While the Chinese zodiac sign for 2018 is the dog, a more appropriate symbol for this year is the woman.
Across the US, women are running for office in record numbers. France announced that it will begin imposing fines on companies that fail to eliminate unjustified gender pay gaps within the next three years. And in the US, movements like #MeToo and #TimesUp have forced our nation to address gender inequality, misogyny, and harassment.
One area where the gender disparity is particularly stark is the startup and venture capital space. In 2017, only 2% of all venture capital was invested in women-led startups, even though women own nearly 40% of the nation’s businesses. That same year, the average financing round for women-led companies was less than half that of their male counterparts.
Why the glaring gender gap? While there’s no clear answer, many blame “mirrorocracy”: the idea that the VC community, lacking in diversity, tends to invest in individuals that look like them. Indeed, only ~8% of partners at the top 100 VC firms are women. A recent Harvard study further revealed bias in the line of questioning venture capitalists pose to female and male entrepreneurs. The study found that women were generally asked about the potential for losses, or what the study called “prevention” questions, whereas men were asked about the potential for gains, or “promotion” questions. For every additional prevention question posed to an entrepreneur, the startup raised an average $3.8M less.
Looking back at our own company’s fundraising trajectory, these figures are unsurprising. It took Allergy Amulet nearly three years to secure its first investment: a convertible note in 2016. And the vast majority of our current investors are men.
There’s a strong business case for investing in women. According to Credit Suisse, companies with female CEOs generate a 19% higher return on equity and a 10% higher dividend payout. A study by the Peterson Institute for International Economics found that companies with women in at least 33% of senior management roles accounted for higher annualized stock returns. The study also found that Fortune 500 companies with the greatest proportion of female board members significantly outperformed those with the lowest proportion.
We need to invest more in women, and we need more women investors.
Several VC firms are proactively seeking to address the problem. In a two-part series, Forbes identified several investors and VC funds committed to bridging the gender gap either by ensuring female representation among their partners, portfolio companies, or both.
As with any ecosystem, diversity breeds strength. The startup and venture capital worlds are no exception.
– Abi and the Allergy Amulet Team