Why Venture Capital Is Such A Boy’s Club, According To 21 Female Entrepreneurs
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Have a brilliant idea for a start-up? If you're a woman, finding venture capital to make that dream a reality is going to be tricky. The gender gap in venture capital (the money invested in start-ups and emerging companies by companies or groups of investors) is a well-known phenomenon, but awareness isn't making it going away anytime soon. Bustle spoke to 21 female entrepreneurs about their experiences starting their businesses, and what can be done to help women close the funding gender gap.
A study published in the journal Venture Capital in July reveals that, frustratingly, all-male teams who seek venture capital are four times more likely to get it than teams with even one woman on them. The numbers get worse as women become more prominent in the groups seeking funding: 97 percent of all the venture capital given out in the United States between 2011 and 2013 was presented to a company with a male CEO.
Even in countries with considerable gender equity, like Sweden, the news is bad for female entrepreneurs. In a study released in May, researchers looked at venture capital applications in Sweden between 2009 and 2010, and found big gender disparities that couldn't be explained by experience. Men's applications were described by funders as "young and promising" and "cautious but level-headed," while women's were described as "too cautious" and "young and inexperienced." The perception bias had monetary implications: On average, women's companies got 25 percent of the money they wanted, while men's got 52 percent. Fifty-three percent of women's applications were dismissed, compared with 38 percent of men's. This is not a case in which women are "bad at business": it's a systematic discrimination issue, and it's hampering innovation and economic progress across the globe.
We asked female investors and entrepreneurs from all parts of the business spectrum, from well-established CEOs to angel investors, to total newbies, about their experiences with discrimination and sexism in the venture capital world, and what could be done about it. Their responses were immediate, detailed, and in many cases upsetting — but they also have brilliant ideas for what can be done to level the playing field. Just what you'd expect from women with innovation on their minds.
As can, sadly, be expected, women seeking venture capital funding were subject to a variety of sexist and misogynist remarks. Sandra Rubinstein, the CEO of the marketing company DXAgency, which works with everybody from HBO to the NY Knicks, tells Bustle that at one presenting opportunity, a man shushed her and said, "Sweetheart, it's OK, we have a bunch of other things to consider." Filomena Laforgia, who is still seeking VC funding for her project filanthropists.com, recalls a meeting with a potential male funder in which he responded to her pitch by saying, "No one is going to want to invest in a bored housewife." The three young female founders of Wethos, a freelancing platform for non-profits, tell Bustle that when they were looking for early funding in March 2017, one male investor made a variety of sexist comments, including that he "liked it when women fought back because he would always win," that they should have married money, and that their profile pictures should be prettier. One woman, Lexi Montgomery of Darling Web Design, actually incorporated the sexism of her experience into her company. "My company is built on sexism. I own a digital agency that's branded like an escort service because early on, someone suggested I become an escort instead of working in tech," she tells Bustle.
Stories of harassment and humiliating treatment pop up regularly. Walsh Costigan, founder of language learning site Lexody, tells Bustle, "I was at an investor meet-up at SXSW in March, and a male investor came up to me and aggressively started hitting on me. I turned away from him without acknowledging him, and he just starts shouting at me, 'What, am I not your type? You don't have a ring on, so you must be available'." Talia Goldstein, who founded matchmaking service Three Day Rule, was noticeably pregnant during a 2016 round of investor meetings, and was regarded as such an astonishing anomaly that, during a Skype meeting with male investors, she was asked to stand up to and twirl to show them her growing belly.
"My company is built on sexism. I own a digital agency branded like an escort service because early on, someone suggested I become an escort instead of working in tech."
These issues grow worse, according to female entrepreneurs, if they're attempting to produce a product or service related specifically to female needs. Rachael McCrary, who runs the body-inclusive shapewear company Jewel Toned, tells Bustle that finding venture capital is immensely difficult when you're explaining female-only products to a room full of men — and having to endure sexist and inappropriate comments because they happen to be talking about lingerie. Kelsey Doorey, founder of bridesmaid dress marketplace Vow To Be Chic, describes explaining the problem of bridesmaid's dresses to men as a "barrier." "I try to talk about it in a relatable way," she tells Bustle, "such as, 'Imagine if you had to buy every tux you've ever worn, for a few hundred dollars each and in all different colors'." Making "female" products palatable to male understanding can go haywire and result in pitches going belly-up — a problem that companies oriented toward solving male issues never face.
The big underlying issue, these women tell Bustle, was that even if overt sexist treatment didn't occur, they still faced expectations of low competence, lack of experience, and professional naivety, on everything from their financial acumen to their ability to operate a projector. Montgomery says, "I’ve encountered everything from males suggesting I work for free, to sponsorship offers to fly out for a visit. It takes a few encounters for a male client to take my skills seriously, and then I have to over-deliver."
For Amanda Weeks, co-founder of biotech company Industrial Organic, gender expectations have affected the core of how she's meant to act when pitching for capital. "There was a study done recently that female founders are asked to explain the risks, and male founders are asked to explain the opportunities," she tells Bustle. "I have 100 percent found this to be true." She's also battled the fact that her male co-founder, despite "not having a business bone in his body," always has the financial questions directed at him. "In one meeting, a man actually said, 'Oh, you're the numbers person, well that's different'," she says.
As with many other scenarios of gender discrimination and harassment, the power dynamics of venture capital are skewed overwhelmingly towards the people with the money — which is why so many women in these positions fail to say anything.
Women of color receive a minuscule 0.2 percent of all venture capital funding available in the United States, and often encounter visceral racism and sexism in their encounters with (white, male) investors. That makes them less likely to even get a meeting in the first place. Chandra Arthur, the founder of Friendish, tells Bustle, "I can only speak from my experience, but Black women get the shortest end of the shortest stick." She knows for a fact, she adds, that "I will only be supported based on performance and not potential," unlike her white, male, funding-seeking peers.
Products that are specifically marketed to women of color are, unsurprisingly, often met with both racist and sexist treatment by investors. Stephanie Caudle created Black Girl Group, a site that connects Black female freelancers to companies. "I recently went to sit down with a potential investor and I experienced quite a bit of resistance," she tells Bustle. "I was told that my start up would never receive funding because my platform was too 'urban' focused, and there was no way that women, or specifically African-American women freelancers, could prove that they were receiving less opportunities than their male counterparts."
Jackie Ros, founder of Revolar, which manufactures a personal safety device, echoes the same issue. "The hardest part of being a female in the venture capital world is getting investors to trust me when I express that I am an expert in my field. I am a female and I am Latina. Revolar was shaped by my and my families' personal life experiences. I created Revolar to keep my little sister safe from assault."
"I was told that my start up would never receive funding because my platform was too 'urban' focused."
Youth plays into the equation as well. Daniella Mohazab, who is biracial and founded her mental health site Happy Pill while in college, has experienced the gamut of discrimination: for her age, her gender and her race. "At the beginning, men think it is cute that I run a site for other young women," she tells Bustle. "As soon as I go into specifics, men get intimidated." The professional consequences have been, to say the least, irritating. "A 60-year-old man offered me a job to help raise money for his company because I am 'young and pretty'," she tells Bustle. "When I have pitched my company to potential clients, these individuals ask who I work with, insinuating that I am not the owner and that there is a guy involved in the business."
More woman-led venture capital funds have been entering the marketplace, and some, like SheEO, are specifically focusing on female entrepreneurial funding. But is that the only solution available? Female investors and start-up founders offered many diverse solutions to attempting to fix the gender gap in venture capital.
Some, like Emma Buck of Your Dirty Secret, are intent on getting more women in the room. "There should be panels of different people with a collective of life experience, ethnicities and genders to ensure everybody has equal opportunities," she tells Bustle. It's a thought echoed across the board. Jessica Rovello of Arkadium says, "The problem with venture capitalists not funding women-owned companies is rooted in the fact that so few VC firms have women senior partners, who are included in the pitch meetings and decision-making process."
And it's not just a thought among entrepreneurs — female investors feel it too. "Having more female investors will lead to more female founders," investor Masha Drokova tells Bustle. But just female representation isn't enough. "I think more representation is needed at every level of VC and tech in general," Arthur says. "More minority limited partners, venture capitalists, firms, and so on."
Entrepreneurs agreed that venture capital firms themselves need to do more in general to target the issue. Research suggests that men who have daughters award more money to female entrepreneurs, but the need for action among investors themselves is, for many start-up founders, paramount. "VCs need to stop talking about their desire to support women entrepreneurs and start actually doing it," Rovello says.
Part of that is going beyond what they know. As Ros says, "From my experiences in working with VCs as a female entrepreneur, I have learned that they all invest in what they know, and who they know. In order for women and any minority in the tech space to get a better footing, I strongly believe that these VCs need to become comfortable, and willing, to learn about new communities of people." McCrary says, "Men have to start seeing women as equals and treating their pitches the same way they treat pitches from male entrepreneurs. Women have great ideas too and if male investors dismiss them just because of their gender, then they are potentially missing out on a very profitable opportunity." Emily Best, of crowdfunding movie platform Seed & Spark has a message for male investors:
Another major obstacle that needs to be knocked down before venture capital becomes equal, according to both investors and entrepreneurs, is confidence. "The main reason we see fewer female companies," Drokova tells Bustle, "is because women have been conditioned to be less confident in themselves. I meet a lot of entrepreneurs from both genders with equally good ideas, but the male founders always seem to believe in themselves more. Women often doubt that they can succeed, which is largely a result of the way society sees them." Investor Magdalena Yesil tells Bustle, "I am a female investor and a female entrepreneur, meaning I have been on both sides. I believe that women discount themselves much more often, and discount their own opportunities. They tend to use smaller numbers and they tend to ask for less money. They also tend to accept lower valuations than their male counterparts do."
Being intimidated by the room is common. Lyde Spann, who founded the digital creative agency netamorphosis (stylized in all lowercase), tells Bustle, "In many ways, the venture capital world harkens to the ‘old boys’ club. As female startup founders, we need to seek education, to not be intimidated by certain rooms and to see this imbalance as an opportunity for fostering the optimal success for our businesses and not an insurmountable hurdle." The high levels of negative response, sexism, harassment and undervaluing can be crushing, but both sides of the equation agree that women still need to ask for a seat at the table.
It's not all about educating yourself to be more confident or agitating for venture capital firms to change their ways, though. Other strategies revolve around buoying each other up, both as mentors and as investors.
The importance of mentoring younger start-up founders in search of capital, and encouraging women who were thinking of beginning a business, was mentioned frequently. "Every individual active in business can do a lot of things on a day-to-day basis to support, encourage, and mentor talented women," Drokova says. Rubinstein mentions the importance of "paying it forward." Women who have attained venture capital often need to hand their knowledge and expertise down to others.
The founding and help of female-led venture capital groups is also seen as important, but not the be-all and end-all. "Definitely go to female-focused funds and angel groups," Weeks advises female entrepreneurs looking for a break, "but don't feel like those are your only options if you're a woman." Also, Best notes, "Women angel groups have a common problem: incredibly high bureaucratic overhead for very small checks." Relying purely on female funding is, at this point, unfortunately unrealistic.
Speaking up about gender discrimination in venture capital can, understandably, be challenging. "It's hard not to appear that you have a chip on your shoulder or are making excuses for a bad idea or pitch when pointing it out," Weeks tells Bustle. Her advice? Be excellent: "Above all else, build a great company, make every investor who passed due to a thinly-veiled bullshit reason regret missing out on the deal. It will make them more likely to invest in the next woman who comes around with a strong pitch."
And, Rovello notes, women should keep in mind that if change is coming too slowly and their ideas are being entirely neglected for less-thought out male pitches, they can circumnavigate the system entirely. "Women should also feel empowered to start their own companies without raising venture capital," she tells Bustle. "Successful women have always known: If the rules are stacked against you, change the game. Michael Bloomberg owns 88 percent of Bloomberg LP; I can’t imagine the next billionaire woman media mogul will get to that level by being beholden to some group of investors."
If you're a female entrepreneur, the picture may look bleak, but it's important to keep fighting and get your ideas out there. After all, once you've got the money you need, you can start inspiring other people and, together, begin to change the game.