The statistics show that women get far fewer venture capital pounds than men. According to a report by the British Business Bank all-female teams get a staggeringly low one per cent of funding, yet all-male teams get 89 per cent.
When this story broke in early 2019, we wanted to explore further. It’s common knowledge in the fundraising landscape that the majority of business investment goes to men. There are less women than men running businesses and this gap increases when looking at businesses that get fundraising.
We’ve taken a wide review of business literature to try and find answers but let’s start with a summary of the issues in the UK today:
The statistics could be endlessly reeled off, but the conclusion is clear: women are underrepresented in business, and this underrepresentation is even more prominent with businesses seeking fundraising. There isn’t a simple answer to the problem but in the UK the government is attempting to address the issue.
The report by the British Business Bank which unearthed that all-women teams get 1p for every £1 invested in venture capital was commissioned by Chancellor Philip Hammond in 2017.
Liz Truss, Chief Secretary to the Treasury, said: “Men seem to have a virtual monopoly on venture capital. We need more investment going into start-up ventures and more women putting businesses forward.”
Let’s take a look at why there are so few women receiving funding.
Women Lead 7 Per Cent of the UK’s Fastest Growing Businesses
The 100 Fastest Growing Companies UK Report by equity crowdfunding platform Syndicate Room includes only seven businesses led by women.
Given that almost 75 per cent of the businesses in the report excel in the technology space we can see that women are underrepresented in the technology industry. It’s technology businesses that receive a large chunk of venture funding, so a clear problem emerges: women aren’t represented well in fields where high growth businesses operate.
Women make up about 21 per cent of the STEM (science, technology, engineering and maths) jobs. In UK schools girls make up 20 per cent of the GCSE Computer Science cohort, which drops off to 16 per cent at degree level. The split is 50 per cent in India and 50 per cent in Malaysia – for some reason the UK system is not attracting women into STEM jobs.
It’s Hard for Women in the STEM Workplace
Research by the Center for Talent Innovation found that women make up 41 per cent of scientists, engineers and technologists in the lower echelons of the corporate ladder, but 52 per cent drop out. Laure Sherbin in her article for the Harvard Business Review cites six reasons women succeed in STEM, and also gives us insight into why some women don’t succeed.
So according to Sherbin women get a tough time in the workplace, but there are tactics they can employ to increase the chances of success.
Men Get a Better Deal
It’s tough for women in the workplace, exasperated in the technology sector. Meanwhile, men generally get a better deal. Nancy Carter and Christine Silva of global non-profit Catalyst and Hermina Ibarra, professor of organisation behaviour at INSEAD, contributed an interesting article called Why Men Still Get More Promotions Than Women to the Harvard Business Review.
Central to the article was a study of 4000 professionals who graduated from top MBA programs between 1996 and 2007. The findings were stark: women are paid $4,600 (£3,500 in March 2019) less than men in their first post-MBA position and women have significantly less career satisfaction than men.
A more in-depth study of 40 high potential men and women that focused on hurdles they faced when moving into senior roles and the help and support they received. There were some interesting conclusions:
It’s not a great surprise that men get better opportunities, but this research does a good job of laying out some of the specific benefits men experience.
Men Control the Money
Coming back to the specific issue of women not receiving venture capital cash, one interesting dynamic here is that most investors are men.
Diversity VC, a non-profit that promotes diversity in venture capital reported:
What Does the Future Hold?
The problem is clear. There are far too many issues to cover them all, but we’ve looked at a few:
The government recognises the issue, and through the British Business Bank there is now focus on the problem. Alongside governmental efforts there have been some studies that look at the issue – let’s take a look.
The Issue is Systemic
In a paper by Duke academics in the Journal of Personality and Social Psychology they challenged the perception that women can solve the problems they face; they call this the “DIY” approach.
In the study participants were directed to read sections of Sheryl Sandberg’s book ‘Lean In’. Some participants read sections that discussed a DIY approach, and the rest were exposed to part of the book that focus on problems such as discrimination.
Participants that read the DIY message were more likely to believe that women could solve the problems but were also responsible for them. They offered the example of an issue at Facebook where women had code rejected more than men; participants that read the DIY message were more likely to believe that women were responsible for the fault and finding a way to fix it. They were less likely to think that there were other changes Facebook could make, for example, managers reviewing code without knowing who wrote it.
Men Have a Key Role to Play
Many of the issues facing women are systemic, and this means there needs to be an organisation-wide drive for change. New research has shown that men who are advocates for this change can experience penalties at work. In the paper Be an advocate for others, unless you are a man, the writers concluded that men who were advocates for others were seen as low on agency and competence.
So the system is broken, and men who try to fix it are penalised. It doesn’t sound very positive, but this article from the Harvard Business Review looks at how men can be strong allies. A positive step is to help provide men with the support to do this. According to the article here are a few tactics for men to employ:
How the VC Industry can Change
The British Business Bank report we cited earlier comes up with some suggestions that specifically look at funnelling more funding to female entrepreneurs (and other under-represented groups).
The report goes beyond just women not receiving funds and cites racial, socio-economic and other inequalities as important areas to address.
One way that venture capitalists can address the problem is by driving the agenda. The report names a few venture capital firms that have implemented inclusion policies. Here are a few:
The list of organisations with a commitment to diversity is encouraging: Downing, Episode 1, Frontline, Funding London, Voulez Capital, Wayra, Forward Partners, DM Capital, JamJar Investments and Octopus Ventures are just a few of the other funds names in the report.
It seems that although the current access to venture capital funding for women and other under-represented groups is less than ideal there is appetite to address the issue. We welcome these efforts.
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