SmartCompany, July 5, 2017
Female entrepreneurs deliver on investment more often than male entrepreneurs, yet are funded less frequently. We must finance more female founders and better support them, writes Julie Demsey.
Recent stats show ventures led by female entrepreneurs consistently generate higher returns—somewhere between 35% and 65% above male entrepreneurs—for their businesses.
Yet other statistics show female entrepreneurs only receive 9% of VC funding.
If you ask me, those numbers don’t add up to smart business. What this tells us is that once female founders secure capital, they can generate exceptional returns. So why are funding rates so low?
Navigating the VC system
Keep in mind that the venture capital system is also a male-dominated system, both at the evaluation stage and during the advisory stage. In many cases, this leads to venture capitalists judging women based on male values rather than business values.
This affects women from the start. Female entrepreneurs are more likely to receive funding if the VC firm also has a woman on their team when they evaluate a pitch. This suggests that while we can support female tech entrepreneurs in growing businesses that are worthy of funding, we also need a gender diverse VC system to fund and accelerate those businesses.
Consider also that a female-led startup is as well more likely to succeed if the VC firm has a female partner, according to research conducted by Sahil Raina at the Alberta School of Business in Canada. Gender matching of entrepreneur to VC partner drives better performance, which is why the low numbers of VC partners is also a concern for female entrepreneurship.
So smart VC firms, who want to see excellent returns, should not only invest in female-led startups, but invest in female VC partners.
A marathon, not a sprint
My experience in Silicon Valley showed me that too many companies and investors were focusing on building Unicorns rather than building sustainable companies that solved real problems. And it seemed to me that companies that didn’t seem like they had the right trajectory to achieve that status (think companies like Uber or Airbnb – US$1 billion or more valuation) were pushed aside. I believe there were a lot of companies that died, that could have actually been otherwise successful companies.
I moved to Australia because I wanted to help the startup ecosystem learn from this and support more companies in staying in business. I feel fortunate to be leading the charge at SBE Australia which gives me the perfect opportunity to do just this. Here in Australia, it feels to me both founders and investors are more interested in creating a sustainable business rather than focusing on building an actual Unicorn.
The female led companies I have seen in Australia are focused on smart, sustainable growth. But they still need more access to networks and capital to make that happen.
Starting a girls’ club
If the tech industry remains a ‘boys’ club’, female entrepreneurs will continue to miss out on opportunities because their networks will be restricted. We’ve come to the point where there are enough female founders to form a sizeable ‘girls’ club’.
While I’m not advocating gender segregation, I also think visibility of female entrepreneurs and VCs is key. We learn a lot by hearing other people talk about their businesses and women in these roles need other women to look up to.
I’ve found that women often don’t ask for support when they need it, which is why female-friendly networks and accelerators are incredibly important to provide support along the entire pipeline. Early stage companies need to consolidate their foundation of good product, strong leadership and a globally focused market.
At this phase, they need access to experienced advisers, and others in the community to help strengthen confidence and foster connections to build greater value in their business. Having access to a network of female entrepreneurs is therefore important so women can share their experiences and support and inspire each other.
I believe it takes a village to scale a company, and by building a community around female entrepreneurship we can allow them a safe space to ask for more, seek help, and secure support to grow more successful female-led companies.
Our job is done only when there are equal female founders to male founders with the same access to capital and to networks.