We can all agree: one of the main goals of any founder is to fund their dreams of changing the world and making it a better place - female founders too. We can also agree that investors want to invest in the companies that are going to yield the best financial returns.
It seems obvious then that we would be able to match these two complementary goals together and fund thousands of business ideas from female founders. But the data shows us a very different reality.
In 2022, companies founded solely by women garnered 2% of the total capital invested in venture-backed startups in the US. Female entrepreneurs receive only about 2% of all venture funding, despite owning 38% of the businesses in the country.
The statistic below is especially alarming: when there was a male co-founder, VC capital shot up to 15%. What the what?!
Sad but true: women who venture into entrepreneurship are not poised to get a fair deal.
There’s a lot of inherent bias when it comes to investing in a female founder. I’d go so far as to say that the bias run rampant. And this bias within the VC industry is preventing capital from being allocated to the best investment opportunities.
So how can we root out this bias and present ourselves in the most effective way?
Having more open, candid conversations is the first step to creating an equal playing field. But until we can change the world on a macro level, there are some things women can do now — on a micro level — to help boost their chances of accessing capital.
1. Understand investor biases and gender stereotypes
In one sample, male-led startups raised 5X more funding than female-led ones. We thought when more females became investors or lead VC firms we’d start to solve this problem. However, statistics still show pervasive gender stereotypes and major gaps in access to funding.
Why is that?
Part of the reason is the traits (and subsequent biases) that are socially ascribed to males and females.
For example, we think of men being more ambitious, logical, direct, assertive, self-confident, and individualistic. We have a tendency to attribute all of these traits to success, or successful and effective leadership.
When it comes to women, typical traits are more warm, affectionate, expressive, helpful.
Although these traits are great for managers and everyday workers, they’re not the traits that we look for when we’re associating who's going to be a successful entrepreneur or who’s going to lead the best investment opportunities.
This really puts women in a double-bind, because it's not saying that females need to just start embodying male traits. We've tried that — and it's backfired. There are countless examples of women who have tried to be more direct and assertive, only to be called a bitch.
Female founders have a balancing act: to be direct without being too direct. To be strong and assertive, but not offensive. It’s critical to understand the interplay between these traits, and learn how we can leverage them for each situation you encounter.
2. Dismantle the confidence gender gap
From a research standpoint, men have a tendency to overestimate their abilities, whereas women have a tendency to underestimate. For example, if you ask a woman if she has experience doing something, she might say, “Well, I've tried it once.” But if you ask a man the same question, he’ll often say, “Yes, I can do that.”
This pattern happens pervasively throughout the investment process, and how we interpret our confidence and ability to accomplish things. Confidence proves to be an equalizer. And, it's just as valuable as being competent.
Sometimes we as women go into pitches thinking that as long as we’re competent, we’ll be able to get access to this capital. But the research shows that we need to have strong confidence as well.
Here are 6 ways to dismantle the confidence gap:
Lower your bar to ‘good enough.’ Many of us are perfectionists who hold ourselves to unreasonable standards. But when we can’t meet them, it’s a blow to our confidence, which trickles down into the way we present ourselves and run our businesses.
Challenge old 'norms' about what a woman ‘should’ do. Don’t ‘should’ all over yourself! Change your internal dialogue to what you could be doing instead of what you think you should be doing.
Befriend your inner critic and don't let self-doubt call the shots. We have mental ‘tapes’ that are playing in our minds that tell us stories. Reframe your thinking so that the negative stories don’t get much time in the spotlight.
Embrace your feminine difference and let go of people-pleasing. I remember a period where I wore awful, boxy blue suits to look less feminine. Now, I’m not afraid to embody my true personality. And I don’t feel the need anymore to please others at the cost of my own needs and wants. It’s made a world of difference.
Celebrate and elevate (rather than compare and compete) with other women. We always have the opportunity to celebrate and elevate other women, to link arms and use our own advantages to raise up those who may not be there yet. I like to think of the saying ‘iron sharpens iron.’
Do not wait for confidence... lean toward risk. I remember watching Amy Cuddy’s TED Talk where she coined ‘fake it ‘til you become it.’ It felt so different than the usual ‘fake it til you make it.’ The more we walk on the path of where we want to be, the closer we’ll become.
3. Deflect prevention questions and redirect with promotion answers
Often, when pitching business opportunities to male or female investors alike, data shows that women will be asked more “prevention questions” while men will be asked more “promotion questions.”
Prevention questions focus on potential losses, while promotion questions focus on potential gains. A promotion question may be, “How do you plan to acquire customers?” while a prevention question might be, “How many daily and monthly active users do you have?”
The worst part is that answering prevention questions with prevention answers often makes you look less competent, while undercutting your confidence. The key here is to be able to shift the conversation by answering with promotion questions.
An interesting study from TechCrunch Disrupt showed that entrepreneurs who responded to prevention questions with promotion answers raised $7.9 million in funding. On the other hand, those who responded to prevention questions with prevention answers raised a measly $563,000.
All it took was a simple shift, and the amount of access to capital grew exponentially.
4. Focus on early stage sales data
This one is fascinating. I’ll start by sharing a story.
In one study, researchers took the exact same slides, with the exact same script, and did voice recordings of men and women presenting the business opportunity. They found that the male voices consistently got more access to capital than the female voices.
While this is disheartening to say the least, there’s some good news: there are companies out there trying to help overcome these inherent biases when it comes to raising capital, like Loyal VC, Clearbanc, and Social Capital.
For example, Loyal uses a tech platform that takes gender out of the equation, so that the early stage investment opportunity is being assessed and evaluated based on unbiased data like customer need, product fit, and the sales funnel.
They’re starting to see a big shift in tide when it comes to investment allocations for women and the returns they yield.
Step into the pitch room with confidence
I’m not going to sugar coat it: it’s a lot harder for women to get funding than it is for men.
Fortunately, the game is changing. More opportunities are opening up, and more players are dedicated to closing the gender gap and eliminating inherent bias from the equation.
On the individual level, there are plenty of practical things that we can do to increase our chances of getting funding. Some of them may take some time, but some of them we can start implementing tomorrow.
So keep your chin up and remember these key tips for presenting yourself in the best way possible. You don’t need to present like a man to get funding.
Check out my full presentation on this topic from the 2022 INTERFACE Women’s Health Summit:
Do you have a story of life as a female founder, investor, VC lead, or another related role? Share it below!