Crowdfunding To Narrow The Gender Gap in Venture Capital

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Forbes | Chance Barnett | Nov 21, 2014

Gender dynamics crowdfundingIf you don’t know the story of women and venture capital, you should. Here’s what the data says…

Of the 6,793 companies funded by VCs between 2011 and 2013, only 2.7% of those companies had a woman at the helm as CEO – according to the recent Babson College study titled “Women Entrepreneurs and Bridging the Gap in Venture Capital” (PDF).

Back in 1999, at the time of a prior study, fewer than 5% of all ventures receiving investment capital had women on their management team. But between 2011 and 2013 that figure rose to over 15%. While that increase seems like a positive trend, it still means that over the last few years 85% of all businesses funded by VCs had no women at all on the management team.

Then there’s also the gender gap among the leadership of venture capital funds themselves. A 2011 survey by the National Venture Capital Association, showed that 89% of all VC investors were men, and only 11% were women.

Women Dominate College Graduates & Purchasing Decisions, Why Not Investments?

When it comes to economic activity and education, the data on women flips on it’s head. Women graduates make up roughly 60% of all US college grads, and women account for an estimated 75-80% of all consumer purchasing decisions in the US.

So why are women so significantly underrepresented when it comes to receiving early stage venture funding? From data mentioned in the Babson study and a recent Stanford study, as well as crowdfunding data published by the Fung Institute at Berkeley on Gender Dynamics in Crowdfunding (PDF), the data points to the same conclusions.

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Investors invest most in those who resemble themselves, including resemblance along gender lines. Put simply: more often, men invest in men and women invest in women. For this reason, bringing more female partners into the traditionally male-dominated culture of venture capital, looks to be one of the more powerful ways to make an impact on the gender gap in venture capital.

But todays VC boardroom seats are still filled by men, which is part of the problem. Sharing about her experience pitching investors in all-male board rooms, Kristin Luck, a successful entrepreneur and currently President and CMO at Decipher, said:

“When, as a woman, you go to meeting after meeting after meeting where you’re pitching to rooms of all white males, and the boards of their companies are comprised of all white males, even when there are now buckets of research from the likes of Catalyst, McKinsey and MIT that support the positive impact of gender diversity on company performance, as well as on the products and services developed, it makes you question if you even want the funding.”

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