The Road to Securing Startup Funding for Female Startup Founders: Challenges, Bias, Gender Gap.
Female startup founders face unique challenges when trying to secure funding for their businesses. Despite the progress that has been made towards gender equality in the business world, there is still a significant gender gap in funding for female entrepreneurs.
In this article, we take a close look at the funding challenges many female startup founders face, we point out strategies to address these systemic biases and list funding resources for female founders.
Studies show that women are less likely to receive venture capital funding than their male counterparts. This is not because there are fewer women starting companies; in fact, women are starting businesses at a faster rate than men. Rather, it is due to the fact that many investors hold unconscious biases against female founders.
Female Founders and Unconscious Bias
When female founders pitch their businesses to investors, they may be met with skepticism or scrutiny that male founders do not experience. Investors ask female founders different questions than they ask male founders, or they may be more critical of female founders’ business plans.
Research by Harvard Business School on cognitive and social forces that influence entrepreneurial investment decisions supports this bias. The research showed that VCs tend to ask women different questions than men. Male-led teams were asked promotion-focussed questions such as “where do you see this market going?” whereas female-led teams were more often asked “prevention-focussed questions”, such as “what will it take to break even?”.
The direct result of this cognitive and social bias was a substantial gap in funding raised: those asked prevention-focussed questions raised $500K where those asked promotion-focussed questions were able to raise up to $7.9 million.
Despite these challenges, many female founders have been successful in securing funding for their businesses. Many have done so by seeking out female-led venture capital firms or by networking with other female entrepreneurs.
Female Founders and the Gender Gap
It is important to recognize that the gender gap in funding for female entrepreneurs is not just an individual problem, but a systemic issue.
The gender gap in funding for female entrepreneurs is not simply an individual problem, but rather a systemic issue that reflects broader gender biases and inequalities in the business world.
Investors and VC firms must take steps to address their biases and create more equitable funding opportunities for all entrepreneurs – regardless of gender. Only then can we truly create a level playing field that offers unbiased funding for all startup founders with a focus on the most viable business ideas.
Why the disconnect [in funding] when the rate of women starting businesses continues to grow rapidly and consistently outperforms? Beyond […] 63% higher performance, female founders are exiting quicker and at higher valuations – a key metric for private investors.
Women have long faced barriers to accessing funding and support in entrepreneurship, which are rooted in societal attitudes and structures that have historically favored men. According to research by the World Economic Forum, the answer is a combination of well-documented issues:
Overcoming the Gender Gap in Funding
To address the gender gap in funding, it is essential to recognize and address the systemic biases that shape investment decisions, mentorship opportunities, and access to networks and resources.
This requires concerted efforts to promote gender equity and inclusion in the business community, including greater diversity among investors and decision-makers, as well as policies and programs that support and empower women entrepreneurs.
The following list of funding opportunities for female founders shows a promising trend – the rising funding support of women-led and women-only founding teams:
5 Steps to Address Bias against Female Founders
Only by working together to address the root causes of the gender gap in funding can we create a more equitable and thriving entrepreneurial ecosystem for all.
Recognizing and addressing the systemic biases that shape investment decisions, mentorship opportunities, and access to networks and resources requires a multifaceted approach. Here are some potential strategies:
- Increase diversity in decision-making roles: One key way to address systemic biases is to increase the diversity of investors, board members, and other decision-makers to bring a broader range of perspectives and experiences to the table and reduce the influence of unconscious biases.
- Implement unconscious bias training: Many investors may not be aware of the unconscious biases that shape their decisions. Providing training on these biases can help to raise awareness and encourage more objective and equitable decision-making.
- Expand mentorship opportunities: Women entrepreneurs often struggle to find mentors and networks of support, particularly in male-dominated industries. Expanding mentorship opportunities can help to connect women with experienced business leaders for guidance and support.
- Create targeted funding programs: Some organizations and governments have created funding programs specifically for women entrepreneurs. These programs may offer grants, loans, or other forms of financial support, as well as training and networking opportunities.
- Foster a culture of inclusivity: It is important to create a culture of inclusivity in the business community, where female founders feel supported, respected, and valued. This means promoting gender equity, challenging stereotypes and biases, and creating a more welcoming and supportive environment for all.