VCs: You should hire and invest in Women


We all know about the gender gap: women make about 80 cents for every dollar that a man earns. However, there is something less well known: the gender investment gap. 

To better understand the entrepreneurial gender gap, I checked BCG’s female entrepreneurship data Why Women-Owned Startups Are a Better Bet. This analysis yielded the following findings:

  • Investments in companies founded or cofounded by women averaged $935,000, which is less than half the average $2.1 million invested in companies founded by male entrepreneurs.
  • According to BCGs same 2018 paper: “…startups founded and cofounded by women actually performed better over time, generating 10% more in cumulative revenue over a five-year period”.
  • And: “For every dollar invested in a female-founded startup, they generated 78 cents, while male-founded startups generated less than half that –  just 31 cents”.

Now, this data is from 2018 and this paper was extensively popular and became a must-read for VCs. So, why are there not more female entrepreneurs in 2022? 

We’ve just seen that female-led startups are more successful and show a higher return on invested capital.

Well, according to Dana Kanze and Marc Conley, there is a clear bias on the nature of questions asked by investors to male and female founders in connection to their pitches.

Kanze and Conley’s research shows female founders tend to be asked questions related to prevention, like: what can go wrong with a venture; while male founders tend to get asked questions related to promotion, like: what is the venture’s home run potential.

What founders and investors say

Concerning the root causes, female founders and VCs respond along similar lines. Gender bias starts early. Schooling from an early age starts differentiating how women and men are expected to behave and communicate in the classroom. And this permeates all the way to venture capital, which, let’s face it, is still a boys’ club.

What do we need?

The issue is not simply that there aren’t enough women at the top. It lies instead with the talent pipeline: there are simply not as many women in the VC field to train and eventually transition into positions of leadership.

There is some great piece of data: women are 2x more likely to invest in other women. This could happen because of the network bias effect. But, whatever the reason, data corroborates it is true. Having said that, what is needed is to level the funding playing field with more women investors in the ecosystem. 

However, the solution isn’t to simply implement a quota to ensure a greater volume of women join the company. Such initiatives often lead to misplaced hiring objectives and also limit the talent pool. An alternative approach hires the right women with the right experience for the right positions across all levels of the organization.

By bringing more women into the full VC ecosystem and investing in women-led businesses, you are consciously taking action towards closing the gender gap by providing funding and access at the early stages. 

While we still have a long way to go, the tides are in fact changing for the better. Gender equality is not just a goal in itself but a necessary foundation for a peaceful, prosperous and sustainable world. The power and resources to reduce the gender gap are there, but leaders need to be aware of this and be willing to provide women with the tools to excel, opportunities, mentorship and training.

Let’s celebrate International Women’s Day acknowledging and fighting this bias.

Don’t miss: 8 startups and initiatives that are improving women’s situation in Latin America

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