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By Mitch Wagner | August 2020
Times are tough for women entrepreneurs. While women-led and diverse businesses tend to be more successful, women entrepreneurs are still struggling to get funding.
“Female-led companies and companies of diverse workforce generate better innovation practices, better collaboration, and most importantly, better financial results,” Amy Sorrells, global communications director for Oracle for Startups, said on a panel titled “The F Word: Future, Female, Funding,” hosted by Oracle for Startups in partnership with Women in AI Netherlands.
For example, a recent Wall Street Journal study found that the most diverse firms have an average operating profit margin of 12%, compared with 8% for the least-diverse companies.
And a 2020 British study found that companies with women in senior leadership roles are more profitable, better innovators, and more respected in their fields. “FTSE 350 [The Financial Times-Stock Exchange 350 most highly capitalized] companies which have executive committees with female membership of more than 33% have a net profit margin over 10 times greater than those companies with no women at this level,” notes the study, from The Pipeline, an organization promoting business diversity.
And yet, women are overlooked for leadership. “In the FTSE 100, there are more CEOs called Peter than there are women in the top job,” The Pipeline study says. The funding picture is grim for women entrepreneurs. Companies founded solely by women only get 2.8% of the funding available, according to a PitchBook study updated with data through June. And for women of color, the record is even worse, Sorrells said.
Sorrells moderated the panel discussion of women entrepreneurs and startup investors to discuss what kind of progress is being made, and how to make further change. Here are some key points:
Until recently, people were still asking whether female underrepresentation is even a problem. Now, everybody knows it is said Janneke Niessen, cofounder of CapitalT, an entrepreneur turned investor.
“What makes me really hopeful that we will see change is that we are getting more male champions as well,” Niessen said. “Women don’t need help. They just need equal opportunity and a level playing field.”
Despite successfully closing a round of funding during COVID-19, “Raising in a pandemic is a new level of hard—I’m not going to lie,” said Jenny Griffiths, founder and CEO of Snap Tech, which provides visual search to the fashion industry. Total global venture funding for the first half of this year tracked at $129 billion, down from the peak of $168 billion in 2018, and down 7% from the first half of 2019. For the second quarter in particular, total funding was $69.5 billion, up 17% sequentially but down 2% year over year. However, a sizeable raise by one company, Indian telco Reliance Jio, skews the data. Excluding Reliance Jio, funding was down 9% sequentially and 23% annually in the second quarter of 2020.
“The next decade’s unicorns are going to be built by a much more diverse group of people.”
“Times like this could make it harder for female and diverse founders to break in,” said Maren Bannon, cofounder and partner for January Ventures, a VC firm that invests in startups by women and underrepresented groups. Early data indicates that VCs are become more cautious during the pandemic, and sticking with bets they consider safe. In an April survey of startup founders conducted by January Ventures, nearly three quarters said investors are taking longer to respond, pausing fundraising activity, or focusing more on existing portfolios. “At a time when founders need more capital than ever, they are hearing that investors are pulling back,” the company said.
Women of color are a fast-growing group of entrepreneurs, but have more difficulty than other women in getting funding. Black women are starting businesses faster than any racial group, according to research by American Express. Since 2007, the number of firms owned by Black women has grown by 164%, according to the Minority Business Development Agency. And yet Black women are more likely than nonminority peers to identify access to credit as a challenge, and to be underfunded, according to a CNBC report.
Women of color are the “last to get a check cut,” said Renée Cummings, founder and CEO, Urban AI, whose mission is bringing AI into an urban environment for public safety, food security, climate protection, and community-led policing.
Fortunately, big tech companies are looking to “celebrate black excellence and excellence by people of color—black and brown individuals,” Cummings says.
“Whether that’s sincere or long lasting remains to be seen,” Cummings said.
In the wake of Black Lives Matter protests in the spring of 2020, multiple venture firms quickly set aside funding for Black and underrepresented startups. However, skeptics noted the speed with which those firms acted indicated that the money was always there; what was lacking was the will. They noted that similar initiatives have fizzled in the past. Elliott Robinson, a general partner at Bessemer Venture Partners, called such efforts “diversity theater.”
Bannon’s fund, January Ventures, was initially branded as Jane VC, but “we felt like ‘Jane’ connotes a certain type of woman,” Bannon said. “It wasn’t as inclusive as the founders wanted it to be.”
The cofounder of January Ventures is Latina, and the company has invested in 23 companies, 50% founded by women of color, and 20% with Black founders. “In seeing the type of people we were investing in, we wanted a brand that is as inclusive and expansive as us,” Bannon said.
Diversity is where the money is. “The next decade’s unicorns are going to be built by a much more diverse group of people,” Bannon said.
And diversity isn’t just about gender or race, but also geography, sexual orientation, and age. “We look to all of this in trying to build funds that speak to a wide range of people,” adds Bannon.
Small barriers can loom large. “You can say you want to support all founders, but if you don’t have an email address on your website of how people can reach you, people outside your network will never be able to get to you,” Niessen said.
Cummings agreed. “We’ve got to not only open the doors, we’ve got to open the windows now, and lift those shutters up and let people know they’re welcome inside,” she said.
Bias is human. “Men, women, everybody has it,” Niessen said. “You tend to just invest in people that look like you and products you understand. If you see the world as white male, then bias goes in that direction.”
A Yale University study found that even scientists—a profession requiring objectivity—were more likely to hire men than women. Yale University researchers asked 127 scientists to review a job application of identically qualified male and female students and found that the faculty members—both men and women—consistently scored a male candidate higher on a number of criteria, such as competency, and were more likely to hire the male.
“Women don’t need help. They just need equal opportunity and a level playing field.”
Niessen adds, “That’s why we have a view of a successful founder as being a white guy with a hoodie.” And that’s why diversity on the VC side is so important to make change. “Your partnership needs to be diverse and you need to be approachable.”
“The notion of being a role model took me a while to get used to because I’m just doing what I do,” Griffiths said. “Putting yourself out there, giving more talks, making sure you’re more visible is a huge part of what we should be doing as role models, even if you don’t necessarily think you are one.”
Girls are more likely to choose STEM careers when they have role models. According to a European study from Microsoft, 41% of girls with role models report an interest in STEM subjects, compared to 26% of girls without a role model.
Teachers can play a big role. Some 73% of high school girls who were interested in studying computing had a teacher who inspired them, according to an Accenture study.
Women need to bring in other women. Said Griffiths, “You don’t want to be the exception. You don’t want to be the sole woman in AI.” To that end, Griffiths said she rarely gives talks on gender, while she does a lot of public speaking on AI and technology. “I want to be known as someone in technology who’s great and who happens to be a woman.”
She adds, “It’s just part of life. We’re women, we’re building companies and we’re working on technology. It’s normal.”
Niessen published a children’s book about a young tech entrepreneur, to give girls a role model to aspire to. “If she can see it, she can be it,” Niessen said. And the book has been localized into different regions, so girls can see characters that look like them.
“Girls need to see there are different paths to tech careers,” she said.