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Why There are Only Few Female Founders in Tech Industry?

Posted by Shivali Anand

March 4, 2022    |     3-minute read (435 words)

According to Work-Bench’s Womenterprise Report: The State of the Enterprise Software Founder Gender Gap, less than 2% of enterprise software firms in the U.S. have at least one female founder. In total, the U.S. had 354 female-founded enterprise software businesses in 2021, of which 154 obtained funding.

Enterprise software startups co-founded by women comprise only 1.91% of all enterprise software startups compared to 23.5% of non-enterprise specific female co-founded startups, the survey found. 

Research consistently finds that female founders have a harder time obtaining financing than male founders. But research from Vivek Wadhwa, a fellow at the Arthur and Toni Rembe Rock Center for Corporate Governance at Stanford University, finds that female-led tech firms are more capital-efficient, generating a 35% better return on investment. Those that are venture-backed create 12% higher revenue compared to their male counterparts. 

In an analysis of the disparity, The Wall Street Journal writes that "A combination of implicit biases, discrepancies in networking connections and a cycle that leaves women largely outside the venture-capital sphere makes it harder for female-led companies to get off the ground — perpetuating a stubborn gender gap in one of the country's most male-dominated industries.”

According to Dana Kanze, an assistant professor of organizational behavior at London Business School, part of the rationale is that venture investors are typically former entrepreneurs; thus, the fewer successful female founders there are, the fewer female venture capitalists there are.

"It has to do with these misperceptions that female founding CEOs are a 'lack of fit' with their ventures when they happen to cater to male-dominated, as opposed to female-dominated industries," Kanze continued.

Women have been underrepresented on the technical side of the software business from its inception. According to U.S. Department of Labor data from 2019, women make up 18.1% of all software engineers in the United States, earning 88.7% less than their male counterparts.

Furthermore, according to Statista, female employees make up between 29% (Microsoft) and 45% (Amazon) of the overall workforce at the two largest tech businesses in the U.S. However, this number is significantly smaller when it comes to actual IT jobs. At every company that discloses such statistics (Amazon is one of few that doesn't), women hold less than 25% of IT jobs.

According to the Work-Bench survey, San Francisco has the highest concentration of female-founded enterprise tech firms, with 48.3%. New York comes in second, followed at 26.8%. Among the category, 35.1% are focused on human resources and the future of work, while 19.8% are focused on data, AI and machine learning.

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