Why Are Women Venture Funded Less than Men?

8334077463_71b441d438_z.jpg

By Pemo Theodore (Founder, EZebis) I spent 5 years in London trying to raise funding for my online matchmaking business, and in the end had to admit failure. Very early on in that journey, I had committed to help women source venture when I was successful. As it turns out, I have been doing just that for the last year -- not because I was successful but because I failed.

I have been video interviewing venture capitalists, angel investors and women founders on the shortfall in funding for women. My goal has been to listen to as many people as I could from both sides of the table, so I could hopefully determine where all these conversations intersected.

The Unequal Landscape

The financial industry was created by men and it has been revealed over the last few years that they didn’t do such a great job with that. Women still are not generally paid as high as men. Despite growth, the average revenues of the majority of women-owned businesses were still only 27% of the average of majority men-owned businesses.

The statistics for women entrepreneurs achieving funding are very low: 3-5% get venture funded, less than 10% even if you expand that to include the entire team and any of the co-founders. Around 16% women achieve angel capital, according to a whitepaper by Illuminate Ventures. Data shows that the percentage of dollars going into women led companies have actually declined by about 30% over the last 10 years. Is there a bias at work in the culture that keeps women disadvantaged as regards finance? Or are women themselves holding the key to financial empowerment but just haven’t fully unleashed their power?

Issues for Women

At this point in the project, I am thinking that women themselves have been slow to adapt to a very male dominated tech and venture capital industry. But there are some very good and valid reasons why that would be the case. Julia Hu, co-founder of LARK, said to me in her interview “I think because by my nature as a woman, maybe I am not as aggressive. Sometimes it’s not that I’m unconfident but that I like to listen to people’s other alternatives and recognize the validity of those. Sometimes it comes across as if I am not completely sure of one particular direction.”

Generally this reflects the very difference in women compared to men, both physically and psychologically. Physically most women tend to be receptive and that also can extend to our psychology. Listening is often highly developed in women; asking for what they want, not so. As Vivek Wadhwa, Senior Research Associate at Harvard Law School, suggested to me, “Women have a lot of advantages. They’re a lot more sensible than men are. They are a lot more caring than men often are. They lack the arrogance. They’re down to earth. And those are big advantages. Now the same advantages in the tech world can be disadvantages because if you look at the stereotypical person that VCs and Silicon Valley fund, it’s a Stanford dropout!”

Are We Risk Averse?

Many people that I interviewed suggested that also women can be less risk tolerant than men. Risk always implies the possibility of failure.

Susan Coelius Keplinger, co-founder of Triggit, suggests that women need to get in training early in their lives to see risk as a challenge and be able to accept potential failure along with success. “You can start it at a young age, by getting comfortable with risk and getting comfortable with failure knowing that there will be more opportunities, there will be more places. But it’s hard, even for someone that is comfortable with it, it’s still hard!”

Women may take risk more seriously than men, it may feel more like a life and death challenge. If women are not exposed or interested in sports when they are young, the question remains are there other ways to support them in being willing to sustain risk and failure, and at times to even enjoy the thrill. We need to encourage the competitive urge without damaging women’s receptivity to others. Team sports, rather than individual sports, as suggested by Tim Draper, Managing Director of Draper Fisher Jurvetson. Team work may be the domain where that can be encouraged for those not focused on sports.

Pros and Cons

We are equipped physically, trained and encouraged to look after and care for others and raise families. Admittedly, women are slowly being released from these duties and responsibilities, and many are demanding equal rights with their partners. But to date there are still no men that I know of, who can birth and breast feed a newborn. Many venture capitalists I have interviewed acknowledged that women are great to work for, because they try to look after everyone.

Tim Draper, Managing Director of Draper Fisher Jurvetson, said “People love working for women. Women somehow are able to attract teams that are very driven. And I think that’s because they are willing to subvert their ego and allow other egos to shine.” Unfortunately one of the main criteria that most VCs have said that they look for in entrepreneurs is confidence, and that is usually the result of at the very least a healthy ego and at the very worst, a very inflated ego.

Cindy Gallop, founder of IfWeRanTheWorld calls it as she sees it and was honest about the shaky foundation that we stand upon to begin with: “As women, from the moment we are born, everything around us conspires to make us feel insecure, absolutely everything to do with ourselves: the way we look, the way we dress, the way we talk, whether people like us or not. And we are taught that nice girls don’t put themselves forward, nice girls are always nice to other people."

Self Awareness

The self awareness that results from listening both to others and self can also result in setbacks in confidence. As Fred Destin, Partner at Atlas Venture said, “One of the things that women are blessed with more than men and is both a blessing and a curse, is self awareness. There is a tendency to deal with rejection that is quite different, where women tend to internalize it and look within themselves as to what they need to change and what’s wrong. Whereas guys will tend to almost be energized by rejection and they’ll want to get into a fight and go prove that they can do it better than you think they can.”

Robin Wolaner, author of "Naked in the Boardroom" also highlighted the negative side of introspection: “In a way, it’s bad to be in tune with your emotions when your emotions are making you feel insecure.” Too much self analysis and criticism can only serve to undermine a true & honest confidence in ourselves and our own abilities.

Maybe It’s hormonal?

Testosterone builds up bone and muscle mass but may also build the necessary psychological "thick skin" too. Just as estrogen supports the female body for the selflessness of fertility and caring for babies, it may also support feminine intuition and sensitivity.

Should We Play Like the Boys?

Although some people suggested that we may have to play more like men, I don’t believe that that is the solution because immediately we are then disingenuous and not ourselves. How can we be passionate and confident if we are playing someone else’s game?

Jane Wurwand, founder of FITE and Dermalogica, refuted this too: “One of the greatest myths is that in order for a woman to be successful, a woman had to behave more like a man. It’s a complete mistake because in order to be successful you have to be at your most, what I call ‘fierce with your own reality’.”

Asking for Money

Another big issue is that women don’t like to ask for money. This is a huge problem if you are an entrepreneur and you must pitch for funding. You definitely have to become comfortable with asking for money!

There seems to be something deeply ingrained in us as women that we should do what we can with what we have. Whereas many men have big dreams, we may tend to "think too small", as a female entrepreneur friend says about herself. This may stem hormonally from our primary focus on the immediate people in our care or responsibility. Historically big picture thinking and exploring may have just been the domain of the male hunters. I know if I am suffering any financial pressures I tend to instinctively think about how to cut back rather than identify how to bring in more revenue.

I read with interest Susan Wilson’s post "Are Girls Afraid of Money" on CNN Money, in which she described placing $20 bills on random desks in a classroom at Georgetown University. The female students who walked into the room ignored the money and wouldn’t sit anywhere near it.

Tereza Nemessanyi, founder of HonestlyNow, said that it increased her desire to raise investment funding once she had a team for her startup. Their needs and her heightened sense of wanting to provide for them increased her confidence and drive to raise funding to provide for her startup’s needs.

Work/Life Balance

Then there is the challenge of the intensity and crazy lack of balance in startup culture that is not appealing to many women, who value their family and personal lives.

Adeo Ressi of TheFunded put his finger on the pulse when he said “It’s pretty clear that modern day startup culture was built and developed by men. And look what the net result is then, over 90% of the people who fund startup culture or who run startups are men. So obviously if you want to get more females involved, it cannot continue to be a male run and operated industry.” Of course this means that women’s organizations and networks, along with individual female entrepreneurs, need to develop their own version of startup culture.

Vivek Wadhwa suggests an important point in that we can leverage our strength and ability to support by pulling each other up and following the lead of the Indian tech community in Silicon Valley. One woman’s success is success for all of us as then our numbers are increased and the playing field becomes closer to equal!

Sexual Tension

Finally Dave McClure of 500 Startups shared when I interviewed him and some of his female founders: “I think it’s impossible to completely ignore the human sexuality issues and other sensitive issues in all contexts. I think you always have to fight biases one way or another when you’re making investments. Sometimes it’s a positive and sometimes it’s a negative but it does enter into the equation. I think if I believe in what I’m doing as a venture capitalist, you take risk in all forms and match it. That’s part of the equation.”

In response, Prerna Gupta, CEO of khu.sh, wisely suggested: “I think that this is one issue that definitely affects women from a really early age. The reason we don’t have more women in technology, and as a result more women in entrepreneurship is because there’s this tension. And again it’s a human tension, individuals are not bad people, they’re not doing it on purpose. I think when you’re a woman being attractive is one of the most important things you can do as a human female. For whatever reason, being intelligent and being powerful, these things are at odds with being sexually attractive for a woman. We are very sensitive to this at a young age. I think if you have to choose between the two, a lot of women go towards being attractive. That is one thing that I hope will change.”

When chemistry happens between people who are looking to work together, it can easily be mistaken for sexual chemistry because it comes from the same place in us, our passion! Rather than pretending this important part of the creative process doesn’t exist or misinterpreting it by fearing it, literalizing it and acting out sexual innuendo or relationship. Investors and women entrepreneurs need to respect and honor this chemistry so that they can work together successfully. Investors need to take this risk along with the financial risk, just as Dave does and know that this is fertile energy to harness and work with a female entrepreneur and do great things in business. And female entrepreneurs should not be afraid of the power of this chemistry and its transformative affect on them and their startup.

Solutions

Like homeopathy the antidotes to these issues are provided within the challenges themselves. First however we need to be aware of the issues which can give us the option to change. Women can then beef up their weaknesses and leverage their strengths in raising funding for their startups. Everyone that I have interviewed to date all agree that women can learn the necessary skills to raise funding successfully & to run successful startups.

So really nothing is holding us back, except ourselves and our desire to change the world one startup after another. As Randy Komisar of Partner Kleiner Perkins put it: “Women bring a holistic sensibility to business that business sorely needs!”

This post was originally posted at www.ezebis.com.

About the guest blogger: Pemo Theodore is Founder of EZebis. She is an Australian entrepreneur focused on winning the venture game for women. Pemo has been involved in online businesses for over 6 years, starting with AstraMatch. Prior to that, she has been involved in small business for over 30 years in Australia, Canada, Ireland and London. Pemo is a certificated business coach. Follow her on Twitter at @pemo and her startup at @ezebis.