How To Improve VC Funding For Female Technology Company Founders

When looking at the situation for female founders of technology companies, one statistic in particular stands out to me. A recent study of 350 companies showed that female-founded companies on average received less than half the funding ($935,000 vs. $2.1 million) compared to male-founded companies. What makes this confounding is that the female-founded companies on average made more than double the revenue per invested dollar.

It begs the question why such a disparity exists when the data indicates that investing in women-founded technology companies is a better bet.

I believe that the answer is complicated, but that part of reason is the equality challenges that exist within venture capital, as well as within technology companies.

Female led companies it seems receive more scrutiny when fundraising and therefore only the best of the best are receiving funding.

The Skewed VC Funding Figures

There can be little doubt that venture capital companies suffer from a strong gender imbalance. 2018 figures for our southern neighbour, the US,  show that 9% of partners in VC firms were women – and a staggering 74% of all venture funds had no women decision makers. In Canada, 70% of VC firms with a focus on technology have no female partners while 12% of all partners in said VC firms are female.

I am not arguing that men will not invest in companies founded by women. The truth of the matter is that there are many, varied reasons why we are seeing a shortage of funding for women founders of technology companies – and why there are fewer women founders than males.

But there seems to be a correlation between the lack of women and the funding numbers. Pitchbook data for the first ten month of 2018 showed that just 2.2% of VC funding went to female-founded companies, and that 12.8% went to mixed-gender teams.

A Leading Reasons For Lack Of Funding?

The initial counter-argument could be that there simply are not enough women-founded companies out there to invest in. Data for 2009 – 2017 shows that 17% of technology companies are founded by women. While some may see a correlation between that figure and the funding figures mentioned above, I would argue that the correlation lies elsewhere.

As Wendy DuBow and Allision Scott-Pruitt point to in their excellent article for Harvard Business Review, there is an argument to made for women founders simply not seeking VC funding because of the low success rate they and their peers have experienced when pitching different funds.

The lack of success seems directly linked to the representation of women in VC.

As DuBow and Scott-Pruitt write:

“Research shows that VC firms with a female partner are more than twice as likely as firms without a female partner to invest in a company with a woman on the management team (34% vs 13%); and they are three times as likely to invest in women CEOs (58% vs 15%).”

So, as the All Raise female-VC interest organisation puts it, there seems to be a correlation between the fact that there are so few women in VC and that just 15% of funding goes to teams with at least one female founder.

What Can VC Companies Do?

My experience with technology companies is that they are generally very proactive and want to do their best to fix equality and gender bias issues once they are aware of them. I think the same can be said of venture capital firms. Personally, I think that some of the issues regarding the under-representation of women in venture capital and the seeming knock-on effect on lack of funding can be fixed through more conscious focus fixing the issues.

Both technology and venture capital are spaces that are overwhelmingly male. As is the case with women in women-dominated fields, men in venture capital and technology need to make an extra effort to engage with women in their field – and actively seek out female technology founders outside of their normal, male-dominated social sphere.

Another area is to be very aware of unconscious biases when listening to pitches. VCs that are male-dominated and have a harder time understanding the business case, if the target customer audience is women. The flip side of that coin is that women can become pigeonholed as founders that are best at the ‘soft’ sides of tech, such as eCommerce and healthcare. The bias is that women are less able to create hardware technology and ‘hardcore’ programming solutions.

On a company level there is a distinct need to look at hiring and promotion practices. While I am not necessarily advocating quotas, VC companies without women in management or leadership roles should consider if addressing the lack women in such roles is a result of unconscious bias. And if they, without women in such roles, feel they are best equipped to invest proactively in women-founded technology companies that, as mentioned in the beginning of this article, have a proven track-record of delivering better revenue returns than companies founded by their male peers.