Gender Bias in Startup Funding
There is a significant amount of gender bias when it comes to startup funding. The diversity problem is not just an opinion; it is real. According to Fortune magazine online, statistics from venture-capital funding in 2017 showed that the more women a startup team had, the less funding they received. Out of all the funding that venture capitalists gave out that year, startups with all-women teams received only 2.2 percent of it. Startup teams with both men and women received about 18 percent of the year’s funding, and the remaining 79 percent of their investments went to all-male startups.
That unfortunate statistic also rings true in other parts of the world.
That’s why it falls to the funders to try to diversify better by reducing gender bias in their own funding efforts.
The gender pay gap is something that people talk about quite frequently when it comes to office work. What a lot of people don’t realize is that it’s a clear issue in the world of funding as well. In September of 2016, Entrepreneur online reported on how, “Women-owned businesses receive just 7 percent of venture-capital investment money, which is highly disproportionate to their role in the economy.”
This gender bias in funding is apparent with:
- Banks offering business loans
- Venture-capitalist firms
- Angel investors
It’s critical for all business funders to remember that they can easily face accusations of gender bias too if all the startups they support have the same type of leadership. Diversification is not only good to protect against lawsuits. It’s also important for business expansion, and it’s good for the growth of the startup market as a whole in the long run.
Best Practices To Tackle Gender Bias Start In The Screening Process.
The best way to avoid such bias, or the accusation of it, is to limit the amount of information that the decision makers see initially in the screening process. Where large sums of money come into play, people will need to meet and talk face-to-face at some point. However, it does not matter whether the application came from Britanny Smith or Bob Smith early on in the application-review process.
A growing number of funders are using blind applications to help avoid accusations of bias. For example, The Guardian reported that, “some startups are attempting to transform the hiring process by anonymizing candidates.” They use systems like Interviewing.io to hold interviews with voice-masking technology that helps to obscure the applicant’s gender. Uber, Twitch and Lyft already use these systems to avoid gender bias in the workplace.
Clearly then, VCs can easily adapt the same types of platforms to manage funding applications, and some gradually are.Who’s Promoting Diversity Now?
Funding for women-led businesses has been hard to come by. However, there are some venture-capital funds that are focusing on changing the system.
Forbes has reported very positively about how Frog Capital and Frontline Ventures are just two of many British companies that have committed to sharing their statistics with a view to improving the way that they do things. These companies are working with the Economics and Business Development department at the British Business Bank to analyze anonymized demographic data from every startup that these companies have met. Their goal is to become more mindful of their funding habits by finding out exactly where in the investment process they need to improve the most.
The School for Social Entrepreneurs is an organization that offers funding and education to social entrepreneurs from all walks of life. Their priority is to support the entrepreneur themselves, not the project alone. They want to grow the next generation of social entrepreneurs. Their application process, however, focuses on the project and the journey of the founder. It doesn’t concentrate on who the founder is. Only when they’ve prequalified an application and screened it do they move on to the issue of meetings. This mindful process ensures that the most-qualified interviewees do get an audience regardless of who they are or what their background is.
Reducing gender bias will take time.
Also in 2018, Alpha Edison launched a new social campaign called the #StartWithEight initiative. They’re reaching out to VCs to take meetings with eight female founders from outside their usual networks as a first step toward embracing funding diversity. As an Alpha Edison representative shared on Medium, they’re also trying to improve gender diversity by requiring VCs to document why they choose to fund certain candidates over others. They even let the funders know that a third-party witness will assess their decisions, and this added awareness creates more mindfulness in the workplace.
The venture-capital industry is a hugely competitive one. It has not been easy for female founders to persuade companies to invest in them, and why that is the case is not entirely clear yet. Is it truly unconscious bias? Has society conditioned men to ask for money more often than women? Many different cultural factors make some people appear more confident than others, and they’re not always easy to define. However, the awareness of the issue is spreading, and that’s the first step to overcoming any bias.
Originally published on https://thriveglobal.com.
