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Why aren’t more women entrepreneurs getting funding?

Categories: Entrepreneurship, Uncategorized


Are you an entrepreneur or are thinking of starting your own business?

Don’t count on venture capital dollars to get you funded. While women are starting businesses at twice the rate of men in the US, a tiny percentage of venture capital money is actually funding these businesses - according to Forbes, less than 3% of venture capital dollars are invested in women-founded businesses.


Even if you aren’t an entrepreneur this should cause your jaw to drop.

During my 5 years in venture capital I spent quite a bit of time thinking about why more women entrepreneurs were not getting funded. While we had some companies in our portfolio that were being run by women as CEOs - and by the way, those companies were, with one exception, in the top third of our companies, based on performance - we did not fund one company that was founded by a woman entrepreneur. I rarely saw women founders come to pitch to us and when I got involved with a few organizations focused on helping women entrepreneurs get funding, we oten had trouble finding great companies to connect with vcs.

Why is this going on?

In my opinion, there are two main reasons:

Reason #1: There are very few women in venture capital. In fact, less than 10% of partners and principals (i.e. people who can make investment decisions) in venture capital are women. Go ahead and name another industry that is this pathetic in this respect. And the reason this matters is because it is part of our human nature to connect with and network with people who are more like us. So if there are few women in venture capital controlling investment dollars it is extremely difficult to women entrepreneurs to get access to that capital.

Reason #2: Some (many?) women entrepreneurs do not want to raise venture capital. Many are starting service-based businesses that don’t need this type of funding and some want to maintain more control over their business (which does not happen often if you take venture money). The two founders of Work It, Mom! - Victoria and myself - spent years in senior positions in venture capital and certainly have access and networks for it. But for now we’re choosing not to go that route; we want to bootstrap our business and to build it into a real company before we even consider raising lots of money. In other words, we want to do it at our own pace.

I am sure there are other reasons, but after a lot of thinking, these are my top two. If you’d like to read some lively discussion on this topic, check out this post by Fred Wilson, one of the top VCs in New York (read the comments - some interesting perspectives!)

I’d love to hear your thoughts on this, so please post a comment. If you are an entrepreneur are you planning to raise money? Why or why not? Do you feel that as a woman you are at a disadvantage?


P.S. I found this article after I wrote this post, but if you want some much smarter people’s opinion on why so few women receive venture (and angel, accoding to this article) funding, check it out.

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5 comments so far...

  • Hi, Nataly. You bring up a good question — I think about this a lot, having raised money from VCs and having found myself the only woman in the room constantly.

    We know that VCs say they don’t fund a lot of women because not a lot of women ask. So the question is, why do so few women pitch to VCs? I think the answer is that you only go for big funding if you want a big liquidation moment. And a comapny that’s gunning for big payout to VCs has to grow big, fast.

    We know that women don’t stay in the grow-big-fast corpporate jobs, so why would women want to create grow-big-fast jobs for themselves when they start their own companeis?

    We also know that most sole proprietorships are run by women. This tells me that women start businesses to accommodate a particular lifestyle, not a particular exit strategy. In these cases, taking in venture capital would constrict a woman’s abiltiy to meet her goals.


    Penelope Trunk  |  June 9th, 2007 at 9:30 pm

  • Penelope, thanks for the thoughtful post. I do think that you’re right in that many women are starting businesses which they don’t want to grow at a crazy pace to sell for $100m in 2 years. However, here’s an issue I encountered when I was in venture - I would meet lots of sharp women entrepreneurs who were starting businesses suitable for venture and they assumed that venture guys would not be interested. There’s definitely the perception in the vc world that women don’t start venture-appropriate businesses and that does work that well for those women who do.

    Nataly  |  June 11th, 2007 at 8:00 am

  • Nataly,

    Thanks for your thoughts. You and I come from different places but share similar ideas.

    One of the items that I also had, in working with many women entrepreneurs, is that women tend not to think big enough. It just never occured to them to build something big. In some ways, many are afraid that success will throw off their balance, which it can, but it doesn’t have to. The secret, for me, has been to define my OWN version of success. Like you, I had a software company that was customer-funding (a great model!) but grew to multi-millions in revenues without abdicating my ‘mother’ role.

    I wrote a book which was recently (this week!) released by John Wiley & Sons called “The ParentPreneur Edge: What Parenting Teaches About Building a Successful Business” that I would love to send you a copy of and get your insights. It was written for women like you! It is a business book that uses parenting analogies to make the concepts more accessible and hopefully shows moms that they can use their parenting skills to start, build, and run a successful business! Please let me know where to send it if you’re interested….

    Thanks again!

    Julie Lenzer Kirk  |  June 14th, 2007 at 12:06 pm

  • Hi Nataly,

    Our coaching company has been assisting women business owners fro several years and I had worked as a volunteer to review and screen businesses for presentations to investor angels and agree that most women business owners do not seek VC financing.

    I believe they have ulterior motives of providing products or services that fit their own life purposes and lifestyles. Giving up control to outsiders for their normally unique and targeted businesses goes counter to their vision and true sense of independence they seek and achieve by developing their own businesses.

    We already have a number of recorded success stories where women business owners started, developed and became very successful independent owners by living their chosen lifestyles at the same time, because they had no VC involvement. They thrived because they did not allow others to take control. They remain successful and happy mothers and life partners, while enjoying the power and rewards of running their own business their way. They get the funding they really want on their own terms.

    I believe they are on to something and I admire their strength of character and purpose to avoid the more traditional VC route followed by male business owners.


    Bill Dueease  |  June 16th, 2007 at 12:56 pm

  • Nataly,
    All of the reasons you cite are valid. But I think reason#1–the lack of women as partners and principals in VC–is particularly powerful. There is tremendous “homophily” in our networks–we tend to connect to others like us. So if women are less than 10% of the principals, it’s almost axiomatic that women receive a low % of VC funding. Changing that structural situation is imperative, if we’re to change the outcome.

    Jeanne Hurlbert  |  March 11th, 2008 at 7:28 pm