According to Harvard Business Review, Women-led startups received just 2.3% of venture capital funding in 2020. This article will discuss the challenges that women entrepreneurs in the venture capital market face. Some of these challenges are unique to women in the industry, and others are more universal. Regardless, the fact remains that these challenges exist and must be overcome if female founders are to succeed in the venture capital market. Venture capital can be a difficult sector for all startups, not just female ones.
There are many factors working against female entrepreneurs in this space, and it takes more than just an individual or organization to change them. Let’s take a look at some of these challenges and how you can help solve them so more women can access venture capital as an entrepreneur.
Lack of Female VCs in the Industry
Women are underrepresented in the venture capital industry. The data on female investors is limited and somewhat inconsistent. For instance, some studies show that women make up 20% of investors, while other research concludes that they represent less than 5%.
What is clear is that female investors tend to invest less than men. In one study, women invested twice as much as men, but still invested only about half as much as what men invest in the same amount of time. Women may be underrepresented in the venture capital industry for a few reasons.
Most importantly, venture capitalists themselves may not be aware of the significant gender gap in the industry. To expand the pool of women who invest in the venture capital industry, organizations and individuals can encourage women to invest and mentor other women. This can be as simple as writing an article in the local newspaper or inviting a few female investors to a networking event.
Difficult Market Conditions
Venture capitalists must assess the potential of a company’s product, evaluate its financial viability, and find the right partners to bring the company to market and manage the business once it is up and running. If a venture capitalist sees a growing and profitable market, she will invest in that company.
The current economic conditions are also working against women entrepreneurs when it comes to venture capital. Investors have been worried about the state of the economy and have been hesitant to invest in new companies or expand current operations. This has led to fewer investment opportunities for startups.
Inaccessibility to Investors via Meetups and Conferences
One of the biggest challenges women entrepreneurs face in the venture capital industry is the lack of funding opportunities. Women may find it difficult to meet funds at events like meetups and conferences because they are often held at specific times when children are present. This can be a barrier to accessing capital.
Women may also find it difficult to get funding because they and their companies may be perceived as less viable than those of their male peers. This can result in lower funding offers and fewer opportunities to access capital. To address this issue, fund managers and investors can create more events that are open to both men and women. They can also change their existing events so that they are less sheltered and more inclusive of women.
Gender Bias in the Venture Capital Process
The gender bias in venture capital can impact a VC’s decision about which companies to invest in. Studies show that investors are more likely to fund companies associated with men than those associated with women. For example, one study found that female entrepreneurs are less likely to be funded than their male peers.
To address this gender bias, investors and fund managers can work to eliminate any bias they may have in funding decisions. They can also make sure that the teams associated with each investment are diverse enough that they may not be biased toward any particular team.
The gender gap in venture capital may be slowly shrinking, but it is still significant. A number of factors work against women in this industry, including a lack of female VCs in the industry, a lack of funding opportunities, and gender bias in the funding process.
To address these challenges, investors and fund managers can create more events that are open to both men and women. They can also make sure that the teams associated with each investment are diverse enough that they may not be biased toward any particular team.