on to say that one potential Gilt investor told her, “women will not spend $500 on shoes” but changed his mind about the opportunity after speaking with his wife.

Venture capitalists seem to have genuine and deep-seated problem with investing in women-targeted startups. With less than 7% female venture capitalists, the majority of VCs simply don’t represent the female economy.

This fact almost convinced Sheila Liro Marcelo – founder of Care.com to forego starting her business all-together.

“For anyone to tell me that care is only a women’s issue, especially investors, was very challenging for me,” she said. “It is still the same challenge for me ten years later,” noted Marcelo.

Wilkis Wison pointed out a blinding glimpse of the obvious to the audience: Male VCs who are open to investment opportunities/business models that target markets they may not understand will be at a competitive advantage.

There are huge women targeted business investment opportunities that go begging for funding because VCs want to feel safe, and follow the pack-mentality of investing in familiar business models.

This problem may have been best summed up in an interview published on the knowledge@wharton blog with Katherine Hayes CEO of Vivoom Inc. and founder of Massive Inc.

The video game advertising company had several successful rounds of funding before being sold to Microsoft for a reported $200-400 million:

‘Sometimes I believe if I were a 21-year-old male in a hoodie, Vivoom would be even more appealing to VCs,’ she notes.

This is a sad commentary on the state of venture capital and women founders in this day and age. With male venture capital chasing investments in areas they understand and resorting to their wives and assistants for the consumer insight, it’s obvious that female investors have a competitive advantage.

Why? They inherently understand the markets serving the female economy, through both better consumer insights and investment savvy.

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Neelam Brar

Neelam is an accomplished female entrepreneur, financier, and start-up adviser. She is the founder and CEO of District CoWork, one of the hottest hub for innovation in NYC and Empress, an empowerment platform designed to mentor and support women. Neelam founded Empress to unite the strongest stakeholders behind the economy: Women. Empress is the nexus of content, community and capital. With a dual MBA from Columbia Business School and London Business School and experience raising capital and advising growth companies throughout the US, Canada, Singapore, Mumbai and Hong Kong, she has tremendous first hand insights on several topics relevant to entrepreneurship and innovation. Neelam did investment banking and private equity for over a decade raising billions of dollars of capital and advising on high profile M&A transactions in the domestic and international markets across industries. She is a veteran deal maker and growth advisor with proven entrepreneurial experience and a firm commitment to support the progress of women.