The Fight for Female Entrepreneurship

As a teenager, I find myself daydreaming about future career choices a great deal. I think about careers in writing, social justice, and politics, but I always come back to entrepreneurship. That career path seems to give people the freedom to march to the beat of their own drum while making a living, which is very appealing to me. Unfortunately, I’m aware that the road to entrepreneurship is somewhat filled with potholes for women.

Female entrepreneurs receive less funding than their male counterparts. This likely has something to do with the fact that only 11% of venture capitalists (or VCs) are women, and 64% of VC firms don’t have a single female partner. What’s more, the organization All Raise, which supports women in tech, predicts that the number of female VCs will continue to plateau or maybe even drop if current trends continue.

Of female partners in VC firms, 35% are in micro and small firms, which means that they manage assets of about $250 million at most. While that might seem like a lot of money, it’s a sparse amount compared to assets totaling up to $1.6 billion maximum that their male counterparts are managing.

Only 14% of VC funds go to teams with a female founder, and in 2018 and 2019 together, only 0.32% of VC funds went to Latinas and 0.27% went to African American women.

This bias, whether implicit or explicit, among VCs likely explains why while the number of entrepreneurs has increased by 114% in the last 20 years, only 40% of businesses are owned and operated by women.

One form this bias can take was revealed by a Harvard Business Review study that found male and female entrepreneurs are asked different kinds of questions to determine if they’ll be funded. The VCs tended to ask male entrepreneurs what they called promotion questions that had to do with potential for gains in profit or customers, and tended to ask female entrepreneurs prevention questions about potential for losses. For example, a VC might ask a man, “What major milestones are you targeting for this year?” but ask a woman, “How predictable are your future cash flows?” Both questions are about financial projections, but while the man’s question presumes his business will grow, the woman’s question presumes she could expect stability problems.

This difference in questions asked creates a situation where women have to defend their businesses while the men are able to share their hopes for their businesses. The study showed that entrepreneurs who were asked promotion questions received twice as much funding as those who were asked prevention questions.

I encourage my female counterparts to go forward with entrepreneurship, and I might join you in a few years. While it won’t be easy, there are many venture capital firms that are interested in funding women, such as Halogen Ventures, 500 Startups, Built By Girls Ventures, and Urban Innovation Fund. While the statistics may discourage many women from pursuing entrepreneurship, I can’t help but think about what the world might miss out on if women don’t pursue this path.