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It’s 2020, and Men Still Receive More Start-up Funding than Women. Why?

It’s 2020, and Men Still Receive More Start-up Funding than Women. Why? main image

While great advances have been made in improving female representation in the world of business and boardrooms around the world, true equality is still yet to be attained.

Although female entrepreneurs are pounding the pavement just as much as their male counterparts, early stage venture capital is still dominated by men. In fact, a 2017 report from Diversity VC found women make up just 13 percent of decision makers in venture capital in the UK.

As a result, there’s still a noticeable disparity between female and male entrepreneurs and the level of investment and funding they receive to get their businesses off the ground.  

Crunching the numbers

A study by the British Business Bank learned that female-founded companies get less than one per cent of total UK venture capital, while male-founded companies get 89 percent. This is an alarmingly high disparity when taking into account that a third of entrepreneurs in the UK according to the Rose Review – spearheaded by Natwest’s Alison Rose – are women.

The figures are pretty similar in the US too. In 2017, 17 percent of startups had a female founder but less than 3 percent of all venture capital went to female CEOs.

The pitches

London Business School’s Dr Dana Kanze offers insight into why men and women are treated differently in the boardroom – and a lot of it comes down to the phrasing of questions during pitches.

She pulls from her personal experience when she and her male co-founder tried to raise money for their mobile tech company at TechCrunch Disrupt – and they both got very different questions from potential investors.

Kanze said she was mainly asked questions about what could possibly go wrong in her company (she calls these “prevention” questions), whereas in comparison, her male co-founder was asked questions about how amazing everything could be (Kanze refers to these as “promotion” questions).

Her research – published in the Academy of Management Journal – takes a closer look at the relationships between the questions entrepreneurs are asked and the funding they get.

Kanze’s findings indicate that if men and women were asked the same questions, they'd be equally successful in raising money. She admits the subconscious cycle of bias needs to be broken, and that’s what her team aimed to do.

Tips to pitch more effectively

  • Tell a story
  • When getting ready to pitch, try and gather all of the learnings and experience you’ve had so far and tell a story about you that has a past, present and future
  • If you’re innovating, then you can illustrate what the world will look like with your idea in motion
  • Investors see hundreds of products and meet lots of entrepreneurs, so it’s important to make yourself stand out. Investors want to be moved by your idea, but it’s the entrepreneurs who have the chance to entice investors first. Be who you are and let people decide if they want a piece of the action.
  • It’s important to outline your company’s needs and product milestones when asking for capital, but you also need to understand – and demonstrate your knowledge of – the capital market environment. If you’re aware fundraising may be harder to do next year, try to raise as much as you can this year.

Beat gender bias by doing your homework

Of course, the best preparation in the world can’t help you completely overcome systemic gender bias. What if you aren’t asked the right questions in your pitch? What if you’re still treated differently to male entrepreneurs?

The best thing you can arguably do is conduct your own research on investors before talking to them and try to find VCs with a track record for investing in female founders. Get in touch via female founders in the industry to find the right VCs to talk to.

Above all else, make sure the investment focus of each VC you meet fits your company’s sector – it’ll make getting the “yes” so much easier when you are strategically aligned.

Written by Niamh Ollerton

Niamh is Assistant Editor of TopMBA.com, creating and editing content for an international MBA student audience. Having gained her journalism qualification at the Press Association, London and since written for different international publications, she's now enjoying telling the stories of the business world.  

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