According to Harvard Business Review, fewer than three percent of women-led businesses receive venture capital funding. This statistic is often cited when discussing the lack of gender diversity in the VC industry. But what does it mean? Why is this number so low?
There are various reasons why women are less likely to receive VC funding. One is that VC firms are predominantly male-dominated and tend to invest in companies that reflect their own experiences and networks. Women are more likely to start businesses in traditionally seen as “non-traditional” sectors for VC investment, such as healthcare and consumer products, and ask for smaller amounts of funding than men, making them seem less investable.
The good news is that there are steps being taken to address this imbalance. An increasing number of VC firms are focusing on investing in women-led businesses, and How Women Invest is working to connect women entrepreneurs with potential investors.
Julie Abrams
In speaking with Julie Abrams, Founder and CEO of How Women Lead, she stated, “to succeed in a male-dominated world, women need to create their own systems and networks, and support other women. Too often, women are pitted against each other in the workplace, instead of being seen as collaborative colleagues. This needs to change. Women need to band together and support each other to create a level playing field. When women help each other, everyone benefits.”
Studies have shown that companies with more gender diversity are more profitable, and yet women still only make up a small percentage of senior positions in most organizations. If we want to see real change, then women need to lift each other up. We need to create our own opportunities and networks, and make our voices heard. Only then will we be able to achieve true gender equality.
According to the McKinsey & Company report, women are positioned to inherit the largest share of wealth in the coming years. And yet, only a fraction of this wealth is currently invested in start-ups. Why is this?
Abrams argues that the report argues that there are multiple reasons for this, including a lack of awareness about the opportunities available to women and a general lack of access to venture capital. She also makes a compelling case for why investing in start-ups can be a powerful way for women to grow their economic power and close the gender wealth gap.
Startup investments can provide women with both financial returns and a sense of ownership and control over their own economic future. In addition, by investing in start-ups that focus on solving social and environmental problems, women can help to create a more equitable and sustainable world for all.
The bottom line is that good happens when money is placed in the hands of women. There is a mountain of evidence showing that when women are given more money and opportunities, society benefits. When women have an increase in wealth, they tend to spend it on their families and community-oriented businesses, which boosts the local economy. Simply put, good things happen when money is placed in the hands of women.
