Published on March 2nd, 2023 | by Contributing Editor0
Increasing Gender Gaps: All-Female Business Teams Received Only 1.9% of US Venture Capital in 2022
It was a one-step-forward, five-steps-backward yearly sum-up for American female-owned startups in 2022, with only a peanut-poor 1.9% of venture capital allocations going to these businesses in the country.
Essentially, women-founded businesses with all-female teams received about $4.5 billion out of the $238 billion venture capital fund for 2022. This is a disappointing drop from the equally poor 2.4% allocation in 2021, a figure that was supposed to be a symbol of hope as it represented an 83% increase from the allocations in 2020.
For teams with a combination of both genders, despite being led by women, the stats jump to 17.2%, showing an obvious inclination to fund these teams when males are a part of the mix. Regardless of the size of the company, all-female teams are almost always rebuffed from venture capital funding. This is generally due to under-toned biases and unconscious assumptions about the capability, strategy, and distraction-free work lives of the founders and team members.
“Male VCs — and obviously most are — are very comfortable now giving female entrepreneurs capital for girl stuff,’” says Katherine Hays, the CEO of Vivoom. “Want to rent dresses or sell baby wipes as a subscription? No problem. The VCs ask their wives or girlfriends if the idea is cool, and they’re good to go.”
However, women in hardcore tech and heavily industrialized businesses are often looked over for their male counterparts, who are considered lower-risk with higher potentials for success where invested money is considered safer.
Venture funds are reported to be on the losing side
Several studies show that venture capitalists would earn more in returns if they equalized allocations for male and female-owned businesses.
According to a study of 350 startups by Mass Challenge and BCG, women-led brands delivered nearly twice as much ROIs as the males for their VCs. With sizeable financial support, women generally make smarter entrepreneurial decisions and lead with a higher level of discipline. The study showed that if these VCs had equaled out cuts in the past five years, they would have enjoyed about $85 million more in returns.
“Your voice is your ultimate power. Loud and clear, we, women are not born to be average. We are born to inspire, lead, and create. Never let society decide otherwise. Get a voice, and leave an impact!” says Taylor Ping, a successful American entrepreneur, media expert, business coach, and the founder of Hierarchy Media and The Risen Group.
Additionally, the gender gap is often easily blamed on the lack of female-owned VC funds, a worsening of the situation rather than an alleviation. Current statistics show that women account for barely 10% of decision-makers across all venture capital businesses. While they are considered a powerful and influential force, their presence on these boards shouldn’t particularly sway funding access decisions for female entrepreneurs.
Problem established – what can women do?
Funding should ideally be awarded on the bases of business plan solidity, innovation and creativity, knowledge of the niche, fail-proof strategies, and overall passion for the venture. Sadly, for many women, having great proposals and effervescent drive won’t always cut it.
Many successful female entrepreneurs encourage women to have one important factor when approaching VCs for funding – vast knowledge of business management. A great way to scale the gender gap is to prove to the VCs that their money isn’t being allocated to a business handled by a confused rookie. Knowing your guns is the ultimate game changer, whether it’s your first time launching a business or not.
As a professional business coach who has helped hundreds of young women all over the world build successful brands, Ping encourages aspiring entrepreneurs to seek mentorship and approach VCs with bullet-proof plans.
“Consultation, providing actionable knowledge, and connecting others to a multitude of assets, not just those within my media company, is one of the things I particularly enjoy about my career,” says Ping, a Forbes-recognized entrepreneur with accolades from Bryce Cleveland and The Black Tape Project. “I service and mentor young entrepreneurs, providing them with strategies to get their own businesses started. I teach them how to start with no capital in the most cost-effective way, and I also consult with businesses looking for capital partners, funding, and global brand expansion into other countries. It is my passion and mission to speak to and reach more young women and men who are looking for real advice on how to expand their business into a realistic, impactful, and unique experience for the consumer.”Tweet