News & Insights · Approx. 3 minute read
The Future Of Venture Capital Funding Is Female
Let’s hear it for the girls: The number of female-run businesses is up 21%. In the fight for gender equality, this steady climb is welcome news. But when you focus on gender-based discrepancies within the venture capital space, there’s still plenty of work to do. Currently, less than 3% of venture capital investment funds female-fronted companies.
Women in business are struggling to secure capital and it’s time for a change, us on providing women representation and support, it would be dangerous to lean into a homogenous, women-only space. It’s proven that more diverse executive teams make better decisions and that gender-diverse organizations are 21% more likely to surpass the financial performance of a competitor with only male executives.
The age-old dynamics of the boys’ club and the future of venture capital
There are countless reasons why someone — regardless of their gender, race and economic background — might struggle to obtain funding. But for women especially, the well-established dynamics within the venture capital space are a formidable obstacle. Female entrepreneurs must glean a better understanding of these dynamics in order to find more success in the space.
– Conservative Projections — Women presenting to venture capital firms tend to conservatively project their business’s goals, budgets and revenue. Men, however, are more likely to present numbers that are exciting and big-picture, which often translates to more funding. Women must do better when it comes to thinking big picture while presenting their business. This isn’t a green light to exaggerate or inflate numbers, it simply means women should steer clear of overly conservative or safe estimates.
– Trusting Your Tribe — Human beings are inherently inclined to trust people that are similar to them, whether that’s based on nationality, alma mater or gender. With only a small fraction of U.S. venture capital firms boasting at least one female partner, it’s no surprise that male-majority venture capitalists are more likely to trust and invest in people that are like them, i.e. men. This isn’t necessarily done on purpose, but it does put women-founded businesses at a disadvantage — until more women are at the helm of these firms.
What can be done to change gender-biased dynamics?
Luckily, the number of female investors is increasing, which will have an impact on the future of venture capital. This in itself will help tremendously with the above dynamics, especially as more investment groups are created with the sole purpose to invest in women-owned or women-led businesses.
That being said, a 100% women-only venture capital space is not the solution. Diverse executive teams are proven to make better decisions and gender-diverse companies are 21% more likely to outperform a company with exclusively male executives. This also indicates that more funding at the onset of a business doesn’t always guarantee future success — something our female entrepreneurs should keep in mind when trying to keep up with their male counterparts.
You can read the full article on LionessMagazine.com