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When she thinks back over the time she spent raising business funding, entrepreneur Lynne Laube remembers meeting only a handful of female venture capitalists.
“If you’re a woman out there raising money, you’re going walk into offices dominated by male partners who have male perspectives,” says Ms Laube, president, chief operating officer and co-founder of Cardlytics, which uses online and mobile banking channels to track consumer spending.
Today, women create and lead a growing number of businesses. In the US the figure is 36 per cent, according to the government’s Washington-based Small Business Administration.
Companies with senior female leaders are making some progress in raising the capital they need to start and expand these businesses. Babson College’s 2014 Diana Project research found that from 2011 to 2013, US companies with a woman on the executive team received more than 15 per cent of venture capital investment, up from less than 5 per cent in 1999.*
Even so, 15 per cent leaves plenty of room for improvement. And companies with a woman chief executive received just 3 per cent of the total venture capital funding invested during this period, according to Babson’s research.
The first barrier, as Ms Laube suggests, is that few women occupy senior positions at venture capital firms. “There are just not a lot of people that look like you,” says Kate Mitchell, co-founder and partner of Scale Venture Partners, a Silicon Valley-based firm that invests in early-in-revenue technology companies.
The statistics bear this out. Research conducted for the Diana Project found that the proportion of women partners in US venture capital firms has fallen to 6 per cent from 10 per cent in 1999.
In such an environment, subconscious bias can come into play. “The pattern recognition is much higher for a male-to-male conversation than it is for a female-to-male conversation,” says Ms Mitchell, who is also co-chair of the Diversity Task Force at the US’s National Venture Capital Association.
Faced with this, women may find it more difficult to come across as self-assured when presenting their business idea to venture capitalists.
Another barrier women face is in gaining access to the networks that often play a big role in funding decisions.
“Venture capitalists tend to provide capital to the people they know,” says Patricia Greene, professor of entrepreneurship at Babson. “It’s still a very tightly networked system and women tend to be not embedded in those networks.”
This means working hard to tap into all kinds of networks, including friends and family, says Swati Chaturvedi, co-founder and chief executive of Propel(x), an online platform that connects angel investors with early stage technology start-ups. “Talk to as many people as you can about your story and what you’re trying to do and the connections will happen,” she says.
Ms Chaturvedi also advocates persistence and building stamina. “You have to knock on more doors,” she says. She adds that having a family the process could be especially difficult because you have to be prepared to work long hours.
Once an initial meeting has been secured, the next challenge is to demonstrate self-assurance in presenting to a group that is likely to be dominated by men.
“Men have a definition of confidence that’s often different from a woman’s, so learning how to be confident in front of a room of men is a skill women need to have,” says Ms Laube.
However, Ms Laube believes the most critical success factor for women entrepreneurs is their ability to demonstrate a mastery of the business they want to start and to convey that with confidence and passion.
Meanwhile, support mechanisms for women entrepreneurs is expanding, with “gender-lens investing” (investments whose priorities include increasing access to capital for women entrepreneurs and women-led businesses) gaining momentum and groups such as The Women’s Organisation in the UK providing training and advice for women-led businesses.
But the Babson College researchers argue that the number one priority is to increase diversity in the venture capital industry.
“The model for venture capital that has been in place since the 1980s should be reconsidered and re-evaluated in order to effect change,” say the Diana Project authors.
*Diana Report: Women Entrepreneurs, 2014: Bridging the Gender Gap in Venture Capital Babson College, 2014
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