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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